Official international assistance insufficient to reach 2030 Agenda

Financing development, from domestic and external public and private sources, is intricately linked to poverty eradication, an essential ingredient of inclusion and an overarching goal of the 2030 Agenda for Sustainable Development. Concerns have been voiced over “the great finance divide” -—
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—- in the context of the ”two-speed recovery” from the COVID-19COVID-19 is an infectious disease caused by the strain of coronavirus SARS-CoV-2 discovered in December 2019. Coronaviruses are a large family of viruses which may cause illness in animals or humans. In humans, several coronaviruses are known to cause respiratory infections ranging from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS). The most recently discovered coronavirus causes coronavirus disease COVID-19 -—
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—-. pandemicCommonly described by the WHO as ‘the worldwide spread of a new disease’, no strict definition is provided. In 2009, they set out the basic requirements for a pandemic: • New virus emerges in humans
• Minimal or no population immunity
• Causes serious illness; high morbidity/mortality
• Spreads easily from person to person
• Global outbreak of disease.
The US Centre for Disease Control uses a similar approach, but with a reduced set of criteria. It is very difficult to gauge whether the spread of a disease should be termed an outbreak, epidemic or pandemic. In other words, when to declare a pandemic isn’t a black and white decision -—
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Despite some increases in ODAOfficial Development Assistance (ODA) are resource flows to countries and territories which are: (a) undertaken by the official sector; (b) with promotion of economic development and welfare as the main objective; (c) at concessional financial terms (implying a minimum grant element depending on the recipient country and the type of loan). In addition to financial flows, technical co-operation is also included -—
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—-., commitments are still out of reach. Considering the overall lack of financing for sustainable development, ODA should be significantly scaled up to support developing countries’ progress towards the 2030 Agenda. Moreover, the many crises, including the economic consequences of the COVID-19 pandemic, war, conflicts and related refugee costs, have derailed funds from the already limited official international assistance.

Despite new highs, ODA flows far from agreed targets

The Bridgetown Covenant -—
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—- reiterates the importance of ODA providers to ”reaffirm their respective ODA commitments, including the commitment by many developed countries to achieve the target of 0.7 per cent of ODA/gross national income (GNIGross national income) and 0.15 to 0.20 per cent of ODA/GNI to the least developed countries, as outlined in the Addis Ababa Action Agenda”.

ODA and OOFsOther official flows (OOF) are transactions by the official sector with countries and territories which do not meet the conditions for eligibility as ODA, either because they are not primarily aimed at development or because they do not meet the minimum grant element requirement -—
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—-. remain relatively small when compared to domestic public resources or private flowsPrivate flows consist of flows at market terms financed out of private sector resources and private grants. They include FDI, private export credits, securities of multilateral agencies and bilateral portfolio investment. Private flows other than FDI are restricted to credits with a maturity of greater than one year -—
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—-. (Volatile, but slowly more sustainability-focused investment flows). However, they play an essential role since they frequently function as “seed funds” or catalysers of additional resource mobilization in sectors or projects where other funding options are limited, or where investors are reluctant to participate. Furthermore, for some countries in vulnerable situations, official funds are frequently the only source of financing available. Thus, their importance is often highlighted in the 2030 Agenda. They are referred to in 11 targets, including sector-specific official support to agriculture¹, health², water and sanitation³, clean energy⁴, biodiversityBiodiversity refers to the diversity within species, between species and of ecosystems -—
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—-.⁵ and others.

In 2022, total ODA reached a record high of US$204 billion, amounting to a real-terms annual increase of 13.6 per cent -—
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—-. Despite this being a fourth consecutive year for ODA to surpass its previous record levels, the share of ODA in GNI still lags significantly behind the committed 0.70 per cent by developed economies, as it only reached 0.36 per cent in 2022 (Figure 1). As such, it remains at a level insufficient to support recipient countries in their efforts to recover from the long-term challenges planted by the pandemic and other compounding crises.

