Chapter 4. What official development assistance went to fragile contexts?

Roberto Schiano Lomoriello

Rachel Scott

OECD Development Co-operation Directorate

This chapter provides an overview of official development assistance (ODA) to fragile contexts, looks at who is providing it, where it is spent and how it is spent. It examines the mounting significance of humanitarian assistance in fragile contexts, especially extremely fragile contexts, and how it affects the development finance landscape. The chapter also looks at the distribution of aid among different fragile contexts and among sectors, highlighting the concentration of ODA in a limited number of aid darlings. It concludes with a review of donor engagement in fragile contexts by the Development Assistance Committee (DAC) and by non-DAC members and the channels of delivery for aid to fragile and extremely fragile contexts.

In figures in this chapter, official development assistance (ODA), or aid, comprises all aid reported to the OECD including ODA disbursed by Development Assistance Committee (DAC) members and by other donors. Unless otherwise noted, figures are calculated in terms of 2016 constant USD and based on net ODA disbursements.

In 2016, earmarked funding for fragile contexts was greater than earmarked funding for other developing countries. In that year, donors spent USD 68.2 billion, or 65.5% of total earmarked funding, in the 58 contexts identified in the OECD fragility framework compared to the USD 35.8 billion they spent in 67 other developing countries (Figure 4.1).

ODA growth is concentrated in fragile contexts. Overall, earmarked ODA increased by 12.2% between 2014 and 2016. As part of this, ODA to fragile contexts increased by 14.4%, or USD 8.6 billion, far outstripping growth in non-fragile contexts (Figure 4.1). Indeed, ODA to fragile contexts has been on the rise since the end of the global financial crisis, growing by 26% in real terms from 2009 to 2016.

This chapter examines how and where ODA was spent in 2016, a review of who is providing ODA, and the methods and channels of delivery.

4.1. The role of humanitarian finance in extremely fragile and other fragile contexts

Most of the growth in ODA to fragile contexts has been in humanitarian assistance, which increased by 144% between 2009 and 2016. From 2015 to 2016 alone, humanitarian assistance for all fragile contexts increased by 38%, reaching a historical peak of USD 18.3 billion. Over the same period, country programmable aid (CPA), i.e. development aid available for programming, did not increase for fragile contexts.

This growth in humanitarian assistance has radically changed the financing landscape, especially in the 15 extremely fragile contexts. By 2016, CPA and humanitarian assistance to such challenging places were roughly the same, with CPA at USD 16 billion and humanitarian finance at USD 15 billion. CPA to these contexts is not projected to grow out to 2019 (Figure 4.2). In other fragile contexts, which feature fewer acute emergency situations, humanitarian assistance made up only 8.6% of the total ODA mix in 2016.

The shift supports the humanitarian community’s assertion that humanitarian aid, especially in extremely fragile contexts, is often stretched beyond its original mandate to save lives and that this is due in part to insufficient development assistance to address the drivers of fragility. The shift also has prompted calls for greater development investment in fragile contexts, following the principle of development wherever possible and humanitarian aid only where necessary. Chapters 9 and 10 discuss this issue further.

4.2. Development aid for fragile contexts by sector

Social infrastructure and services receive more ODA than other programming in fragile contexts, as shown in Figure 4.3. In 2016, 31% of all ODA to extremely fragile contexts, or USD 9.8 billion, went to this sector. Other fragile contexts received 49% of their total ODA, or USD 20.9 billion, for this sector. Within social infrastructure and services, health received USD 2 billion in extremely fragile contexts and USD 4.6 billion in other fragile contexts, or 6.2 % and 10.5% of all ODA respectively; water and sanitation received USD 700 million in extremely fragile contexts and USD 2 billion in other fragile contexts, or 2.2% and 4.7% of total ODA; and education received USD 1.2 billion in extremely fragile contexts and USD 4 billion in other fragile contexts, or 3.8% and 8.9% of total ODA. Humanitarian assistance makes up the next largest portion of ODA to extremely fragile contexts at USD 14.8 billion, or 47% of the total, and much of this also contributes to social sectors. In other fragile contexts, humanitarian assistance was USD 3.4 billion, or 8.1% of total ODA. Additionally, ODA to production sectors amounted to USD 1.5 billion in extremely fragile contexts, or 4.5% of the total, and USD 3.6 billion in other fragile contexts, or 8.2% of total ODA. The economic infrastructure and services sector received USD 1.9 billion in extremely fragile contexts and USD 6.6 billion in other fragile contexts, or 6% and 15%, of their total ODA.

Chapter 8 continues the discussion of aid allocation by sectors and whether it targets the real drivers of fragility.

