Trends and Issues in Development Aid

Executive Summary

This note provides background data and analysis on what has been happening to aid flows and the resulting change in aid architecture. It is based on data taken from the OECD/DAC and on a review of the literature.

Key numbers on development assistance trends

  • Net official development assistance (ODA) from the 22 DAC member countries has increased to over $100 billion over the last two years, with a promise of increases of 30 percent over the next three years.
  • Most ODA is for special purpose needs which do not translate into funds available for development projects and programs. Developing country governments are only receiving about $38 billion in net country programmable aid (CPA).
  • Sub-Saharan Africa is especially hard hit by this wedge between ODA and CPA. It only received $12.1 billion in CPA in 2005, showing almost no increase over the preceding two decades.
  • Non-DAC bilateral assistance (NDBA) is growing rapidly and amounts to more than $8 billion in ODA and $5 billion annually in CPA.
  • Private aid (PrA) from DAC member countries might already contribute between $58-68 billion per year, although aggregate data is sketchy.
  • Total aid flows to developing countries therefore currently amount to around $180 billion annually.

Key trends in aid architecture

  • Multilateral aid agencies (around 230) outnumber donors and recipients combined.
  • Multilaterals only disburse 12 percent of total aid (offi cial plus private), and about one-quarter of total net CPA.
  • Multilaterals disburse more towards Africa than do bilaterals.
  • The average number of donors per country is growing, while average project size appears to be shrinking, implying growing fragmentation of aid.

Key Issues

  • Mechanisms for information sharing, coordination, planning and aid administration are increasingly costly and ineffective.
  • There is a growing need for efficient allocation rules for donors to fund the growing number of aid agencies, but assessments of aid agency effectiveness is in its infancy.
  • Scaling up, learning and innovation could advance as new players experiment with new methods, but would require more public and private sector exchanges.