9. Estimates of official development assistance funding for COVID-19 response in 2020

Mags Gaynor
Development Co-operation Directorate, OECD
Anita King
Development Co-operation Directorate, OECD
Yasmin Ahmad
Development Co-operation Directorate, OECD
  • Total funding commitments and disbursements by providers of development co-operation for COVID-19 have been difficult to track and determine. Initial and partial estimates from an OECD survey suggest that Development Assistance Committee (DAC) members mobilised USD 12 billion for COVID-19 support to developing countries.

  • Comprehensive, real-time tools for tracking pledges, disbursements and allocations would increase funding transparency and help identify where official development assistance could best fill gaps in a crisis and in normal times.

  • Shifts in funding allocations to health and humanitarian assistance from other sectors could hamper a comprehensive multi-sector approach to addressing COVID-19 and achieving the Sustainable Development Goals. It will be important to find the right balance between resources for crisis response and longer term investments in sustainable development.

  • Looking ahead, there are signs that a funding crisis is on the horizon. Many DAC members indicated they would protect official development assistance (ODA) budgets and some plan to increase ODA budgets for 2021. Yet, given the global economic impacts of the pandemic, it is not certain that ODA volumes can rise or even hold steady over the coming years.

As the COVID-19 crisis evolved, development co-operation actors optimised flexibility and adapted their funding and budgets. This chapter draws on interviews with DAC members, a recent survey conducted by the OECD1 on financing for COVID-19 response and other literature.

Though many new initiatives and co-ordinated actions emerged to respond to COVID-19, calculating the total international response to COVID-19 in developing countries has proven challenging, raising more questions at the end of 2020 than answers. Questions range from how much was committed and then disbursed, to how much funding was extrabudgetary, and how much was reallocated from existing programmes, and at what cost? It also remains to be seen how much international development finance for COVID-19 will be counted as ODA. On this last point, the OECD (2020[1]) published an initial indication of ODA eligibility in July 2020. The DAC Working Party on Development Finance Statistics also approved two tools to track COVID-19-related expenses in the health sector and other sectors.

By any estimate, demand far outstrips funding. African governments are calling for significantly more support (Ofori-Atta, 2020[2]). Based on International Monetary Fund (IMF) estimates, the gap in finance available to help developing countries deal with the fallout of COVID-19 could be as much as USD 2 trillion (Kharas and Dooley, 2020[3]). For humanitarian needs alone, the overall global funding gap was USD 24 billion at the beginning of November. Humanitarian appeals are the highest on record – a total of USD 39 billion, of which USD 9.5 billion is specifically for COVID-19 through the Global Humanitarian Response Plan (UN OCHA, 2020[4]). At the same time, OECD governments mobilised stimulus packages that account for 84% of total world stimulus packages, or a total of USD 9.9 trillion as of September 2020 based on IMF (2020[5]) data.2

Estimates of development finance for COVID-19 are presented in Table 9.1. The figures, which are preliminary and partial, are drawn from a survey conducted by the OECD in October 2020.

Key funding trends and findings from the OECD survey and interviews with DAC members on funding are:

  • Seventeen DAC member countries indicated that they had provided new or additional funding to 2020 budget envelopes, amounting to about USD 7 billion to be spent in 2020 and thereafter. Germany (Box 9.1) and the United States (USD 1.1 billion; See Box 4.1 in Chapter 4) account for a high share of the total.

  • An estimated USD 4.8 billion of DAC member’s commitments have been re-programmed towards COVID-19 response in 2020, some of which through redirecting resources from development programmes that were delayed or stalled due to the crisis, for example scholarships and training or volunteer programmes.

  • Development actors adapted many existing programmes so that they could continue to deliver in a COVID-19 context or address altered contexts and needs. Most DAC members indicated that they have not discontinued ongoing development programmes.

