Coronavirus and aid data: What the latest DAC data tells us

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The world is facing an unprecedented challenge, with the vast impacts of coronavirus compounding worrying trends in aid. This briefing looks at the most recent trends in aid data (the OECD DAC’s release of provisional aid data for 2019) and considers what impacts the pandemic may have.

Even before the pandemic there were worrying trends in the economic outlook, both globally and for developing countries specifically.[1] For example, there were growing concerns of another debt crisis in developing countries, with 44% of low income countries (LICs) and least developed countries (LDCs) either at high risk of, or already in, debt distress. The global economic downturn and the immediate challenges of the health crisis both brought on by the coronavirus pandemic will, in many cases, exacerbate these concerns.

The impacts of the pandemic on global resource flows are already being felt. In March 2020 alone, investors pulled out approximately US$90 billion from emerging markets.[2] With other international flows such as remittances and receipts from tourism also set to fall, the counter-cyclical potential of aid (also known as official development assistance, or ODA) becomes increasingly important, not just in volume but also in the quality of that assistance and the use of appropriate tools and instruments for delivering it.

In addition to the immediate threat to lives and livelihoods (it is currently estimated that the crisis could push up to half a billion more people into poverty globally[3] and cause up to 3.3 million deaths in Africa alone[4]), the coronavirus pandemic is likely to stall and indeed reverse progress towards achieving Agenda 2030. In this context, as developing countries face multiple and overlapping health, economic and social crises sparked by coronavirus, the unique potential of ODA to limit its impact on the poorest and most vulnerable people will be vital.

This briefing highlights both positive aid trends from 2019 – including slight upticks in global aid and aid to the poorest countries – but equally some more problematic trends that are likely to be exacerbated by the current crisis. The paper also projects the impacts of the crisis on the volume of ODA and considers the implications of other significant trends in considering the response to the crisis in developing countries.

SHARE SECTION Key points 1: ODA growth sees slight increases in 2019 amid concerns of a significant decline beginning in 2020. ►The crises in donor countries caused by the pandemic – from the immediate health crisis to the deep socioeconomic crises – are likely to drive reductions in global aid levels at a time when global aid flows have seen very limited growth since 2016.

2: The economic impact of coronavirus may lead to further substantial declines in ODA. ►A longer-term economic recession alongside cuts from donors as budget is reallocated to domestic spending could see global ODA levels drop sharply, with a fall of US$25 billion by 2021 within the range of possibilities.

3: The number of donors achieving the 0.7% ODA/GNI target remains the same, but there is potential for all donors, including those hitting this target, to see these ratios fall. ►The economic downturn and potential reallocation of current aid spending to domestic priorities could see significant falls in aid from some of the biggest donors – for example, up to US$8.2 billion from aid from the US.

4: ODA to the most vulnerable countries grows slightly, ahead of potential real-terms cuts. ►The poorest and most vulnerable countries will require more concessional grant finance to confront the challenges of the current crisis: domestic government expenditure on health in LDCs (PPP$29 per capita in 2017) is more than 100 times lower than in high income countries (PPP$3,692 in 2017).

5: Gross ODA lending by DAC donors up by 50% since 2010, despite warnings of a new debt crisis – and the growth has been fastest in lending to least developed countries. ►Countries already struggling to service debts will face additional constraints in responding to the long-term effects of the crisis.

6: Despite a rise in 2019, core contributions to the UN flatlined for most of the decade and lagged behind funding for loan-giving bodies. ►The World Health Organization (WHO), a key player in immediate and medium-term crisis response, has seen core funding fall by 13% between 2011 and 2018.

7: Following substantial growth in bilateral humanitarian assistance since 2012, such funding has fallen year on year since 2017 while needs have continued to rise. ►Without significant new funding, the repurposing of existing assistance in response to coronavirus risks exacerbating the existing humanitarian finance gap for other crises and contexts.