Annex B. Methodological notes on financial flows to fragile contexts

Official development assistance

Like the 2015 report, this report uses official development assistance (ODA) excluding debt relief as its primary metric in examining aid flows. This choice allows the study of flows that enter developing countries, instead of debt that has been forgiven on a country’s balance sheet. The total ODA is shown for all donors, not just Development Assistance Committee members.

It was decided for this report to convert current USD figures into constant 2014 USD using the corresponding US GDP deflator to show financial flows over time in real terms. However, it should be noted that using this methodology to convert the flows into constant USD is intended to capture the scale of the amount of flows from the development assistance provider’s perspective and may or may not be an accurate representation of the scale of the amount from the recipient country’s perspective.

Chapter 5 analyses Official Development Assistance in the context of overall financial flows towards fragile contexts. It is interesting, in this context, to exclude debt relief from ODA and focus on actual inflows between donor countries and fragile contexts. Chapter 6, by contrast, scrutinises the relations between ODA and the fragility profiles of recipients, and debt relief was deemed relevant to this analysis.

Remittances

Remittances are shown net. Data are sourced from World Bank (2016a), “Personal remittances received (current USD)”, World Development Indicators (database), http://data.worldbank.org/indicators, converted to constant 2014 USD prices.

Foreign direct investment

Foreign direct investment is shown net. Data are sourced from World Bank (2016b), “Foreign direct investment, net inflows (Current USD)”, World Development Indicators (database), http://data.worldbank.org/indicators, converted to constant 2014 USD prices.

Data availability

In examining financial flows in aggregate, per capita and percentage of gross domestic product (GDP), data for these flows in one or more years were missing for many fragile contexts.

Beyond the question of data gaps in financial flows data, there is a more fundamental issue of missing data in population and GDP and gross national income (GNI) estimates. As a consequence, some fragile contexts that have data on financial flows cannot be counted in per capita or percentage GDP calculations. This further complicates the task of finding per capita and percentage GDP figures that are truly representative of all fragile contexts.

Care must also be taken as the group of donors reporting to the OECD has expanded over time, and thus ODA figures in particular may have increased solely because of better reporting.

As a result of all of these issues, the figures presented in this report should be taken as approximations using the best available data sources but may deviate, in some cases potentially significantly, from the actual true values of the financial flows to fragile contexts. Better data quality in this area would greatly help to improve confidence and resulting policy recommendations on financial flows to fragile contexts in the future.

Principal component analysis of aid and fragility

Table B.1 summarises the results of the principal components analysis of ODA sectors per capita (Figure 6.15).

Table B.1. Principal component statistics for ODA sectors per capita

First principal component: Magnitude of aid

Second principal component: Type of aid (long-term development vs. firefighthing)

ODA sector

Contribution

Correlation

Cos2

Contribution

Correlation

Cos2

Business

7.31

-0.73

0.53

0.37

0.10

0.01

Agriculture, forestry, fisheries

7.39

-0.73

0.54

0.02

-0.02

0.00

Industry, mining, construction

2.48

-0.42

0.18

1.24

-0.18

0.03

Population policies

1.07

-0.28

0.08

0.38

-0.10

0.01

Water and sanitation

7.40

-0.73

0.54

2.94

-0.27

0.07

Emergency response

1.84

-0.37

0.13

12.37

0.56

0.31

Budget support

3.36

-0.49

0.24

0.82

-0.14

0.02

Banking and finance

1.52

-0.33

0.11

0.36

-0.10

0.01

Energy

4.48

-0.57

0.33

13.26

-0.58

0.33

Environmental protection

2.65

-0.44

0.19

7.73

-0.44

0.20

Reconstruction and rehabilitation

3.46

-0.50

0.25

11.88

0.55

0.30

Conflict prevention, peace and security

4.71

-0.59

0.34

12.87

0.57

0.33

Government and civil society

6.39

-0.68

0.46

3.76

0.31

0.10

Trade

5.97

-0.66

0.43

1.22

0.18

0.03

Health

8.36

-0.78

0.61

0.90

0.15

0.02

Food

3.49

-0.50

0.25

1.42

0.19

0.04

Disaster prevention

5.86

-0.65

0.43

1.56

-0.20

0.04

Transport

7.56

-0.74

0.55

0.05

-0.04

0.00

Education

9.76

-0.84

0.71

1.39

0.19

0.04

Tourism

2.41

-0.42

0.18

14.32

-0.60

0.36

Communication

2.52

-0.43

0.18

11.14

-0.53

0.28

 http://dx.doi.org/10.1787/888933442197