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Executive summary
Over the last decade, donor country governments have faced new and additional demands for financing international challenges, including providing global public goods (GPGs) and addressing historically high numbers of refugees and humanitarian crises. They have partly done so by re-allocating their official development assistance (ODA) away from its original aim: to support poverty reduction and growth in developing countries. This has led to questions about the integrity and credibility of ODA.
These questions are only likely to grow more pertinent in the coming decade because the pressures on ODA—and on public finances more broadly—are here to stay. ODA budgets are being cut in a number of traditional donor countries and what remains is increasingly being deployed to meet emerging needs beyond traditional development and to reflect a more national security perspective on development cooperation. The time is right, therefore, to ask whether the concept and accounting for ODA need to be modified to ensure that the needy and vulnerable it was designed to serve continue to be protected in the face of fiscal constraints and changing geopolitical circumstances.
This report, a compendium on the future of ODA, aims to provide fresh thinking and inspire the action needed for ODA to remain relevant and effective. It brings together reflections and proposals from leading experts and practitioners, including the under-secretary-general and executive director of UNOPS to a former DAC chair, to inform policymakers.
In this executive summary, we will introduce the key arguments from the compendium contributors. The contributions are organised into four key areas of discussion that reflect the main themes raised in this compendium: the rationale for ODA reform, the political and institutional realities shaping reform, using ODA for climate and leveraging private finance, and forward-looking proposals for reimagining ODA’s role and purpose.
Setting the scene for ODA reform
Several authors provide an overview of the key challenges facing the development landscape. Jorge Moreira da Silva argues that despite significant changes in the development finance landscape, institutional structures and governance have remained largely unchanged. He identifies current challenges including poor coordination among funding sources (from ODA and South-South cooperation to private philanthropy and impact investing), fragmentation within the multilateral system, and the lack of coherent approaches to trade, tax, debt, and investment. To address these issues, he calls for new institutional arrangements that bring together all financing sources as well as relevant players, and tackle key aspects of development cooperation, including decision-making, rule-setting, accountability, enforcement, and learning.
ODA is facing a crisis of purpose. Nikolai Hegertun, Håvard Mokleiv Nygård and Bård Vegar Solhjell note that four emerging “ODA rationales”—poverty reduction, humanitarian aid, refugee support, and financing GPGs—are pulling the development system in multiple directions. The authors argue while a shift from a “country-based” approach to a GPG-focused agenda may be necessary, it is also disruptive. This shift requires clarification of ODA’s core mission and its role in financing global challenges. The authors posit that a crucial step forward is for the OECD’s Development Assistance Committee (the DAC) to adapt and “find the right balance between inclusion, relevance, and effective decision-making.”
Meanwhile, Olivier Cattaneo distinguishes geopolitical, financial and systemic challenges characterising the current development landscape. Unmet commitments have eroded trust and limited international collaboration. At the same time, governments are facing unprecedented financial pressures with rising public debt, fiscal constraints, and the failure to mobilise private finance (the “billions to trillions” agenda). Moreover, the increasing complexity of the current system continues to undermine effective development outcomes. To untangle this “gordian knot” of challenges, Cattaneo proposes to revise the ODA narrative to ring-fence its core objectives in support of those most in need while using its potential at the investment margin to support crises response and financing of global public goods, reaffirming development effectiveness principles, and creating a “DAC+” framework that includes new actors to foster inclusivity, coherence, and impact.
Political and institutional realities
The political and institutional realities shaping ODA are rooted in historical structures and shaped by ongoing power struggles between traditional providers, emerging powers, and partner countries. Gerardo Bracho calls for a revised international development cooperation system, which moves beyond the North-South development paradigm that currently underlies development institutions, metrics, and narratives. He argues that in today’s divided international context, incremental changes towards a system that establishes a legitimate framework for burden sharing, refines the North-South divide to reflect contemporary realities, and defines metrics capable of capturing different actors’ contributions, could be partly achieved through the International Forum on Total Official Support for Sustainable Development (TOSSD).
By contrast, Susanna Moorehead focuses on what drives decision making and change within the DAC, emphasising the central role of culture and politics. She notes that the DAC’s consensus-driven approach, often shaped by political compromises among its members, including when deciding ODA reporting rules, helps to preserve common standards, transparency, accountability, and peer review. Looking ahead, Moorehead views reaching consensus on what ODA cannot be spent on as a key challenge for the DAC, while a broader development challenge will be to secure more and better development finance from a broader range of sources to support the SDGs.
