Official development assistance – definition and coverage

Starting with 2018 data, the new grant equivalent measure of ODA became the standard for reporting, with the headline ODA figures published on that basis.

The ODA grant equivalent is a measure of donor effort. Grants and ODA loans entering the calculation of the ODA grant equivalent measure are referred to as ODA flows. The donor effort in providing ODA-eligible private sector instruments (PSI) is included in the ODA grant equivalent measure too.

Official development assistance flows are defined as grants and loans to the official sector of countries and territories on the DAC List of ODA Recipients, INGOs and multilateral development institutions which are:

1. provided by official agencies, including state and local governments, or by their executive agencies; and
2. each transaction of which:
   1. is administered with the promotion of the economic development and welfare of developing countries as its main objective; and
   2. is concessional in character. In DAC statistics, this implies a grant element of at least:
      • 45 per cent in the case of bilateral loans to the official sector of LDCs and other LICs (calculated at a rate of discount of 9 per cent).
      • 15 per cent in the case of bilateral loans to the official sector of LMICs (calculated at a rate of discount of 7 per cent).
      • 10 per cent in the case of bilateral loans to the official sector of UMICs (calculated at a rate of discount of 6 per cent).
      • 10 per cent in the case of loans to multilateral institutions [note 1] (calculated at a rate of discount of 5 per cent for global institutions and multilateral development banks, and 6 per cent for other organisations, including sub-regional organisations).
      • 10 per cent in the case of  loans to INGOs [note 2] (calculated at a rate of discount of 6 per cent).

Loans whose terms are not consistent with the IMF Debt Limits Policy and/or the World Bank’s Non-Concessional Borrowing Policy/Sustainable Development Finance Policy are not reportable as ODA.

Private sector instruments (PSI) include loans to the private sector, guarantees, equity investments, mezzanine finance instruments and reimbursable grants. The donor effort in providing PSI can be included in ODA if they are:

1. allocated to countries and territories on the DAC List of ODA Recipients; [note 3]
2. administered with the promotion of economic development and welfare of developing countries as their main objective, 
3. additional financially and/or in value, together with their development additionality. 

The indicator of donor effort in DAC statistics is the ODA grant equivalent measure.  The ODA grant equivalent measure is calculated for ODA flows, as defined above, and for ODA-eligible private sector instruments.

1. For loans to the official sector, INGOs and multilateral organisations which pass the tests for ODA scoring [conditions 1 and 2 above], the grant equivalent recorded as ODA is obtained by multiplying the annual disbursements on the loan by the loan’s grant element as calculated at the time of the commitment .
2. For PSI, the ODA grant equivalent measure includes either capital increases of PSI vehicles adjusted with their ODA coefficients (institutional approach) or grant equivalents of individual PSI activities (instrument approach) [note 4].
   See Addendum 3 of the Reporting Directives for details on PSI.

Over the years the DAC has continuously refined the detailed ODA reporting rules to ensure fidelity to the definition and the greatest possible consistency among donors.  The boundary of ODA has been carefully delineated in many fields, including:

• Military aid: No military equipment or services are reportable as ODA.  Anti-terrorism activities are also excluded.  However, the cost of using donors’ armed forces to deliver humanitarian aid is eligible.
• Peacekeeping: Most peacekeeping expenditures are excluded in line with the exclusion of military costs.  However, some closely-defined developmentally relevant activities within peacekeeping operations are included.
• Nuclear energy: Reportable as ODA, provided it is for civilian purposes.
• Migration-related activities: As for all ODA, the reporting of migration-related activities is guided by the general rule that the main objective of ODA is the promotion of the economic development and welfare of developing countries. Activities that intercept and return migrants with the main objective to restrict migration to provider countries are excluded from ODA.
• Cultural programmes:  Eligible as ODA if they build the cultural capacities of recipient countries, activities to promote the donors’ image, are excluded.