Four Priorities for Development Ministers at the OECD DAC

This week, development ministers of the OECD’s Development Assistance Committee (DAC) come together for one of their occasional “high-level meetings.” The attendees control the vast majority of the global aid budget, and in the past their decisions have had a considerable impact on the pace of global development. More recently, their willingness to act together—and their influence—has waned. Here we set out four challenges faced by the DAC that, if met, could make a major difference both to the COVID response and to global progress in the coming two decades.

The DAC, which has existed for 60 years, was formed to coordinate the aid programs of its member states. It is still dominated by “traditional” donors–Europe, the US, Japan, Australia, and New Zealand.  Despite the rise of development finance from China and other countries that don’t belong to the committee, DAC ministers are collectively responsible for over 80 percent of global development finance; they also have an influence on other policies that matter to development, including trade, environment, and security.

The COVID-19 pandemic response

The economic and health fallout from the COVID-19 pandemic will dominate much of the ministerial discussion. The ministers’ first priority should be persuading their colleagues in government and finance of the need to increase aid flows and empower development institutions to expand lending. Of course, budget pressures are considerable at home, but they have grown even more quickly in lower-income countries with limited access to external lending. These economies cannot borrow their way out of the crisis in the way high-income countries are doing and urgently need support to finance health and education budgets as well as safety net systems.

Along with this acute challenge, there are three other major issues the DAC needs to address at the ministerial meeting: climate change, leaving no one behind, and the core principles of the committee’s work.

Climate finance and adaptation focus

DAC members are devoting an increasing share of their finance towards climate, in part to contribute to the target of $100bn “new and additional” support by 2020 that was agreed in 2009 and re-endorsed as part of the Paris negotiations. It is disappointing that much of this finance is coming from existing aid budgets and even more so that over two-thirds of the spending is on mitigation. That is not only against the spirit and letter of the Paris agreement, which emphasizes the need for “a balance between mitigation and adaptation” and to account for “the priorities and needs of developing country Parties.” It also means resources are being shifted from the immediate and pressing development challenges of the world’s poorest countries to fix a problem overwhelmingly created by the world’s richest economies.

All development projects should take opportunities to efficiently mitigate climate impacts in their approach, but as ministers sign-up to use aid to “build back better” they should insist that concessional resources for climate are truly additional and used on adaptation, backing projects that recipient countries see as a priority for national resilience.

Allocate budgets to leaving no one behind

On leaving no one behind, there is a strong consensus in development that aid is insufficiently focused on the poorest people and countries. Over a fifth of the global aid budget is inexplicably directed at upper-middle-income countries. This shortchanges OECD taxpayers and developing country recipients alike. Whilst global official development assistance (ODA) budgets in principle equate to $225 per person in extreme poverty ($85 in cross-border non-emergency spend), in practice countries like Morocco, Tunisia, Thailand, and Georgia receive thousands per person in extreme poverty while Nigeria, DRC, and South Sudan receive $50 or less. The DAC should develop a new framework to mutually commit to a share of member budgets directed to the least developed countries.

DAC Commitments to LDCs has Stagnated

Correction: a previous version of this blog included a figure that did not account for DAC country ODA contributions which flow through multilateral institutions. The new figure includes imputed flows.

Although the (largely unfulfilled) Istanbul declaration to spend 0.15-0.2 percent of donor GNI on the (now) 47 least developed countries should remain, a more manageable step that is more likely to be within ministerial control would be to commit a share of each countries’ existing aid budget. A starting point would be to commit to no more than 10 percent of existing budget envelopes going to upper-middle-income countries, and at least half going to low-income and other least developed countries.

Revisit DAC’s core principles and measures

Finally, ministers need to start work on resolving fundamental issues in the DAC’s approach. DAC countries have been the leaders in establishing standards in aid and transparency that have helped improve the lives of millions of people. But this focus on measurement, transparency, and standards is being eroded. DAC’s core measure—ODA—is coming under political pressure from countries keen to inflate the aid they record. Loans are (still) overcounted and debt relief double-counted, for example. This, along with the fact that recipients get no say in its definition, is slowly undermining the ODA brand.

There are two solutions ministers can pursue:

• First, they should instigate work on a new measure to capture valuable international contributions that are not ODA. This would incorporate UN peacekeeping spend; R&D on international issues like vaccines; and international climate mitigation spend. Such an effort should conclude much more promptly than the more ambitious efforts of TOSSD (Total Official Support for Sustainable Development) and enable ministers to point to a broader measure of international coordination. Preferably, ministers would agree that the effort should be led by the UN to ensure agreement by non-DAC members and a broader recording of global public good spending.
• Second, ministers should give a formal voice to recipient countries in the definition and measurement of ODA, in particular regarding spending that is not country programmable and/or that is spent outside recipient countries.

Development ministers will play a key role in their home countries in coming months as they make the case for combining international alongside domestic action to respond to the COVID crisis. They should use the opportunity of the High-level Meeting to ensure ODA is better designed to tackle the ongoing crises of global poverty and climate as well.

We are grateful for good analysis from Sam Hughes and Atousa Tamesebi.