Chapter 3. The Slovak Republic’s financing for development
Overall ODA volume
The Slovak Republic’s official development assistance (ODA) has increased at a slow pace since it joined the OECD Development Assistance Committee. It aims to increase its ODA to reach the target of 0.33% of gross national income (GNI) by 2030, but has yet to develop a credible plan for doing so. The Slovak Republic’s statistical reporting conforms to OECD guidelines; however, it does not report on other official flows or private flows.
ODA is growing, but a plan is needed for boosting it
In 2016, the Slovak Republic provided USD 106 million in net ODA. This was a rise of 26.8% in real terms over 2015, explained by increases in the bilateral budget. Preliminary data for 2017 of USD 110 million of net ODA suggests this positive trajectory is continuing. This represents 0.12% of GNI for 2016 and 2017. This makes the Slovak Republic the 29th largest DAC provider in terms of ODA as a percentage of GNI in 2016, the 28th according to 2017 preliminary figures, and 27th by volume in 2016 and 2017, out of 30 members (Annex A, Figure A.6; OECD, 2016). The Slovak Republic aims at allocating 0.33% of its GNI as ODA by 2030. Assuming a GNI growth of 3% per annum over 2018-2030, this would mean increasing the total ODA budget by over 10%. Achieving this objective will require taking GNI growth into account and a firm commitment and credible plan that are shared across government.
The Slovak Republic allocates a high share of its total ODA to multilateral organisations (Figure and Table 3.1). The European Union institutions receive the lion’s share (88% of gross multilateral disbursements in 2016). As the Slovak Republic is seeking to increase the bilateral share of its ODA, it will need to ensure that its bilateral budget outstrips GNI growth in order to avoid assessed contributions to the EU absorbing most of the increase.
The Slovak Republic has significantly increased the untied share of its bilateral ODA, from 47.5% in 2015 to 64.3% in 2016. However, it still performed considerably below the 81.2% DAC average in 2016. To meet its commitments, the Slovak Republic needs to step up its efforts to further untie its aid (OECD, 2018).
Source: OECD (2018), “Detailed aid statistics: Official and private flows’’, OECD International Development Statistics (database), https://doi.org/10.1787/data-00072-en (accessed on 11 April 2018).
Reporting conforms to OECD rules, but data are missing
The Slovak Republic’s statistical reporting to the DAC mostly conforms to the DAC’s ODA rules, with improvements in timeliness and quality of reporting (tying status, purpose-codes) required, giving the country a “fair” reporting score (OECD, 2017b). The Slovak Republic is also encouraged to report to the DAC on other sources of development finance, such as private flows and export credits.
Bilateral ODA allocations
The Slovak Republic allocates most of its bilateral aid according to geographical and sectoral priorities. However, consisting mainly of small grants spread across many short-term interventions, Slovak bilateral ODA is fragmented. Moving to a more integrated programme, notably in least-developed countries, could help the Slovak Republic to target its aid to where it can add the most value.
Aid modalities will need to evolve with new geographic priorities
The Slovak Republic is not focusing its aid on the least developed countries (LDCs); they received only 11% of its allocable bilateral aid in 2016, well below the DAC average of 37%. The highest share of the Slovak Republic’s gross bilateral aid allocable by income went to lower middle-income countries in 2016 (36%), followed by upper middle-income countries (32%) (Annex A, Figure A.3). This reflects the Slovak Republic’s focus on economic and societal transition in the Western Balkans and Eastern Europe. As noted in Chapter 2, most LDCs do not have the same political and economic transition trajectory as the Slovak Republic. As it aims to increase its contributions to LDCs within the timeframe of its future mid-term strategy, the Slovak Republic should adapt its comparative advantage. This will require it to adjust its modalities of support and develop thematic and geographical priorities adapted to LDCs.
In 2016, 24% of the Slovak Republic’s total ODA was provided bilaterally, amounting to USD 25.7 million. The Slovak Republic programmed 36.3% (USD 9 million) of its bilateral ODA at partner country level, down from 48% in 2015, which was very close to the DAC average of 48.8% (OECD, 2017c). In 2015-16, while the Slovak Republic’s 10 priority countries were among its top 15 recipients, the three programme countries - Afghanistan, Kenya and Moldova – received only 1%, 8%, and 3% respectively of gross bilateral disbursements. This distribution blurs the distinction between programme and project countries. Moreover, some countries that are not amongst the 10 priority countries also receive significant funds. For example, in 2016 Serbia was the third largest recipient of Slovak bilateral ODA, mainly due to its high scholarship budget managed by the Ministry of Education, Science, Research and Sports (Annex A, Figure A.4).1
Sectoral priorities are reflected in ODA allocations, but cross-cutting issues remain underfunded
The Slovak Republic has identified seven sectoral priorities2 in its Medium-Term Strategy for Development Co-operation for 2014-2018. Allocations are aligned with these broad priorities. Because the Slovak Republic strives to capitalise on its expertise in economic transition, most of its bilateral aid focuses on government and civil society, and education (25% and 24% of total allocable bilateral commitments respectively in 2015-16). Other social services receive less attention, such as water supply and sanitation (3%), and health (5%) (Annex A, Figure A.5).
