By Bridget Steele, Sydney Pagan and Aniket Bhushan
Published: February 12, 2021
In early April, the Organization for Economic Cooperation and Development’s Development Assistance Committee (OECD-DAC) will release preliminary official development assistance (ODA) figures for 2020. This release is expected to include the OECD-DAC’s estimate of donor contributions to the global COVID-19 response. The estimate is likely to show an increase in ODA for many donors. How should these data be interpreted? Our analysis suggests caution.
Crises offer opportunities to align response with political incentives. While donors often increase aid spending in the short term in response to crisis, sharp short-term increases are never sustained. We highlight three recent cases where political incentives and messaging created long term challenges from a data integrity perspective: 9/11; the “Ebola effect”; and the refugee crisis.
COVID-19 may be worse in depth and duration than our three cases. From a donor response perspective, however, we expect it will be no different. Given the health and economic impact of the crisis on donor countries, aid spending may be particularly vulnerable to fiscal realities coming out of the exceptional crisis period.
Rationalizing aid increases in the middle of a crisis in the name of solidarity and equity is politically attractive from a progressive perspective. However, it can create perverse incentives and is problematic from a data integrity perspective. Far more useful would be for donors to commit to modest increases that are sustainable beyond crisis mode. As we demonstrate, donors should be especially careful with their rhetoric given the risk that collective action and solidarity can easily fray at the edges.
It is too early to say whether exceptional aid increases in response to COVID-19 are a sign of donors ‘stepping up to the plate’. They are as much a sign of ‘plugging holes in the dam’ of an aid system that is inadequately resourced in more normal times. Without appropriate caveats and a longer-term perspective, the upcoming DAC data should be viewed with caution.
How donors respond to crisis: Three recent cases
This section provides mini case studies that illustrate how short-term donor political incentives combined with the politicization of DAC data, create long-term challenges from a data integrity perspective.
9/11, Security, and ODA
There has long been a sacrosanct distinction in defining what counts as “ODA”. Military aid and most peacekeeping expenses are not included. The DAC maintains a casebook and database on exclusions. Exclusions are a key reason why major donors maintain alternative definitions to guide fiscal allocation (in the US – ‘foreign assistance’, in Canada – ‘international assistance’). However, the proliferation of peacekeeping in the 1990s and the events of 9/11 led many members to suggest the DAC’s focus was too narrow. Some donors (Ireland and Sweden) made the case during the Gulf War that certain military expenses (medical costs) should count as ODA. After 9/11 the notion that development, conflict prevention, and peace and security were interdependent became widely accepted. DAC guidance was amended in 2006 and 2013 to include a portion of multilateral peacekeeping within ODA. The wars in Afghanistan and Iraq led to further expansion. Research since finds the correlation between aid increases and security factors, while complex, strengthened around crisis events. A review of donors, Canada included, finds that since 9/11 donors increasingly linked their aid budgets with security concerns. Aid levels increased due to security factors and intervention but then fell back sharply below trend (Canada’s aid to Afghanistan is an example).
The “Ebola Effect”
Prior to the emergence of the COVID-19 pandemic, donor ODA spending on infectious diseases was declining. A key reason for this has come to be known as the “Ebola Effect”. According to the Secretary General of the OECD, “the ‘Ebola effect’ – or an increased funding because of the outbreak – ended abruptly in those countries affected by the epidemics in 2015. In 2018, humanitarian funding further dropped by 77%, and was not offset by development funding. The “Ebola effect” suggests that while increased aid commitments are needed beyond the urgency of an immediate crisis, this typically does not happen.
The refugee crisis brings concerns regarding politicization and DAC data sharply into focus. Between 2014 and 2016 ODA from donor countries increased dramatically from approximately US$130 billion to over US$153 billion. But this dramatic rise in aid levels led to almost no increase in flows to developing countries. Why? The reason is that the majority of the increase was in the form of ‘in-donor refugee costs’ which quintupled between 2010 and 2016, exceeding humanitarian aid for the first time. Donor political incentives and messaging aimed at domestic audiences meant that unspecific DAC guidance was applied inconsistently. Civil society groups warned unclear rules meant donors could report increases when aid levels (excluding refugee costs) were in fact declining (e.g. in Norway).This inconsistency allowed some donors to achieve their commitment to 0.7% ODA/GNI (UK) and others to unintentionally meet the target with a 25% increase in refugee costs counted as ODA that involved no additional outflows (Germany). Again, these bounces were short lived and the decline to trend inevitable.