4.3. Aid orphans and aid darlings: Aid is neither consistent nor evenly distributed

Aid is not equally distributed among fragile contexts and is heavily concentrated in a few of these places. In 2016, a total of USD 50 billion, or 74% of ODA spent in fragile contexts, was concentrated on 20 of the 58 fragile contexts. Further, just 10 of these contexts, which are often referred to as aid darlings, received 50% of all ODA to fragile contexts, or almost USD 35 billion. This concentration continues a trend. For instance, during the 11-year period from 2003 to 2012, Afghanistan and Iraq together accounted for fully 22% of all ODA to contexts then classified as fragile (OECD, 2015, p. 61[3]).

Syria is a notable special case. ODA to Syria increased by 87% from 2015 to 2016, making it the largest single recipient of aid. It overtook Afghanistan, which had received the most aid of any single place every year since 2009 (with the exception of 2013 when Egypt topped the list). Most of the aid going to Syria is in the form of humanitarian assistance (USD 8.1 billion).

As shown in Figure 4.4, the distribution of aid to the top 20 most fragile contexts caused other shifts in 2016. Afghanistan remains the largest recipient of non-humanitarian ODA, despite a 4% decline over the previous year. ODA to Ethiopia increased by 28% from 2015 to 2016, moving it from the fourth-biggest to the second-biggest single recipient. ODA to Iraq increased 51% in the same period; Iraq is also the second-largest recipient of humanitarian aid. After large increases in 2015, ODA to both Pakistan and Bangladesh fell in 2016 by 20% and 3%, respectively. ODA to the Democratic Republic of the Congo (DRC) fell by 18%, pushing it out of the top ten list of largest ODA recipients despite the ongoing crisis in the country.1

The distribution of ODA among fragile contexts also varies significantly when measured as aid per capita (Figure 4.5). Average ODA per capita in fragile lower middle-income contexts is significantly higher (USD 110) than in fragile low-income contexts (USD 71). Two factors can explain this. First, as might be expected, island states with small populations such as the Solomon Islands (USD 317) and Timor-Leste (USD 180), both of which are lower middle-income, receive significantly higher than the average. Their relatively high per-capita ODA can be explained by the fact that service delivery is inherently more expensive when the population is geographically dispersed. Another factor in the differences in ODA per capita is that major humanitarian crises are increasingly occurring in lower middle-income places where the cost of responding is more expensive. Examples of such contexts include the West Bank and Gaza Strip (USD 537) and Syria (USD 482).

Attention has been focused on the asymmetry in aid allocations since the 2008 Accra Agenda for Action. Yet, ten years later, this remains an issue that deserves greater attention and increased collective action from aid providers, particularly in light of the more recent commitment to leave no one behind (Ericsson and Steensen, 2014, p. 2[4]).

4.4. Aid dependency

For many fragile contexts, ODA provides critical development finance that is simply not accessible through other means. These contexts can be called aid dependent. Aid dependency is higher in low-income fragile contexts than middle-income contexts. As shown in Figure 4.6, countries with the highest aid dependency, which include even those with higher levels of income, are largely concentrated in sub-Saharan Africa. Liberia is the most aid-dependent fragile context, followed by Central African Republic, Burundi and Malawi. Aid dependency is lowest in upper middle-income fragile contexts. This is because most of these places, such as Angola and Iraq, are rich in natural resources.

It is interesting to consider aid dependency alongside aid per capita. For instance, Liberia is highly aid dependant and in 2016 it also received the highest rate of ODA per capita (USD 178). Burundi is also aid dependant but received ODA per capita of only USD 74. These cases illustrate the usefulness of both considerations in determining whether a context is receiving the right amount of development finance. Chapter 9 discusses this question further.

4.5. Main providers of ODA to fragile contexts by donor type

In 2016, fragile contexts received ODA in the amount of USD 68.2 billion. DAC donors spent USD 35.8 billion of this amount; other bilateral donors spent USD 9.9 billion; and the remaining USD 22.5 billion in ODA was channelled through multilateral actors including the development banks and United Nations (UN) agencies.

4.5.1. DAC donors

DAC donors2 provide ODA to fragile contexts in two different ways – as bilateral aid spent directly for programmes in the fragile context and as multilateral aid through multilateral actors who use the funds in a fragile context.

In 2016, DAC member countries disbursed ODA in the amount of USD 55.2 billion for fragile contexts. This total includes USD 35.8 billion of net ODA as bilateral aid to fragile contexts. DAC members also channelled USD 19.4 billion to fragile contexts through their contributions in the multilateral system. In total, DAC countries spent 35% of their total aid portfolio in fragile contexts. Figure 4.7 shows the top 20 DAC donors to fragile contexts in 2016.

