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Development aid reaches its highest level ever

Figures published by the OECD yesterday show that total net official development assistance (ODA) from members of the OECD’s Development Assistance Committee (DAC) rose by 10.2% in real terms in 2008 to reach $119.8bn. This is the highest dollar figure ever recorded. In total, it represents 0.30% of member countries combined gross national income (GNI).


This is great news for the developing world at the present time of economic crisis. A 10% real increase is very welcome at a time when: world trade is experiencing its largest decline since 1929 and commodity prices are falling; foreign direct investment is declining; and, the budget position of many developing countries has been hit hard by the increases in food and oil prices over the past couple of years. Altogether, this means that many developing countries are not in a strong fiscal position to deal with the current crisis.


In terms of giving, the US continues to be the largest gross donor, donating $26bn in 2008, which was a real increase of 16.8%. Even so, with a ratio of ODA to GNI of 0.18%, the US is still well below the UN target for developed countries to give 0.7% of their Gross National Income. Other major givers are Germany, UK, France and Japan. In terms of GNI ratios, the leading countries are Sweden, Luxembourg, Norway, Denmark and Netherlands, all of whom exceed the UN target. The overall picture can be seen in the graphic below.



In 2005 major donors at the Gleneagles G8 and other summits pledged to lift aid from $80bn in 2004 to $130bn in 2010, at constant 2004 prices. But, the OECD notes that the prospects of economic contraction this year will reduce the level of dollar commitments. They believe that current commitments imply an aid level of $121bn in 2010, which will be below target.


The OECD points out that whilst the full effects and duration of the financial crisis are still to be seen, it is important for aid to play a countercyclical role to help balance the sharp reversal in overall flows to developing countries. The organisation said: “Only a special crisis-related effort can ensure that the 2010 targets for aid are met, which is even more important now that the economic crisis is reducing developing countries’ growth prospects and their ability to make progress towards the Millennium Development Goals.”

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Posted in aid, Development, International, Low-income countries

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