Although gender and environment are cross-cutting issues for the Slovak Republic, financial reporting does not suggest that these priorities are reflected adequately in its bilateral programme. In 2015-16, Slovak support to gender equality represented 21% of total allocable bilateral aid. Although that represents a substantial increase from the 5% share in 2013-14, only 6% included gender as a significant objective (equal to USD 0.093 million). The Slovak Republic’s bilateral aid committed to the environment was USD 1.9 million in 2015-16, representing 10% of its total bilateral ODA commitments (Annex A, Figure A.5).
The Slovak Republic implements a large number of short-term project-type interventions consisting of very limited volumes spread across broad sectors. In 2016 there were 85 such interventions, with an average grant size of USD 0.13 million. The result is a fragmented portfolio. The biggest share (41%) of the Slovak Republic’s country programmable aid (CPA) was made up of project-type interventions, followed by contributions to pooled programmes and funds (27%), and technical assistance (18%). In addition, the largest part of Slovak bilateral ODA went to other/unallocated items3 (44%); in-donor country refugee costs received 6% (USD 1.6 million). In 2016, USD 1.83 million was spent on scholarships and training in the Slovak Republic, provided by the Ministry of Education, Science, Research and Sports. This represented a significant share of bilateral aid (7.1%, down from 7.7% in 2015). In addition, in 2015 the MFEA provided funds to a Višegrad Scholarship Programme in 10 countries4 for a total amount of USD 0.14 million. The Slovak Republic has made progress in reducing its administrative costs from 10% to 7% of bilateral aid between 2015 and 2016 (Annex A, Figure A.2).
The multi-bi channel is heavily used
The Slovak Republic channelled USD 8.5 million as bilateral aid through multilateral organisations in 2016 (USD 1.01 million through UN agencies, USD 7.45 through EU institutions, and USD 0.06 through other multilateral institutions such as the OECD and NATO). A further USD 6.2 million were channelled through NGOs and civil society organisations; USD 6.9 million through the public sector; USD 2.3 million through teaching institutions, research institutes or think-tanks; and USD 1.1 million through private sector institutions. No funding is currently channelled through partner governments.
Multilateral ODA allocations
The Slovak Republic uses the multilateral channel to fulfil its mandatory assessed contributions, mainly to the EU. As a country with a limited ODA budget, the Slovak Republic pays great attention to its multilateral partnerships. It also increasingly provides voluntary contributions to some UN agencies and multilateral development banks as a way of pursuing its strategic priorities, such as migration management.
Although its relative share in total ODA has been decreasing since 2014, multilateral aid still represents the most important part of Slovak ODA. In 2016, the Slovak Republic’s total funding of the multilateral system amounted to USD 80.31 million, representing 75.8% of its total net ODA at current prices.
Contributions to the EU make up most of the Slovak Republic’s multilateral ODA
Most of the Slovak Republic’s multilateral ODA is made up of mandatory contributions to the EU’s budget; this share is increasing with Slovak economic growth, and voluntary contribution to the European Development Fund (EDF). Taken together, the EU institutions represented 88% of the Slovak Republic’s gross multilateral disbursements in 2016, rising from USD 53 million in 2015 to USD 70.3 million in 2016. As it represents such a significant part of ODA, great attention is paid to the evolution of the EU’s development policies. The Slovak Republic is active in relevant committees, such as the European Council Working Party on Development Co-operation (CODEV) and the European Council Working Party on Humanitarian Aid and Food Aid (COHAFA). It also amplifies its voice by participating in joint donor positions, for example through the Višegrad Group (see Chapter 1 and Box 5.1).
Contributions to the UN and other multilateral banks are increasing
The Slovak Republic provides both assessed and voluntary contributions to UN specialised agencies, programmes and funds, amounting to 8% of its gross multilateral ODA in 2016. Its total core contributions to the UN system are increasing, from USD 4.02 million in 2015 to USD 6.40 million in 2016. Earmarked contributions to specific projects and funds were USD 2.85 million. The Slovak Republic has a long-term relationship with the UNDP, which it views as a key partner, and to which it started to provide core contributions in 2017.
In 2016 the Slovak Republic provided USD 3.5 million (4%) as core contributions to other multilateral organisations. This included the International Organisation for Migration, which is an increasingly strategic partner during the migration crisis. The Organisation for Security and Co-operation in Europe was also allocated 19% (USD 0.67 million) of the Slovak Republic’s multilateral ODA, in line with its focus on peace and security and on Eastern Europe. This reflects how the Slovak Republic is paying greater attention to aid effectiveness and alignment with its strategic priorities, following the biannual performance assessment started in 2016 (Chapters 5 and 6).