Using ODA for climate and leveraging private finance
The overlap between development and climate objectives is another key part of the ODA reform debate. Jürgen Karl Zattler highlights the inseparability of these goals, arguing that integrated approaches are essential to address their overlapping crises. He proposes a cost-benefit approach to identify potential co-benefits for development and climate. Zattler argues that while this method will require an investment in data on the national and global benefits of different projects and programmes, it would help policymakers measure the climate and developmental benefits of future interventions.
Financing development and climate action also demands rethinking how resources are allocated. Susanna Gable and Kalpana Kochhar argue that policymakers face the imperative of reducing poverty while responding to and preventing future climate change, calling for a more coherent framing of interconnected development challenges and solutions. They note that the future of ODA requires a new framework under which all countries contribute as they are able through prioritising high-impact investments, matching investments with appropriate financing, and innovating to improve productivity.
Another major concern is the need to scale up financing for global public goods without overburdening ODA. Thomas Melonio, Jean-David Naudet, and Jérémie Daussin-Charpantier’s contribution focuses on the concept of leverage, whereby ODA can be used to mobilise additional private finance. They highlight the challenges underlying the “billions to trillions” agenda and advocate for a more complete and accurate measure of leverage effects, by specifying both the leverage source and target.
New proposals for reinventing ODA
In our introductory piece we propose the ODA reform should start by clarifying the range of legitimate purposes for countries to spend public money beyond their borders. Specifically, our proposal suggests developing a framework for engagement on three main developmental purposes: poverty reduction and economic growth, humanitarian support and crisis response, and global public goods. We believe that such a framework would safeguard resources for each goal, reducing the risk of reallocation during crises while improving accountability. For example, we advocate for treating GPG financing, such as climate action, as a separate category supported by a broader range of public and private instruments, rather than relying solely on ODA. This separation would allow ODA to remain focused on its primary mission of supporting long-term development in the poorest countries.
On another track, Homi Kharas points to pervasive gaps in the current development landscape and long-standing challenges with ODA’s allocation, instruments, and impact and accountability. Kharas argues that a potential “big bet” for reform would be to establish a global fund to eradicate extreme poverty through cash transfers. Adopting this “big bet” approach, he suggests, could help to restore attractiveness and support for ODA, which is in urgent need of a success story.
Jean-Michel Severino notes that challenges with exclusive ODA management systems and measurement are opening two avenues for reform: one involving the transformation of ODA into a new global framework for financing international public policies; and one consisting of refining the current development system to improve inclusivity of decision making and address technical challenges related to ODA measurement. He suggests a combination of both paths as a potential way forward and adds that clarifying the purposes of international financial transfers would be a good first step in the process. Accordingly, he identifies three categories of flows: 1) international transfers related to “deep solidarity policies” (such as financing of assistance for refugees), 2) financing for the management of global common challenges and 3) discretionary financing for sustainable growth and convergence.
Lastly, Shanta Devarajan makes the case for the need to re-think ODA beyond a financial transfer. He argues that the underlying constraint to development is often “a lack of a political consensus for reform of policies and institutions,” rather than insufficient resources alone. He suggests reimagining ODA to create and disseminate knowledge that will help to build political consensus for change. According to Devarajan, this approach would help “to relax the political constraints to national and global public goods.”
A call for action
Broadly, the contributions gathered in this compendium have a shared message: ODA is at a crossroads and reform is needed to balance the original mission of poverty reduction with the growing demands of global challenges such as climate change. While there is broad agreement on the need to clarify ODA’s purpose, modernise its governance frameworks, and develop financing mechanisms fit to today’s highly interconnected world, contributors’ opinions differ when it comes to envisaging the path forward. Some advocate for incremental adjustments, emphasising cautious evolution, while others call for more radical, transformative reforms.
We hope this compendium serves as a valuable resource for both reflection and action. By pursuing innovative yet realistic reforms, strengthening collaboration among diverse development actors, and upholding accountability ODA can be successfully reformed if policymakers give it the attention it deserves.
Read the full report here.
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