An increased percentage of DAC ODA was spent internally in donor countries in 2016, largely in response to an influx of refugees.3 This spending boosted the overall total of ODA, which increased 8.9% over 2015, but even excluding refugee costs, total aid rose by 7.1%; however, bilateral aid to the least developed countries fell by 3.9% (OECD, 2017[7]). Many in-donor refugee costs are counted as ODA only for the first year after a refugee’s arrival, so this trend is likely to fluctuate over time.

The largest donor to fragile contexts, through bilateral and multilateral channels, remains the United States, followed by the United Kingdom, European Union (EU) institutions, Germany and Japan. Ireland, Japan, the United States, the United Kingdom and Canada provide the largest percentage of their total bilateral aid to fragile contexts. Some countries such as Italy, the Netherlands and Spain provide more to fragile contexts through multilaterals than bilaterally. Luxemburg, Norway, Sweden and the United Kingdom rank as the largest donors in terms of bilateral disbursements to fragile contexts as a percentage of gross national income (GNI) (Figure 4.8).

4.5.2. Non-DAC donors

In addition to ODA flows from DAC members, development co-operation and investments by providers beyond the DAC are becoming increasingly relevant in the development finance landscape, especially in fragile contexts. In 2016, non-DAC members4 spent USD 13 billion in bilateral aid to all developing countries and USD 9.9 billion of that total was spent bilaterally in fragile contexts.5 Non-DAC members, then, are spending an impressive 76% of their bilateral ODA in fragile contexts. Conversely, non-DAC members only channelled USD 246 million (2%) to fragile contexts through their contributions in the multilateral system.

Turkey, a DAC observer country, and the United Arab Emirates, a DAC participant since 2014, both ranked among the most generous non-DAC providers in terms of the percentage of their GNIs – 0.76% and 1.12%, respectively – that is allocated to fragile contexts. Among the top ten recipients of Turkey’s gross bilateral ODA in 2015 were fragile contexts including Afghanistan, Somalia, Sudan, Syria, and the West Bank and Gaza Strip (OECD, 2017, p. 296[9]). In 2015, programmes related to the crisis in Syria received the lion’s share, or 70%, of Turkey’s ODA, up from 52% in 2013 (OECD, 2017, p. 295[9]).

Arab donors spent 29% of their ODA between 2011 and 2015 on fragile contexts in the Middle East and North Africa region including Egypt, Iraq, Libya, Syria and Yemen.

China, another significant non-DAC donor, gives aid mainly to Africa. According to recent estimates, six of the top ten recipients of ODA from China between 2000 and 2014 also are fragile contexts. In order of the amounts received, these are Côte d’Ivoire (USD 4.0 billion), Ethiopia (USD 3.7 billion), Zimbabwe (USD 3.6 billion), Cameroon (USD 3.4 billion) and Nigeria (USD 3.1 billion) (AidData, n.d.[10]).

Saudi Arabia reports that it provided USD 32.8 billion in aid between 2007 and 2017, with a significant portion going to fragile contexts. Its neighbour, Yemen, received the largest amount of Saudi Arabia’s aid (USD 13.4 billion), followed by Syria (USD 2.3 billion) and Egypt (USD 1.8 billion) (King Salman Humanitarian Aid and Relief Centre, 2018[11]).

As shown in Figure 4.9, ODA to fragile contexts is not uniform in terms of the amount of aid received or in the mix of donors in each place. DAC members provided the majority of the ODA received by fragile contexts in 2016, with Afghanistan receiving the most bilateral ODA from these donors. Non-DAC members, however, disbursed most of the ODA reaching Egypt and Syria in 2016. In Bangladesh, Ethiopia, Nigeria and Pakistan, bilateral aid from DAC donors is the largest source of ODA, closely followed by the aid from the World Bank Group. The UN is particularly active in the West Bank and Gaza Strip, mostly due to the presence of the UN Relief Work Agency for Palestinian Refugees in the Near East (UNRWA, 2015[12]). Of all ODA provided by government donors to UNRWA in 2015, 70% came from DAC member countries.