In addition, the observed increase of ODA was primarily led by in-donor refugee costsIn-donor refugee costs include the cost for the first year of receiving refugees and asylum seekers in donor countries. OECD DAC rules have allowed DAC members to report in-donor refugee costs as ODA for decades, but it was considered an exceptional item of ODA reporting, not envisaged to be a major component -—
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—-. which amounted to US$29.3 billion in 2022 and represented 14.4 per cent of DACDevelopment Assistance Committee member countries’ total ODA. Excluding in-donor refugee costs, ODA rose by a modest 4.6 per cent compared to 2021. A jump in net ODA to Ukraine contributed to the increase; on the other hand, initial estimates indicate that ODA support related to the COVID-19 pandemic was down by 45 per cent in 2022 compared to the previous year -—
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Whereas ODA to developing countries exhibits a modest increase, ODA flows to LDCsLeast developed country for 2021 saw a slight downward trend: developed economies devoted just below 0.06 per cent of their GNI to ODA to LDCs (Figure 1), below the over 0.08 per cent recorded in 2008 and falling short of their commitment to allocate from 0.15 to 0.20 per cent exclusively to LDCs.

In-donor refugee costs increased

After a significant increase of debt relief reported in ODA in 2020, it shrunk by nearly a third, to 0.5 per cent as a share of total ODA in 2021 (Figure 2). The observed pattern from previous crises repeats itself: the share of debt relief in ODA ramped up considerably in the aftermath of the 2008 financial crisis, reaching 6.2 per cent in 2011. This rise persisted until 2013, representing a significant shortfall in ODA to foster sustainable development from 2014 onwards. Recent years have seen much lower values of debt relief reported in ODA, the spike in 2020 reflects the response to challenges related to the COVID-19 pandemic.

In recent years, many donor countries rechannelled their ODA domestically to care for refugees fleeing conflicts⁶. In-donor refugee costs peaked at 14.1 per cent of total ODA in 2016 with the Syrian refugee crisis. In 2021, as a response to increased displacements and some countries’ adaptive measures to closed borders due to the COVID-19 pandemic -—
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—-, the share of in-donor refugee costs increased by 2 percentage points, reaching 9.2 per cent (Figure 2).

In a similar fashion, the war in Ukraine increased the share of in-donor country refugee costs in 2022, meaning not all ODA were received by developing economies. Preliminary data for 2022 show that in-donor refugee costs amounted to USD 29.3 billion in 2022, representing 14.4 per cent of total ODA. Further, net bilateral ODA to Ukraine preliminarily amounted to US$16.1 billion in 2022, 7.8 per cent of global ODA, a more than 17-fold increase from US$ 0.9 billion in the previous year -—
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At the time of the Syrian refugee crisis, former UN Secretary-General Ban Ki-moon warned that “reducing development assistance to finance the cost of refugee flows was counter-productive” and that “helping people in need should not be a zero-sum game” -—
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—-. Similarly, the current UN Secretary-General Guterres has urged “all countries to reconsider making cuts that will affect the world’s most vulnerable” -—
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—-. Finally, “DAC members still have the option to decide that such costs are additional to their planned development budgets. This is what for example Austria and Germany have done in their preliminary 2022 ODA reporting – meaning that these costs did not have a negative effect on already budgeted ODA programmes and contributions” -—
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—-. These considerations are not to be taken lightly to ensure no one is left behind in efforts to progress towards the 2030 Agenda.

