The great aid heist
The great aid heist
We lift the lid on the accountancy magic donors are using on their aid figures and look into how the 'aid debt' has reached $7.2 trillion.
The OECD preliminary aid figures for 2023 were published last week with great fanfare, with the Development Assistance Committee (DAC) claiming a record-high number for the fifth year in a row.
According to official figures, Official Development Assistance (ODA) from DAC donors totalled $223.7 billion last year, a small increase from 2022, and, just halfway to meeting the decades-old promise of allocating 0.7% of national income to ODA.
Equals has analysed the official data and found some worrying trends.
The great aid heist in numbers
Hidden behind the headlines. ODA has increased by 34% in real terms since 2019, and 29% since 2020. However, ODA to Least Developed Countries (LDCs) went from $31.8 billion in 2020 to $31.6 billion in 2023. In Sub-Saharan Africa, it went from $30.8 billion to $30.4 billion. The countries that need aid the most have seen a decrease. How’s this even possible…?
First, billions in aid is staying within donors’ borders. For decades, donors have been allowed to count the costs of hosting refugees and asylum-seekers in a donor country as ODA. NGOs and civil society argue that these legal – and moral – obligations should not count as ODA as they do not meet the core objectives of aid: to improve the economic development and welfare of recipients.
In 2022, over 5 million people were displaced by the war in Ukraine and the amount of money spent on hosting refugees and asylum-seekers counted as ODA rose to a record of almost 15% of all reported ODA. In 2023, despite a slight decrease, these costs still account for $30.9 billion of total ODA (13.8%).
Rich countries keeping their aid money for themselves is driving an even greater wedge between them and the rest of the world.
Second, donors are cheating with ODA loans. In 2018 a new reporting method was approved for aid disbursed in the form of bilateral loans. Since the rules changed, aid loans have increased by 64% - a much faster pace than that of bilateral grants (41%).
Thanks to an intricate methodology for assessing risk premium and interest rates, it is little wonder why. In some cases, donors can even count commercial loans as aid. Donors can also count the risk of default in advance to further inflate their aid figures. And if the default actually happens…they count it again, as debt relief. Smells like double counting to us.
You can read more about how this financial wizardry is possible in this article from former high-level OECD officer Steve Cutts.
Rich world, empty government coffers. OECD and donor officials all agree on one thing: they don’t have enough money to meet their aid promises. But how can their coffers be empty when the world is getting richer and richer? The wealth of the super-rich is soaring. As Equals reported, 2023 was an extraordinarily good year for billionaires who added over $2 trillion to their already meteoric fortunes. The problem is a lack of political will to fairly tax the rich, not a lack of money.
Change on the horizon? The Brazilian government is calling for the G20 to drive a global deal to increase taxes on the income and wealth of the super-rich, and momentum is building. Oxfam estimates that a 5% wealth tax on multi-millionaires and billionaires in DAC countries could raise over $1.2 trillion a year, enough for them to meet their 0.7% aid promises 3 times over.
Time to deliver on broken promises! Instead of congratulating themselves for small increases to (still) incredibly low aid levels, donors should start making great strides to meet decades of broken promises in light of today’s increasing needs.
Using OECD data, we’ve calculated the ‘aid debt’ by totalling the gap between what was promised, 0.7% of GNI, and what has been delivered. This aid debt goes back to 1970 when the 0.7% target was set. We found that this gap has grown to $7.2 trillion.
Something to read and listen to
Read Grace Blakeley in the Jacobin on Why the Superrich Keep Getting Richer.
Listen to Guido Alfani interviewed about his book "As Gods Among Men: A History of the Rich in the West"
Read Esther Duflo’s interview in the FT (paywalled) on the moral debt owed to poor countries.