The above examples demonstrate how incentives, messaging, and politicization combine to create long-term challenges from a data integrity perspective. Similar factors are already at play during COVID-19 and are likely to affect the DAC’s preliminary data on global COVID-19 response.
COVID-19 and preliminary DAC data: Two key reasons for caution
The OECD-DAC’s April 2021 preliminary data release is expected to provide estimates of donors’ COVID-19 response based on the application of the DAC’s new approach. Two key issues suggest caution: methodology and timing.
Methods are preliminary
The DAC has been iterating its approach and has compiled internal estimates based on data volunteered by donors to guide the methodology. The DAC is using both a pilot keyword approach newly extended to COVID-19, and sector coding. A key contentious issue has been COVID-19 related research spending. Clearly these costs are not distributed uniformly across donors. Recent guidance suggests which research costs are ODA-eligible and which are not (the latter includes the bulk of patent protected research and development into COVID-19 vaccines). However, the latest guidance remains preliminary and is subject to change.
Our analysis of donor spending on COVID-19 suggests there may be other issues. For example, in many cases donors have ‘pivoted’ existing projects (and funding balances) towards COVID-19 response. How each donor has tracked and accounted for this is unclear and likely inconsistent. Global Affairs Canada for instance has taken the approach of setting up a new element in each COVID-19 “pivot project” with a distinct amount that is specific to the purpose of responding to COVID-19. It is unclear whether others have or will take a similar or comparable approach. In cases where pivoted balances make up a significant share of a donor’s global response, inconsistency in the approach among donors can impact comparability and create a misleading global picture.
Furthermore, our analysis indicates there are differences between donor announcements and data from international institutions that intermediate donor contributions. For example, donor announcements on contributions to the main global COVID-19 response mechanisms like the Access to COVID Tools Accelerator (ACT-A) do not line up with the WHO/GAVI/Covax’s own data tables (accounting for know factors such as currency). Part of the issue is the variability in donor commitments which in some cases (for example, France’s contribution to the Covax AMC) are contingent on other criteria being met. Part of the issue may also be timing (more on this below). In general, it would not be unexpected if there are significant gaps between data on a ‘commitment’ vs. ‘disbursement’ basis, an often-overlooked distinction. In a crisis that has shown how much speed and timing matter, such gaps would weaken the efficacy of and confidence in donor response.
Timing and reporting lags
While donors operate on a fiscal cycle basis, the DAC normalizes data to the calendar year. In some cases (for example, Canada) this can make a big difference in interpreting ODA data. The most important point to note is that while the DAC may release preliminary aggregates in April, detailed disaggregated data will only become available in late 2021. This lag, given the nature of the crisis, may render the picture presented by the aggregated data problematic to interpret and validate.
Some of the largest ODA-eligible contributions to the global COVID-19 response have yet to take place. For example, the Biden administration’s yet to be approved and appropriated US$1.9 trillion stimulus package contains provision for $11bn in global COVID response. This is in addition to an emergency package approved only in December 2020 which included provision for global vaccination, disbursal of which (at last check) was yet to take effect. It is important to note there are further lags between high level appropriations, and specific investments and contributions. Some of Canada’s largest contributions (for example, to WHO’s ACT-A) were also only agreed in December, and much of the disbursement has yet to take place.
As it relates to timing, an additional factor is that the crisis is not over. While some countries are rapidly vaccinating, for others procurement has faced barriers. It is possible, if not likely, that countries that are the focus of ODA, the poorest and most vulnerable, will lag in vaccination well beyond artificial fiscal and reporting timelines. Most of the global response mechanisms are still reporting funding gaps, just to procure vaccines and respond to health sector needs, let alone to stimulate economic recovery. To date, donors have collectively and individually provided little indication of how they will rectify the diversion of resources away from other sectors to health.
The impact of COVID -19 on the aid system and ODA data will take place further down the road. Early estimates of donor response should be treated with a great deal of caution.
Additional CIDP analyses on COVID and ODA
- 2020 Fall Economic Statement and IAE Scenarios for Canada
- Building Back Better: Four Commitments Canada Should Make on International Development
- Throne Speech: Opportunity to Stimulate Canada’s Support for Development
- ODA is Recession Proof: A Reality Check
- ODA in response to crises: Portfolio risks and fragmentation