In the next few weeks, the OECD will release its estimate of ODA—Official Development Assistance—provided by member countries, and will no doubt claim yet another record high. But this inflated measure has lost its credibility, in large part because its definition is governed solely by ODA-providing countries. In this blog, we look at the underlying drivers of ODA’s mismeasurement, and suggest a parallel and independent committee to provide an objective view on levels of finance and what should count towards it.
The OECD Development Assistance Committee (DAC), the body that sets the rules and counts the beans on ODA, has been weakening the ODA brand. A group of donors that makes decisions by consensus, the DAC has long been prone to the temptation to count things as ODA even if they don’t involve money going to development countries, do nothing to assist development, or significantly exaggerate the cost involved. Donor-country refugee-hosting costs, for example, traditionally soak up about $9 billion of global ODA a year but could reach almost $35bn in 2022. Overcounting is one thing, but several countries—particularly Sweden and the UK—have taken billions of funding away from projects that support development while claiming unchanged levels of ODA.
A tumultuous global economy has put fiscal strains on ODA-providing countries, combined with new pressures to address climate and COVID out of the same pot of money—all of which have caused the long, slow drift toward increasingly irrelevant measures of development effort to snowball as of late. This has been most obvious with the exaggerated and confused approach to counting loans, but has also appeared in the questionable decisions to count dumping hoarded, excess COVID vaccines on developing countries as ODA, and in accounting tricks that mean debt relief can be counted as ODA spending equal to multiples of the original loan value, often to the benefit of rich-country banks who made the loan.
The DAC Secretariat—staffed by officials at the OECD—does play a role in holding back the worst instincts of providers (for example, holding down the price per dose claimed by providers for vaccine donations). But it clearly lacks the power to prevent a serious deterioration of the ODA rules. Treasury ministries of donor countries, often those with mandated aid targets, are keen to spend as little on development as possible while getting the maximum credit, and their pressure is apparently too great to resist.
That has led to a number of reform proposals and calls for improved governance. And perhaps the time for fundamental reform has come. But it is a little hard to imagine those donor treasury ministries rolling over so easily for a governance change that would strip them of power and force them to spend more.
An interim solution might be to raise the profile of the problem, so that supporters and recipients of real aid can have independent and reliable estimates to rally in opposition to further dilution and in favor of reform. One tool to do that would be the creation of a ‘Real Assistance Committee.’ Rather than consisting solely of (rich) donor country government representatives, a new body would establish a small, authoritative, senior group of former officials from countries that provide finance (both those currently in the DAC and others that aren’t) along with former officials from recipient countries with experience in managing ODA flows, potentially chaired by a former senior official from a multilateral development organization. It would be supported by a small technical subgroup or secretariat that would draw on expertise from civil society groups, think tanks, and universities worldwide.
The ‘Real Assistance Committee’ would initially have two roles: first, in advance of official DAC decisions on upcoming changes to ODA accounting rules, it would issue guidance on what the ruling should be if the intent is to report development finance objectively and robustly as a measure of provider effort toward the principle objective of improving low and middle-income countries’ welfare and development (per the DAC’s original and current mandate). Second, it would issue a yearly ‘shadow’ report on development assistance, soon after the official DAC figures were released, on ‘real assistance’: the best estimate of how much fiscal effort from each donor actually met appropriate standards for aid, and could be considered effective financing for promoting the welfare and development of recipient countries. This could draw on ONE, ODI, and CGD’s efforts to produce an improved measure. The committee could also be an independent source of advice on related issues like how to measure climate finance.
The shadow report would be valuable to recipient countries as a source of more reliable information on actual available assistance for development, but also for advocacy organizations in DAC donor countries: a source of data, analysis, and campaign targets. And it might be welcomed (quietly) by the official DAC secretariat as a counterweight to the pressure it faces from donor countries. This committee might also enable countries outside the DAC—who contribute around a sixth of global development finance—to be part of creating a new measure of assistance that they might want to adopt, broadening its legitimacy beyond the ‘traditional’ providers. Perhaps a Real Assistance Committee wouldn’t reverse erosion of the ODA brand, but it might at least be a method to showcase an alternative.
This blog was updated with ONE’s latest estimates of in-donor refugee costs for 2022.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
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