Development aid rose by 6.1% in real terms in 2013 to reach the highest level ever recorded, despite continued pressure on budgets in OECD countries since the global economic crisis.

Donors provided a total of USD 134.8 billion in net official development assistance (ODA), marking a rebound after two years of falling volumes, as a number of governments stepped up their spending on foreign aid.

An annual survey of donor spending plans by the OECD Development Assistance Committee (DAC) indicated that aid levels could increase again in 2014 and stabilise thereafter. However, a trend of a falling share of aid going to the neediest sub-Saharan African countries looks likely to continue.

“It is heartening to see governments increasing their development aid budgets again, despite the financial constraints they are currently facing,” said OECD Secretary-General Angel Gurría.

“However, assistance to some of the neediest countries continues to fall, which is a serious concern. We will need to address this issue when the Global Partnership for Effective Development Co-operation meets in Mexico next week, as well as the broader challenge of how to make the most of ODA in a growing pool of resources for development finance.”

Key aid figures in 2013

In all, 17 of the DAC’s 28 member countries increased their ODA in 2013, while 11 reported a decrease. Net ODA from DAC countries stood at 0.3% of gross national income (GNI.) Five countries met a longstanding UN target for an ODA/GNI ratio of 0.7%.

The United Kingdom increased its ODA by 27.8% to hit the 0.7% target for the first time. The United Arab Emirates posted the highest ODA/GNI ratio, 1.25%, after providing exceptional support to Egypt.

Aid to developing countries grew steadily from 1997 to a first peak in 2010. It fell in 2011 and 2012 as many governments took austerity measures and trimmed aid budgets. The rebound in aid budgets in 2013 meant that even excluding the five countries that joined the DAC in 2013 (Czech Republic, Iceland, Poland, Slovak Republic and Slovenia), 2013 DAC ODA was still at an all-time high.

Shifting aid allocations

Within bilateral net ODA, non-grant disbursements (including equity acquisitions) rose by about 33% in real terms from 2012. Total grants rose 7.7% in real terms; excluding debt forgiveness grants, they rose 3.5%. Net aid for core bilateral projects (excluding debt relief grants and humanitarian aid) rose by nearly 2.3% in real terms and core contributions to multilateral institutions by 6.9%.

Bilateral aid to sub-Saharan Africa was USD 26.2 billion, a decrease of 4.0% in real terms from 2012.  Aid to the African continent fell by 5.6% to USD 28.9 billion. Excluding debt relief, which was high in 2012 due to assistance to Côte d’Ivoire, net aid in real terms rose by 1.2% to sub-Saharan Africa but fell by 0.9% to the continent as a whole.

Bilateral net ODA to the Least Developed Countries (LDCs) rose by 12.3% in real terms to about USD 30 billion. However, there was exceptional debt relief for Myanmar in 2013. Details on the impact of debt relief on aid flows to LDCs will be available later this year.

Donor performance

The largest donors by volume were the United States, the United Kingdom, Germany, Japan and France.  Denmark, Luxembourg, Norway and Sweden continued to exceed the 0.7% ODA/GNI target and the UK met it for the first time. The Netherlands fell below 0.7% for the first time since 1974.

Net ODA rose in 17 countries, with the largest increases recorded in Iceland, Italy, Japan, Norway and the UK. It fell in 11 countries, with the biggest decreases in Canada, France and Portugal.

The G7 countries provided 70% of total net DAC ODA in 2013, and the DAC-EU countries 52%.

The US remained the largest donor by volume with net ODA flows of USD 31.5 billion, an increase of 1.3% in real terms from 2012.  US ODA as a share of GNI was 0.19%. Most of the increase was due to humanitarian aid and support for fighting HIV/AIDS. By contrast US net bilateral aid to LDCs fell by 11.7% in real terms to USD 8.4 billion due in particular to reduced disbursements to Afghanistan. Net ODA disbursements to sub-Saharan Africa fell by 2.9% to USD 8.7 billion.

Further outlook

The 2014 DAC Survey on Donors’ Forward Spending Plans gives estimates of future aid allocations for all DAC members, major non-DAC and multilateral donors up to 2017, based on developing countries’ gross receipts of Country Programmable Aid. CPA thus differs from ODA, especially by counting multilateral agencies’ outflows rather than inflows.

The CPA increase predicted last year for 2013 did translate into increased overall ODA, and affected all income groups. Global CPA rose by 10.2% in real terms in 2013 to USD 103.1 billion, but with widely differing increases from DAC members (+2.0%), multilateral agencies (+17.6%), and non-DAC donors (+123.7%).

CPA is projected to increase slightly by 2.4% in real terms in 2014, due to continued increases by a few DAC donors and multilateral agencies, and is expected to remain stable beyond 2014.

The survey suggests a continued focus in the medium term on middle-income countries – many with large populations in extreme poverty – in particular countries such as Brazil, China, Chile, Georgia, India, Mexico, Pakistan, Sri Lanka, and Uzbekistan, where programmed increases above 5% are expected up to 2017. It is most likely that aid to these countries will be in the form of soft loans.

By contrast, the survey suggests a continuation of the worrying trend of declines in programmed aid to LDCs and low-income countries, in particular in Africa. CPA to LDCs and LICs is set to decrease by 5%, reflecting reduced access to grant resources on which these countries are highly dependent. Some Asian countries may see increases, however, so that by 2017 overall allocations to Asia are expected to equal those towards Africa.

Some Asian countries may see increases, however, so that by 2017 overall allocations to Asia are expected to equal those towards Africa.