Total foreign aid, the voluntary transfer of funds from richer governments for the purpose of assisting less fortunate countries, was $145 billion in 2016, an all-time high and an increase of 10.7% from 2015 in real terms. However, the $41.8 billion share for sub-Saharan Africa was down 1.5% from 2015, lower than it was in 2010 and a source of concern for the global goal to eliminate poverty and hunger by 2030.
These figures relate only to 29 of the richer OECD countries for whom aid data is collated systematically. Known as “Official Development Assistance” (ODA), this data collection is coordinated by the Development Assistance Committee (DAC). It represents a substantial but diminishing proportion of all international aid.
A further 20 “non-DAC” countries submit data to the OECD, their contribution adding 14.5 billion of foreign aid in 2016. A number of developing countries are also increasingly engaged in strategic “south-south” aid programmes, reported as totalling $6.9 billion in 2015. Private foundations and non-governmental agencies lack formal reporting frameworks but their total for 2016 was given by DAC as $39.9 billion. The Bill & Melinda Gates Foundation contributes about $3bn each year towards development assistance.
These statistics are not confined to conventional long term development programmes. They also cover emergency humanitarian aid provided in response to natural disasters, conflict and post-war reconstruction. The differentiation from development aid is not always straightforward but total humanitarian aid was reported to be $16 billion for 2016, a significant increase over the previous year.
A significant proportion of ODA relates to “multilateral aid” – funds made available to support the development programmes of UN agencies, the European Union, the World Bank and regional development banks.
“Bilateral aid” targets specific beneficiary countries, its distribution reflecting the priorities of individual donor countries as much as any global strategic plan for poverty reduction. It is disbursed largely by grants to government ministries or through national and international development NGOs. Bilateral aid also includes “technical cooperation”, the transfer of skills and knowledge, often involving fees for individual consultants from the donor country.
The remaining two principal categories of aid, debt relief and refugee costs (in the donor’s own country), are moving in opposite directions. In-donor refugee costs have soared to $16 billion, over 10% of all aid. Several European countries, led by Denmark, were the largest single beneficiary of their own aid budget. By contrast, debt relief has fallen to just 2% of the total, having been as high as 20% of total ODA back in 2005.
Aid contributions by individual countries are monitored by reference to a UN Resolution passed as long ago as 1970. The richest countries promised to advance their aid budgets progressively towards a target of 0.7% of national income.
This percentage is somewhat arbitrary in relation to the needs of the poor but it has remained an acknowledged benchmark. The commitment was renewed as recently as September 2015 in the 2030 Agenda for Sustainable Development adopted by the UN General Assembly.
Aid promises have no substance in international law and there is a long track record of backsliding by rich governments. The 0.7% aid target in particular remains unfulfilled. Only six countries, Denmark, Germany, Luxembourg, Norway, Sweden and the UK, attained this benchmark in 2016. The remainder are so far behind that the DAC average for 2016 was only 0.32%, less than the equivalent figure for 1990. Of the richer countries, US, Italy and Japan occupy the foot of the percentage table.
An important informal source of finance for the poorest countries is the value of remittance payments sent by migrant workers to their families. According to the World Bank, this value reached $574 billion in 2016, over four times the total amount of foreign aid for that year.
For many of the world’s poorest countries, remittances sent by migrant workers represent a significant percentage of GDP and the greatest source of foreign currency. In Nepal, the world’s most remittance-dependent country, a large proportion of the work force is absent, sending remittances amounting to 31% of GDP.
Remittances have the advantage over foreign aid of reaching households directly, cutting out any losses through corruption or unnecessary layers of bureaucracy. On the other hand, remittances cannot be channelled into strategic national development projects.