4.6. Channels of delivery in fragile and extremely fragile contexts

Development assistance reported to the OECD is delivered in many different ways. These include through direct implementation (bilaterally), through funds provided to multilateral organisations including the UN and the international financial institutions (IFIs), and through funds channelled through non-governmental organisations (NGOs) or passed directly to partner governments. As shown in Figure 4.10, in extremely fragile contexts in 2016, 27% of ODA (USD 8.4 billion) was channelled through multilateral organisations, 27% (USD 8.3 billion) through donor governments and 20% (USD 6 billion) through partner governments. In other fragile contexts, 46% of all ODA (USD 16.3 billion) was channelled through partner governments, 11% (3.8 USD billion) through donor governments and 12% (USD 4.3 billion) through multilateral organisations (Figure 4.10).

Prominent multilateral organisations in aid delivery to extremely fragile contexts include the UN agencies that often deliver a relatively large proportion of humanitarian aid, the International Red Cross and Red Crescent Movement, and NGOs (OECD, 2013[13]). An example of funding through the multilateral channel is development assistance delivered through the African Development Bank, which was one of the first international financial institutions to create a special facility specifically tailored to the type of support needed by fragile contexts in Africa (Box 4.1).

Box 4.1. The African Development Bank: Providing additional financing support to countries in transition

The Transition Support Facility (TSF), formerly the Fragile States Facility, is an operationally autonomous financing facility under the African Development Fund (ADF) of the African Development Bank (AfDB). It is wholly dedicated to supporting transition countries to consolidate peace, build resilient institutions, stabilise their economies and lay the foundations for inclusive growth. The TSF was established as a response to the contradictions in the performance-based allocation of ADF resources, which tended to disadvantage transition countries relative to their needs and legitimate demands. Since its inception in 2008, the TSF has received UA 2.78 billion (USD 4.01 billion).1 In the ADF-13 cycle alone, the TSF resource flow to transition states was UA 651.4 million (USD 941.85 million) and flows increased by 17% under ADF-14.

Fragile contexts tend to be under-resourced. Despite their greater resource needs, such places also struggle to access concessional resources due to performance and risk perceptions. The TSF therefore is particularly important for countries and contexts under sanctions. Such contexts under arrears find themselves in a vicious cycle of ever-dwindling access to financing and an inability to access international capital, which in turn constrains their ability to break out of the fragility trap. TSF Pillar II (Arrears Clearance Window) resources are set aside to assist in the re-engagement process with international creditors. Countries such as Côte d’Ivoire, the DRC, Liberia and Sierra Leone have benefitted from AfDB-mobilised resources to clear their arrears and resume normal interactions with the international community.

The African Development Bank has taken advantage of the flexibility of the TSF resources to leverage the regional envelope resources under ADF-13, approving 14 regional operations that include fragile situations in the amount of UA 478 million (USD 691 million). This amount represents 55% of all resources approved under the regional operations envelope. The operations include scaling up the existing ones to build drought resilience in the Horn of Africa; develop the transport corridor from the coast of Côte d’Ivoire (San Pedro) to the landlocked capital of Mali, Bamako; bring green energy to Burundi, the DRC and Rwanda (Ruzizi); and address the Ebola epidemic by enabling doctors from other African countries to deploy quickly to the affected zones. For instance, a total of USD 225 million was approved to address some of the deficits that had been exposed in national health systems. High-level engagement complemented this financial support.

The AfDB assigns a high premium to fragility-sensitive programming and interventions by identifying levers of resilience in transition states. Significant knowledge, experience and know-how have been generated over the last decade and these have shaped the AfDB’s holistic approach in engaging in these contexts. Using the TSF resources, the AfDB has therefore been able to contribute to addressing fragility and building resilience in Africa. There also is increasing acknowledgment of the need for partners to focus on addressing fragility in order to better support those at the bottom of the pyramid in transition countries. These communities bear the brunt of the effects of fragility including limited access to and participation in the formal economy and socio-political areas, environmental and climate change shocks, and violent conflict. The AfDB is therefore exploring the potential for mobilising more resources and bringing greater attention to the principle of leave no one behind, as pledged in the Sustainable Development Goals.

Contributed by African Development Bank, Transition Support Department

← 1. The AfDB uses a unit of account (UA) as its reporting currency that is equivalent to the International Monetary Fund’s Special Drawing Right. UA amounts have been converted to USD using the exchange rate, published by the AfDB in March 2018, of USD 1.44589 = UA 1.

A smaller proportion of ODA has been channelled through NGOs, although the proportion is higher in extremely fragile contexts (17%) than in other fragile contexts (15%). In 2016, aid channelled through private sector institutions accounted for 3% of total ODA (USD 867 million) in extremely fragile contexts and 4% (USD 1.26 billion) in other fragile contexts. This demonstrates that the private sector is not yet a preferred delivery option in fragile contexts. Like the low levels of ODA channelled through the private sector, the portion of ODA that is channelled through public-private partnerships is also very small, despite the recognition that this type of delivery could have great potential. Chapters 6 and 9 further explore this issue.