Aid for trade disbursements remain resilient

The Aid for TradeMeasures aimed at assisting developing countries to increase exports of goods and services, to integrate into the multilateral trading system, and to benefit from liberalized trade and increased market access. It is considered as part of ODA. Effective Aid for Trade will enhance growth prospects and reduce poverty in developing countries, as well as complement multilateral trade reforms and distribute the global benefits more equitably across and within developing countries -—
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—-. It is measured as gross disbursements and commitments of total ODA from all donors for Aid for Trade -—
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—- helps developing countries, particularly LDCs, to build the capacity to benefit from WTOWorld Trade Organization agreements and engage in international trade. The assistance is targeted at enhancing national trade policy and regulations, developing infrastructure, and building productive capacityUNCTAD defines productive capacities as consisting of the productive resources, entrepreneurial capabilities and production linkages that together determine a country’s ability to produce goods and services that will help it grow and develop -—
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—-. Many positive impacts from Aid for Trade have been identified, for instance by the -—
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—-. The 2022 global review of Aid for Trade also focused on Aid for Trade as a tool to attract more investment into advancing gender equality, digitalization and efforts to mitigate and adapt to climate change via Aid for Trade -—
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In 2021, Aid for Trade remained relatively stable with a slight decrease compared to 2020. For developing economies, Aid for Trade commitmentsAid for Trade commitment is a firm obligation, expressed in writing and backed by the necessary funds, undertaken by an official donor to provide specified assistance to a recipient country or a multilateral organisation -—
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—-. after increasing more than 18 per cent in 2020 fell by more than 18 per cent in 2021. The commitments were valued at US$52.2billion in 2021 (Figure 3). Aid for Trade disbursementsAid for Trade disbursements refer to the release of funds to or the purchase of goods or services for a recipient; by extension, the amount thus spent. Disbursements record the actual international transfer of financial resources, or of goods or services valued at the cost to the donor -—
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—-. were worth US$47.8 billion in 2021, and have plateaued since 2017, but they have more than doubled since the launch of the Aid for Trade initiative in 2006. Aid for Trade disbursements represent about one fifth of total ODA based on data from the -—
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—-. The Aid for Trade gap decreased to an all-time low of just below US$5 billion (9 per cent short of commitments) in 2021, not because of more disbursements but due to a drop in committed amounts. The Aid for Trade disbursements to LDCs stood at US$13.5 billion in 2021, 2.6 times higher than in 2006, but slightly below the 2019 peak of US$14.3 billion. The Aid for Trade gap for LDCs remained at US$5.3billion in 2021, leaving disbursements 28 per cent short of commitments.

New framework enables the quantification of South-South cooperation alongside other development support

The Bridgetown Covenant -—
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—- emphasized the importance to strengthen South–South and triangular cooperation as a means of bringing relevant experience and expertise to bear in development cooperation and to enhance its development effectiveness. They also underlined the need to continue holding open, inclusive and transparent discussions on the proposed measure of “total official support for sustainable development”.

From the start, the SDG indicator framework included indicator 17.3.1 on ODA, FDIForeign Direct Investment (FDI) is an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy (foreign direct investor or parent enterprise) in an enterprise resident in an economy other than that of the foreign direct investor (FDI enterprise or affiliate enterprise or foreign affiliate) -—
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—-. and SSCBroad framework of collaboration among countries of the Global South in the political, economic, social, cultural, environmental and technical domains. It includes trade, FDI, regional integration efforts, technology transfers, sharing of solutions and experts, and other forms. Involving two or more developing countries, it can take place on a bilateral, regional, intraregional or interregional basis  -—
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—-., but data were never reported on all its elements. The lack of data was discussed as part of the 2020 review of the SDG indicator framework, and the countries of the South requested that a new methodology be discussed to measure these development support flows with universally agreed concepts and methods. Further work on data was also called by the outcome of the March 2019 High-Level Conference on South-South CooperationBroad framework of collaboration among countries of the Global South in the political, economic, social, cultural, environmental and technical domains. It includes trade, FDI, regional integration efforts, technology transfers, sharing of solutions and experts, and other forms. Involving two or more developing countries, it can take place on a bilateral, regional, intraregional or interregional basis  -—
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—- which encouraged “all actors to support initiatives for information and data collection, coordination, dissemination and evaluation of South-SouthBroad framework of collaboration among countries of the Global South in the political, economic, social, cultural, environmental and technical domains. It includes trade, FDI, regional integration efforts, technology transfers, sharing of solutions and experts, and other forms. Involving two or more developing countries, it can take place on a bilateral, regional, intraregional or interregional basis  -—
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—-. cooperation, upon the request of developing countries”.

