This briefing looks at trends in aid from the OECD DAC’s full release of official development assistance (ODA) data for 2019, which tells us what was happening to aid right before the Covid-19 pandemic hit. These trends are contextualised with the most recent IATI data (January to November 2020), which tells us how these trends have shifted in 2020 as the impacts of the coronavirus crisis unfold.
Previous DI analysis of the possible effects of the pandemic on aid identified areas of concern, including most notably the risk of a substantial cut to ODA in 2020, a concern which has now become a reality. Before the pandemic, the world was already off track to meet the Sustainable Development Goals and there is no question that this crisis has pushed us even further off track.
With the economic and health impacts of the Covid-19 pandemic compounding worrying trends in aid, the world faces an unprecedented challenge and one that will have serious development effects. The pandemic has exacerbated existing concerns about the economic outlook both globally and for developing countries specifically.
The pandemic has driven the greatest economic recession since the Great Depression – with the International Monetary Fund forecasting in October 2020 that global growth would have declined by almost 5% in 2020, and that was before the renewed lockdowns and downturn seen at the end of last year.
The picture is more challenging for poorer countries as progress is reversed while poverty and inequality rise. Our analysis shows that, in 2020 alone, extreme poverty was set to increase by 2.5% on average across low-income countries (LICs), with extreme poverty levels in Sub-Saharan climbing to 43%.
Developing countries face sustained and growing challenges in financing development. Our projections show developing countries are set to lose almost a trillion dollars in 2020, a loss that will be sustained for many years to come. Debt ratios in the least developed countries (LDCs) had already more than doubled in the last decade and the current Covid-19 crisis is projected to further exacerbate that challenge in all LICs.
Expected falls in foreign direct investment, remittances, tourism receipts and government revenue to LDCs (US$62.8 billion) are larger than total ODA to LDCs (US$57 billion) in 2019. In this context, as developing countries face multiple and overlapping economic, health and social crises sparked by the pandemic, understanding what is happening to ODA is critical.
ODA is a vital resource for supporting those most in need and countering these negative trends. Making the best use of this resource will be fundamental to mitigating the worst effects of the current crisis and hopefully promoting renewed progress towards achieving Agenda 2030.
The first section of this briefing provides analysis of the major global trends in aid which show both a historic flatlining of ODA growth followed by a sharp decline in aid as the crisis hit. This section also looks at the shifting balance of aid from grants to loans, despite the concerns of a growing debt crisis. In section two, the briefing then looks at developments in individual donor countries and how aid from international financial institutions (IFIs) and multilateral organisations has evolved into 2020. Section three assesses changes in the sector allocation and policy focus of aid – looking at allocation to vital areas including health, humanitarian response, gender equality and climate change. Finally, section four assesses the targeting of ODA, including allocations to LDCs, as well breakdown by country poverty and income levels.