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Development aid falls in 2012 amid euro crisis - OECD

Source: Thomson Reuters Foundation - Wed, 3 Apr 2013 14:15 GMT
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(Changes $125.7 billion in second para to $125.6 billion after official correction from OECD)

By Megan Rowling

LONDON (AlertNet) - Development aid from the world's rich donor nations fell for the second straight year in 2012, as the euro zone debt crisis squeezed contributions by the worst-hit European countries, the Organisation for Economic Cooperation and Development (OECD) said on Wednesday.

The 24 member states of the OECD's Development Assistance Committee (DAC) provided $125.6 billion in net aid in 2012, a drop of 4 percent in real terms, following a 2 percent fall in 2011. The countries that cut their aid by the largest proportion were Spain, Italy, Greece and Portugal - all euro zone states where cash-strapped governments have implemented major austerity measures.

Development aid from DAC donors peaked in 2010, and the falls in 2011 and 2012 mark the first time since 1996-97 that aid has dropped for two years in a row, the OECD said.

"It is worrying that budgetary duress in our member countries has led to a second successive fall in total aid, but I take heart from the fact that, in spite of the crisis, nine countries still managed to increase their aid," OECD Secretary-General Angel Gurría said in a statement.

The largest increases were recorded in Australia, Austria, Iceland, South Korea and Luxembourg, the organisation said.

It singled out "a noticeable shift" in aid away from the poorest countries and towards middle-income nations, a trend expected to favour the Far East and South and Central Asia in the coming few years.

Bilateral aid to sub-Saharan Africa was $26.2 billion in 2012, a fall of 7.9 percent in real terms from 2011, and for the group of 49 least developed countries, such aid fell by 12.8 percent to around $26 billion.

"As we approach the 2015 deadline for achieving the Millennium Development Goals, I hope that the trend in aid away from the poorest countries will be reversed," Gurría said. "This is essential if aid is to play its part in helping achieve the goals."

Erik Solheim, the new DAC chairman, urged countries that have slashed their aid to increase it "as soon as their budget circumstances allow".  “Maintaining aid is not impossible even in today’s fiscal climate," he said. "The UK's 2013-14 budget increases its aid to 0.7 percent of national income, which gives hope that we can reverse the falling trend.”

Despite difficult economic conditions, the British government recently confirmed a commitment to meet the longstanding U.N. target of spending 0.7 percent of gross national income (GNI) on aid, making it the first G8 country do so.

The OECD said Denmark, Luxembourg, the Netherlands, Norway and Sweden continued to exceed that target in 2012. But as a whole, the DAC donors gave only 0.29 percent of their combined GNI in development aid.

'MODERATE RECOVERY' IN 2013

The OECD predicted "a moderate recovery" in aid levels in 2013. The latest survey of forward spending plans - which includes all major donors, not just those in the DAC - suggested aid will rise by 9 percent in real terms in 2013, mainly due to planned increases by Australia, Germany, Italy, Switzerland and the UK, and in soft loans from multilateral agencies.

On this measure, aid received by developing countries actually rose 1 percent in real terms in 2012, with falls from DAC countries outweighed by increases from other donors, the OECD said.

The United States continued to be the largest donor by volume in 2012, with net aid flows amounting to $30.5 billion in 2012, a fall of 2.8 percent in real terms from 2011. Aid from the 15 EU countries that are DAC members was $63.8 billion in 2012, down 7.3 percent from 2011.

"European leaders are in a scramble to cut what they can, despite the very real damage this could do to the lives and livelihoods of the world’s poorest people," said Zuzana Sladkova of Concord, a European confederation of relief and development groups.

Mercedes Ruiz-Jimenez, president of Spanish NGO platform Coordinadora, noted that Spain's aid had sunk to its lowest level in 22 years, following a 2012 cut of nearly 50 percent.

"This has resulted in Spanish NGOs pulling out of developing countries," she said in a statement, noting that 68 percent of aid groups had had to close some of their projects on the ground.

Oxfam said the 2012 data showed that aid spending was, for some countries, a question of political choice rather than fiscal necessity.

"The UK government has shown it is possible to keep aid promises even in the toughest economic times," said Emma Seery, Oxfam's head of development finance. "Political will is crucial, especially as it is now clear that the euro zone crisis is having a devastating knock-on effect on some of the world’s poorest people."

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