While it is a significant source of finance for fragile contexts, ODA nevertheless makes up less than one-third of all external finance available to these countries and economies (Chapter 6). However, ODA is essential in that it is used for purposes – for example, the provision of basic services and general strengthening of the enabling environment – in which other sources of finance will not invest. ODA also can have a catalytic effect by leveraging future private investment and supporting improvements in domestic resource mobilisation and budget execution (Chapters 7 and 9).

ODA also is the only flow that donors can directly affect and thus channel towards helping fragile contexts to achieve the Sustainable Development Goals. How to enhance the potential of ODA, taking into account the full spectrum of development finance, is discussed in Chapter 9.

References

[10] AidData (n.d.), China's Global Development Footprint (database), Institute for the Theory & Practice of International Relations, William & Mary, Williamsburg, VA, http://aiddata.org/china (accessed on 25 April 2018).

[4] Ericsson, F. and S. Steensen (2014), “OECD-DAC Development Brief: Where do we stand on the aid orphans?”, OECD, Paris, https://www.oecd.org/dac/aid-architecture/Aid%20Orphans%20Development%20Brief.pdf (accessed on 25 April 2018).

[11] King Salman Humanitarian Aid and Relief Centre (2018), Saudi Aid Platform: First stage 2007-2017, https://data.ksrelief.org/en/Home.aspx. (accessed on 25 April 2018)

[6] OECD (2018), “Aggregate DAC Statistics Table DAC-2a: Aid (ODA) disbursements to countries and regions : ODA as a percentage of GNI”, OECD International Development Statistics (database), https://stats.oecd.org/qwids/. (accessed on 28 April 2018)

[2] OECD (2018), “Country Programmable Aid (CPA)”, OECD International Development Statistics (database), https://doi.org/10.1787/data-00585-en. (accessed on 27 June 2018)

[1] OECD (2018), “Detailed aid statistics: ODA Official development assistance: disbursements”, OECD International Development Statistics (database), https://doi.org/10.1787/data-00069-en. (accessed on 11 June 2018)

[8] OECD (2018), Gross national income (indicator), https://doi.org/10.1787/8a36773a-en. (accessed on 27 June 2018)

[7] OECD (2017), “Development aid rises again in 2016 but flows to poorest countries dip”, http://www.oecd.org/dac/financing-sustainable-development/development-aid-rises-again-in-2016-but-flows-to-poorest-countries-dip.htm (accessed on 25 May 2018).

[9] OECD (2017), Development Co-operation Report 2017: Data for Development, OECD Publishing, Paris, https://doi.org/10.1787/dcr-2017-en.

[3] OECD (2015), States of Fragility 2015: Meeting Post-2015 Ambitions, OECD Publishing, https://doi.org/10.1787/9789264227699-en.

[13] OECD (2013), Fragile States 2013: Resource Flows and trends in a Shifting World, OECD Publishing, http://www.oecd.org/dac/incaf.

[12] UNRWA (2015), Donor charts: Government and EU Pledges to UNRWA (Cash and In-kind) for 2015, United Nations Relief and Works Agency for Palestinian Refugees in the Near East (UNRWA), https://www.unrwa.org/sites/default/files/2015_government_donors_and_eu_overall.pdf (accessed on 27 May 2018).

[5] World Bank (2018), “Population, Total”, World Development Indicators (database), https://data.worldbank.org/indicator/SP.POP.TOTL. (accessed on 04 June 2018)

Notes

← 1. In 2015, the top ten ODA recipients, in descending order of volume of aid, were Syria, Afghanistan, Pakistan, Ethiopia, the DRC, Tanzania, Bangladesh, Egypt, Kenya and Nigeria.

← 2. DAC members are Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, the United Kingdom and the United States.

← 3. A 1988 DAC rule allows donor countries to count certain refugee expenses as ODA for the first year after a refugee’s arrival. Australia, Japan, Korea and Luxembourg did not count any refugee costs as ODA in 2016. Eleven donor countries spent over 10% of their ODA on refugees; of these, Austria, Germany, Greece and Italy used more than 20% of ODA for refugee costs.

← 4. Non-DAC members that report to the OECD are Azerbaijan, Bulgaria, Croatia, Cyprus, Estonia, Israel, Kazakhstan, Kuwait, Latvia, Liechtenstein, Lithuania, Malta, Romania, Russia, Saudi Arabia, Chinese Taipei, Thailand, Timor-Leste, Turkey and United Arab Emirates.

← 5. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

Note by Turkey. The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union. The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

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