As information on other elements of development support existed, countries considered it important that South-South cooperation be equally measured alongside other development support. South-South cooperation “is a vital force for initiating, designing, organizing and promoting cooperation among developing countries so that they can create, acquire, adapt, transfer and pool knowledge and experience for their mutual benefit and for achieving national and collective self-reliance, which are essential for their social and economic development”, as described already in 1978 in the Buenos Aires Action Plan -—
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In March 2020, the UN Statistical Commission established a Working Group on Measurement of Development Support. It set up a dedicated sub-group to develop methods to measure SSC, in a process led by the global South and with representation from all regions. Countries invited UNCTAD to provide the secretariat to this effort. This work resulted in a voluntary Conceptual Framework for the measurement of SSC -—
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—-. It was welcomed by the UN Statistical Commission in March 2022, as member States endorsed the new SDG indicator 17.3.1 to measure “additional financial resources mobilized for developing countries from multiple sources” and requested UNCTAD and the OECD to act as co-custodians of the indicator.

The framework aims to quantify the value of SSC, while it does not measure the impacts of SSC. It takes into account the multidimensional and unique characteristics of SSC and the different modalities, thus enabling quantification of both financial and non-financial dimensions. The framework considers elements of solidarity between developing countries that constitute powerful instruments for promoting international and regional development, instead of focusing only on vertical relations driven by grants, technical cooperation, and concessional loansLoans that are extended on terms substantially more generous than market loans. The concessionality is achieved either through interest rates below those available on the market or by grace periods, or a combination of these -—
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The voluntary framework proposes three sets of quantifiable items, that can be independently measured and reported to allow flexibility for country-led systems:

• Group A: Financial modalities of SSC (reported directly through monetization)
• Group B: Non-financial modalities of SSC (including items that may be monetized)
• Group C: Non-financial modalities of SSC (quantification by non-monetized methods)

Notes

1. SDG indicator 2.a.2: Total official flows (official development assistanceOfficial Development Assistance (ODA) are resource flows to countries and territories which are: (a) undertaken by the official sector; (b) with promotion of economic development and welfare as the main objective; (c) at concessional financial terms (implying a minimum grant element depending on the recipient country and the type of loan). In addition to financial flows, technical co-operation is also included -—
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   —-. plus other official flowsOther official flows (OOF) are transactions by the official sector with countries and territories which do not meet the conditions for eligibility as ODA, either because they are not primarily aimed at development or because they do not meet the minimum grant element requirement -—
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   —-.) to the agriculture sector.
2. SDG indicator 3.b.2: Total net official development assistance to medical research and basic health sectors.
3. SDG indicator 6.a.1: Amount of water- and sanitation-related official development assistance that is part of a government-coordinated spending plan.
4. SDG indicator 7.a.1: International financial flows to developing countries in support of clean energy research and developmentResearch and development (R&D) comprise creative and systematic work undertaken in order to increase the stock of knowledge – including knowledge of humankind, culture and society – and to devise new applications of available knowledge -—
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   —-. and renewable energy production, including in hybrid systems.
5. SDG indicator 15.a.1: Official development assistance and public expenditure on conservation and sustainable use of biodiversity and ecosystems.
6. OECD DAC rules allow DAC members to report in-donor refugee costs as ODA. When specific instructions were first introduced in 1988, it was agreed that “the first-year costs of sustaining developing country refugees arriving in donor countries could be reported as ODA. The rationale behind this agreement is to reflect the financial effort of hosting refugees and the sharing of responsibility with developing countries whoWorld Health Organization host the vast majority of the world’s refugees” -—
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7. The Aid for Trade initiative was launched at the 2005 WTO Ministerial Conference in China, Hong Kong (SARSpecial Administrative Region) -—
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   —- to help developing countries, particularly LDCs, build the supply-side capacity and trade-related infrastructure to assist them in benefiting from WTO agreements and engaging in international trade.

References

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