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Aid trend is reversing: More money to the poorest

April 18, 2016

dac oda 2016Erik Solheim, Chair of the OECD Development Assistance Committee

Global development aid reached a record high in 2015. Being inspired to do even better, we should also focus on the main purpose of aid. Is it to be the salt or the oil in the water?

This year’s figures from OECD show that development aid rose again. Despite the huge refugee crisis, the DAC donors spent more money on aid in 2015 than they did in 2014. True, some countries have used big amounts from their aid budgets on refugees in their own countries. But even when we strip out funds spent on refugees at home, overall aid to everything else has increased by almost 2 percent. This means more money to poor countries.

The total amount of aid money reached USD 131.6 billion in 2015. That is a lot of money, and we need to make sure that it is spent well. Which leads me to my initial question: What is the main purpose of aid? As someone said at the UN Development Cooperation Forum in Brussels, is it to be the salt or the oil in the water? More precisely: Should we use aid to blend in with private investments, enforce tax administration and invest in the environment? Or should aid be something separate which goes directly to health, education or building roads?

For the poorest countries, there is no doubt that aid naturally plays a much bigger role than in middle-income countries. As ONE’s Global Policy Director, Eloise Todd writes in her blog: International development is our best long-term bet in foreign policy.

For countries such as Malawi, Tanzania and Mozambique aid is essential for supporting health, education, and the creation of livelihoods – without which, human development and an end to poverty cannot be achieved. Aid supports poor countries’ own plans and paths to development. Thus I believe it is still needed with a drastic increase in countries’ assistance in the years ahead. Education in the Central African Republic cannot be achieved through private investment, it goes without saying. And as Bono said earlier this week after visiting refugee camps in Africa and the Middle East “It is less expensive to invest in stability than to confront instability.”

The OECD has long called for more aid to the least developed countries. Also ONE and many other humanitarian organisations have also focused on the need for more money to the poorest. This year I am happy that we see a reversing trend, and in 2015 the poorest received more money that the years before: a 4 percent increase in bilateral aid and 3 percent increase in core assistance to the least developed countries. And 11 percent increase in humanitarian aid. We need to keep this aid high in the years to come as well.

At the same time we need to think smarter about aid to middle-income countries. The main focus of development has to be on increasing taxes and green growth. Already developing countries are paying for 98 percent of their education expenses themselves. If they increase their tax incomes by only one percent, it will contribute more to their finances than all the development aid they receive.

Aid has an important role, but we will not find the really big investments in development cooperation. Both aid and private investment are needed to move the world, and aid can be a catalyst to make this happen. When solar and hydropower are profitable, then we will also have major investments there. Aid and investment must go hand in hand.

Despite last year’s huge refugee crisis, the OECD countries have given more aid to poor countries and major international organisations. They have shown to be both generous and responsible. And I am optimistic on our way to reach the new and ambitious Sustainable Development Goals which aim for a future of peace, prosperity, and dignity for all.

We have over the two last decades made huge progress reducing poverty and are on track to eradicate extreme poverty by 2030, but success is still elusive. Aid plays a vital role in helping the most vulnerable countries and people. On our way to a better life for the poorest and a greener world, aid needs to be used both as salt and oil in the water. Hopefully we will see even more aid next year.
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