  • Providers are focusing on countries most affected or at risk, low-income countries and fragile regions, and their priority countries. For example, the World Bank responded that USD 25 billion of the USD 43 billion it had committed by September 2020 went to IDA-eligible countries, i.e. the 74 mainly low-income countries that are eligible to borrow at concessional rates from the International Development Association (IDA). Fragile and conflict-affected economies received USD 7.6 billion of the total (World Bank, 2020[8]).

The Arab Coordination Group, the second-largest grouping of development co-operation providers after the DAC, committed to allocate USD 10 billion to support developing countries in their immediate response and recovery efforts, including through provision of medical supplies and protective equipment, and to provide further financial assistance for agriculture, food security, energy, education, and micro and small and medium-sized enterprises. One member, Saudi Arabia, pledged USD 500 million to support partner countries in mitigating the impacts of the crisis, extending its partnerships with the World Health Organization, the World Food Programme and Gavi, the Vaccine Alliance and is using its Group of 20 (G20) chairmanship in 2020 to support international co-ordination of the COVID-19 economic response. Another member, Kuwait, postponed to 2021 debt repayments from countries on the IDA eligibility list that were due between 1 May and 31 December 2020.4

Development agencies balanced two competing demands in 2020: responding to the impacts of COVID-19 and ensuring that resources continue to be invested in longer term development priorities. Budget reallocations by development agencies released billions to respond to new needs linked to COVID-19. France, for example, raised EUR 1.2 billion for COVID-19 through reallocations (Box 9.2).

Good pledging practices agreed by the DAC include, but are not limited to, stating the date or period covered, the source and terms of finance, and the baseline against which to assess any claims of additionality to existing flows or existing commitments (OECD, 2011[11]). The variety of approaches and sources of funding for the response to COVID-19 makes the task of tracking pledges and commitments challenging. For example, Devex set up a portal to track how funding pledges translated into contracts and projects, but it only proved possible for a fraction of total pledges (Box 9.3). Moreover, the time lag in official ODA statistical reporting to the OECD means that preliminary official aggregate data on ODA for COVID-19 will not be available before the first quarter of 2021. The OECD-DAC Creditor Reporting System is a statistical system and does not monitor real-time tracking of pledges, disbursements and allocations.5

OECD governments are projecting a drop in national income and an increase in public expenditure at home. Sustaining or increasing ODA in this context sends a strong signal of global solidarity and several DAC members indicated at the November 2020 DAC High-Level Meeting that they will protect or increase their ODA budgets in 2021. However, the combined GBP 7.2 billion (USD 9.3 billion) cut in the United Kingdom’s 2020 (GBP 2.9 billion) and 2021 budget (GBP 4.3 billion), which is a major provider of ODA, makes it increasingly unlikely that overall total DAC ODA volumes will hold steady in 2020 and 2021 (House of Commons Library, 2020[12]).

COVID-19 has also triggered a funding crisis for development organisations, particularly local and international civil society organisations (CSOs). In recognition of their pivotal role, OECD governments and foundations have made their funding more flexible and granted exceptions to support their partners through a challenging period. For example, Italy provided EUR 13 million (USD 15 million) to help CSOs through the crisis; Germany reduced the co-finance element that CSOs must provide from 25% to 10%; Switzerland provided credit to the International Committee of the Red Cross and many UK charities have made use of the government’s Coronavirus Job Retention Scheme. However, despite these exceptional measures, many CSOs have been forced to halt programmes and downsize or lay off staff. Moreover, such exceptional measures to support CSOs may not be sustainable over time.

Initially, funding for COVID-19 response became available from funds that had not yet been committed or where lockdown situations and travel restrictions forced the delay or cancellation of programmes and activities such as volunteer programmes, posting experts abroad, scholarships, workshops and conferences. As time passed, additional reallocations came from delayed or underperforming programmes.

