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Which Countries Miss Out in Global Aid Allocation?

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Ian Mitchell and Sam Hughes

Countries provide aid for a variety of reasons, but if uncoordinated, the individual decisions of 30 OECD DAC donors and many more multilateral institutions can lead to wide and ineffective variations in how much aid countries receive. These allocations create "aid orphans," who receive too little support relative to their circumstances and needs, and "darlings," where the opposite is true. As part of our efforts to assess countries' Quality of ODA (QuODA), we were keen to develop a measure which rewards aid providers supporting countries that others ignore.

Our former CGD colleague Paddy Carter has urged the development of an aid allocation indicator that assess whether a provider's portfolio moves the global distribution of aid towards, or away from, some optimal allocation (rather than focussing on "under-aided" countries). Building on his idea, we set out below our proposed approach, and seek feedback on three ways to assess the "optimal" allocation.

ISSUES WITH GLOBAL AID ALLOCATION

In 2018 total official development assistance (ODA) provided by the DAC reached a grant equivalent value of $153 billion, with $59 billon distributed as "country programmable aid" (CPA): a measure of non-emergency cross-border flows. But split between all the people living in extreme poverty around the world, this equates to just $223 of ODA per person (or only $85 of CPA). Clearly, aid is a scarce resource, meaning how it is distributed is all the more important.

But it seems global aid could be better allocated. For instance, the prevalence of "small country bias" sees aid per capita tending to arbitrarily fall with population size. Whilst many small island states received hundreds or even thousands of dollars in aid per head of population in 2018, Nigeria received just $17. More concerningly, it's been found that the patterns of foreign aid are frequently better explained by the political and strategic interests of donors, rather than the need or merit of recipients. The phenomenon of aid fragmentation also creates challenges for coordination between providers, which is essential to ensure an optimal allocation of global aid. What coordination there is seems to go in the wrong direction, with donors following the herd rather than plugging the gaps in global aid allocation.