The World Bank Group received USD 9.7 million of Slovak aid in 2015 (14% of its gross multilateral disbursements) as part of the 18th replenishment contribution to the International Development Association (IDA). During the peer review meetings, the Slovak Republic indicated its intention to contribute to the Green Climate Fund and the Adaptation Fund to help developing countries build resilience and adapt to climate change.5
Finally, the Slovak Republic reported to the United Nations Framework Convention on Climate Change (UNFCCC) USD 1.23 million as climate-specific finance to developing countries in 2014 (latest data available). This was down from USD 1.52 million in 2013, USD 4.31 million in 2012, and USD 2.12 million in 2011 (UNFCCC, 2016).
Financing for development
The Slovak Republic encourages other development actors, such as the EU, to mobilise additional development finance other than ODA. Its Export Credit Agency EXIMBANKA SR has developed a concessional loans scheme. The Slovak Republic is committed to collaborating with the private sector; at present, this is implemented through ODA grants to help companies enter developing country markets.
The Slovak Republic is considering how ODA might serve as a catalyst for private investment
The Slovak Republic recognises the importance of using financial sources other than ODA to support development in partner countries and is making efforts in piloting alternative finance mechanisms to attract additional development funding from private resources. However, the Slovak Republic itself provides no other development finance additional to ODA and its partnerships with the private sector consist of ODA grants to help private companies enter developing country markets. Things are changing, however: a specific paragraph in the Development Assistance Law dedicated to Concessional Loans is valid since 2016 but further legislative updates are still necessary before the Slovak Republic´s Export Credit Agency, EXIMBANKA SR, can launch its first project under the concessional loan scheme (Chapter 5). In addition, Slovakia together with other V4 countries is making efforts to involve the private sector in projects financed by the IFC.
References
Government sources
MFEA (2017), “OECD DAC Peer Review 2018: Memorandum of the Slovak Republic”, unpublished, Ministry of Foreign and European Affairs of the Slovak Republic, Bratislava.
MFEA (2013), “Mid-term strategy for development cooperation of the Slovak Republic for 2014-2018”, Ministry of Foreign and European Affairs of the Slovak Republic, Bratislava, https://www.mzv.sk/web/en/foreign_policy/slovak_aid.
Other sources
OECD (2018), “2018 Report on the DAC untying recommendation”, OECD Publishing, Paris, http://www.oecd.org/dac/financing-sustainable-development/development-finance-standards/DCD-DAC(2018)12-REV2.en.pdf.
OECD (2017b), “DAC Statistical Reporting Issues in 2016”, Working Party on Development Finance Statistics (WP-STAT), (unpublished), OECD, Paris.
OECD (2017c), "Slovak Republic", in Development Co-operation Report 2017: Data for Development, OECD Publishing, Paris, https://doi.org/10.1787/dcr-2017-29-en.
OECD (2016), "Slovak Republic", in Development Co-operation Report 2016: The Sustainable Development Goals as Business Opportunities, OECD Publishing, Paris, https://doi.org/10.1787/dcr-2016-en.
UNFCCC (2016), “UNFCCC Standing Committee on Finance: 2016 Biennial Assessment and Overview of Climate Finance Flows Report”, United Nations Framework Convention on Climate Change, http://unfccc.int/files/cooperation_and_support/financial_mechanism/standing_committee/application/pdf/2016_ba_technical_report.pdf.
Notes
← 1. 1 The 2014-2018 mid-term strategy identifies three partner countries – Afghanistan, Kenya, and Moldova (the latter became a programme country in 2014) – and six projects countries – Albania, Belarus, Bosnia and Herzegovina, Montenegro, Georgia, Kosovo, and Ukraine. Finally, South Sudan and the Syrian Region (since 2016) are considered as countries with exceptional humanitarian and development needs (MFEA, 2017).
← 2. Those are: (1) education, (2) healthcare, (3) good governance and building of civil society, (4) agriculture and forestry, (5) water and sanitation, (6) energy, (7) support of market environment (MFEA, 2013).
← 3. 3 Fund for Africa; the EU facility for refugees in Turkey; the EU Trust Fund in response to the Syrian crisis – MADAD; the UNDP Crisis, Prevention and Recovery Thematic Trust Fund; and a voluntary financial contribution to support the activities of the OECD DAC; core support to NGOs, other private bodies, PPPs and research institutes, such as assessed contributions to ISTA for 2017 and a contribution to ICRC (International Committee of the Red Cross); financial contributions to project-type interventions, such as the development co-operation projects implemented by the Višegrad Fund; and contributions for development awareness initiatives (CRS dataset).
← 4. Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Georgia, Macedonia, Moldova, Serbia and Ukraine.
← 5. The Adaptation Fund finances projects and programmes that help vulnerable communities in developing countries adapt to climate change. Initiatives are based on country needs, views and priorities. See more at https://www.adaptation-fund.org/about/