Lessons from past crises suggest that an effective response to COVID-19 requires concerted action across multiple sectors. It is thus critical to maintain an adequate distribution of ODA across key sectors, both for the COVID-19 response and for longer term development. Initial fears that the development community’s immediate pandemic response would have a narrow health focus did not fully materialise – through DAC networks, members have indicated that they prioritised visible secondary impacts of the crisis such as deteriorating governance and gender-based violence. For example, the United Kingdom set a strategy to ensure that resources to respond to the short-term impacts of COVID-19 are not diverted from priority areas such as girls’ education, climate, sexual and reproductive health, and gender-based violence services. The government of France, on the other hand, expects that ODA for education-related investments will fall in the short term and that they will catch up in the future. This reduction mirrors a more general trend of decreased funding to education in 2020, in spite of all the evidence linking education, particularly girls’ education, to better economic, social and human development, as discussed in Box 9.4. Some DAC members reported they cut investments targeting agriculture.

There was, nevertheless, a visible shift in funding towards health and humanitarian assistance. While a humanitarian response is one instrument to meet immediate needs, it is costly and can draw funding away from programmes aimed at long-term investments in systems that build resilience (OECD, 2019[13]). Norway and other DAC members have expressed concerns about reprioritisation of health budgets towards the COVID-19 response and away from other longer term health support, while noting that many OECD countries are grappling with a similar competition for funding within their own health systems. The increase in humanitarian funding plateaued by mid-2020, but assessments of emergency needs are still being revised upwards (International Crisis Group, 2020[14]; Norwegian Refugee Council, 2020[15]).

According to a recent analysis of International Aid Transparency Initiative data6 covering 70% of total ODA, ODA commitments in economic sectors and for conflict, peace and security, appear to have declined in 2020 compared to 2018 and 2019 levels, while the proportion of overall ODA going to low-income and fragile economies has not increased (Dodd, Breed and Coppard, 2020[16]). More comprehensive and detailed analysis will be possible by late 2021 when all project data for 2020 are reported to the OECD Creditor Reporting System.7

The growing gap between needs and resources in developing countries raises three financing challenges for international development co-operation. The first is how to mobilise more resources through ODA and other sources, to help make up the USD 2 trillion shortfall in COVID-19-related funding for developing countries, while also meeting financing commitments for the Sustainable Development Goals (OECD, 2020[23]). A second challenge is making existing development finance work harder to achieve development results. Some new and innovative approaches to programming and delivering development co-operation may be needed to meet this challenge, including tapping into local capacity, cutting costs, reducing duplication, and investing more in prevention and preparedness to reduce future risks (see Chapter 4). The third financing challenge is to focus stretched ODA resources on the countries and people who are most in need and least able to cope.

As a first step towards raising more financing, OECD countries could meet the targets they have set and find innovative ways to raise the money, such as setting aside a proportion of domestic stimulus packages for developing countries. Full accountability and transparency for all the funding decisions taken to date will require an ex post assessment of the extent to which pledges are honoured and whether funding is allocated in line with needs.

References

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Notes

← 1. The OECD conducted the survey on COVID-19 funding in October 2020; 28 of the 30 DAC members responded.

← 2. This calculation is based on data in the Database of Fiscal Policy Responses to COVID-19 as of September 2020. The IMF (2020[5]) database summarises key fiscal measures announced or taken by governments in 190 economies.

← 3. The World Bank Group committed USD 160 billion in total. Included in this total is USD 104 billion from the IDA (mainly for low-income countries) and the International Bank for Reconstruction and Development. The remaining amount is from the International Finance Corporation and the Multilateral Investment Guarantee Agency. For more information, see World Bank (2020[8]).

← 4. See Islamic Development Bank (2020[25]).

← 5. Several development actors report funding information through the International Aid Transparency Initiative (IATI, 2020[24]), a global initiative to improve the transparency of development and humanitarian resources and their results in addressing poverty and crises. Information is available at: https://iatistandard.org/en.

← 6. The IATI database includes data from 15 bilateral donors, 7 international financial institutions and 11 multilateral organisations, thus covering an estimated 70% of ODA.

← 7. The Creditor Reporting System has been amended to track COVID-19 expenses, based on what the DAC agrees can be reported as ODA. This will allow for analysis of 2020 data that will be reported to the OECD in 2021 and available on line by late 2021.

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