Campaign To Date
My interest in the counting of Official Development Assistance (ODA) dates from 2002. At that time, I was Head of Office of the OECD Deputy Secretary-General responsible for the “Development Cluster” – the various bodies working on development issues within the Organisation. I had previously worked as Deputy Head of the OECD Export Credits Division and was familiar with the robust work member countries and the Secretariat had completed on the pricing of country credit risk as well as the well-founded calculations of “concessionality levels” that formed part of the Helsinki Disciplines on tied aid.
Based on this knowledge, I was highly critical of the “cashflow” (or more precisely “capital-flow”) methodology the Development Assistance Committee was then using to report the ODA of concessional loans, as this was a poor measure of the donor’s fiscal effort, which seemed to me at the heart of the commitment that had been made in the context of the 1970 agreement in the United Nations for developed countries to spend 0.7% of their Gross National Income on ODA.
In 2002, I argued strongly that the DAC should adopt a new system whereby only the grant equivalent of a loan would count as ODA (instead of the outflow and reflow of loan principal), and that these grant equivalents should be worked out using discount rates reflecting the cost of funds to the donor instead of the 10% rate that the DAC had historically used and that no longer bore any relation to prevailing market rates.
In 2021, while reading articles about climate financing following the COP-26 Summit in Glasgow, I became aware that the DAC had adopted a new system for measuring ODA and was now only counting its own calculation of the “grant equivalent” of loans. However, while this is fundamentally the right methodology, I quickly learned that the DAC had made a series of decisions, especially on discount rates, that had resulted in massive exaggeration of donor effort and over-counting of ODA. It had failed in its stated aim for ODA to measure more accurately the donor effort in concessional loans. And it was overcounting the costs of debt relief, and in some cases scoring ODA where there was no donor effort whatsoever.
Correspondence with the OECD
In February 2022, I drafted a paper setting out the key issues and highlighting some of the serious negative consequences of the DAC’s botched “reform”:
ODA in loans is being massively exaggerated, fatally undermining the credibility of the ODA figures.
Many loans that now qualify as ODA entail little or no donor effort, and some loans on commercial terms now score ODA.
The new system massively incentivises loans over grants: for a similar donor effort (cost to the donor), far more ODA is recorded for a loan than for a grant.
Incentivising loans at a time of rising global interest rates and increased debt stress across many developing and transition economies is helping to fuel an impending debt crisis.
In the area of climate finance, the DAC’s incentives to provide loans instead of grants run counter to the needs of developing countries in trying to mitigate and adapt to the impact of climate change.
The preponderance of ODA loans (instead of grants) in this area actually deters the involvement of the private sector (essential if the Billions of Dollars is going to become the Trillions of Dollars needed) as official debt reduces the headroom for countries to take on more private loans or issue bonds.
The paper concluded that reform cannot be left to the DAC – a body comprising only donor countries incentivised to exaggerate their own generosity in giving aid, and which has forfeited its authority to make rules in this area through its demonstrated inability to put in place a robust methodology for the counting of ODA.
Nine technical annexes were attached to the main paper. I also attached a series of Q&As.
I sent a series of letters to the Chair of the DAC and then to the OECD Deputy Secretary-General for the Development Cluster, copied to the OECD Secretary-General and to the Chief Statistician in the hope that they might instigate an independent review. I met with the Working Party on Development Finance Statistics (WPStat) in May 2022, and the Secretariat did eventually publish FAQs to which I sent a detailed reply. But, overall, the response has been superficial, and the major criticisms have been left unaddressed. Meanwhile, the OECD has shown itself to be unwilling to insist on compliance with their own “Twelve Key Recommendations to Ensure the Quality of Statistics”, of which the DAC’s statistics are in clear breach. Instead, the OECD seems content to continue to launder the corrupt ODA statistics of the DAC, risking its own reputation in doing so.
Documents summarising these exchanges, as well as a record of the meeting with WPStat and outside articles etc. are found below.
Having still received no substantive response (although she did have time to respond to my FT article, which you can see at the Useful Links page) I wrote a 3rd time, drawing attention to my FT and Brookings articles calling for ODA Reform.
Eventually, in October, I received an e-mail from the DAC Secretariat informing me that they had posted a set of FAQs which I was to take as the substantive response to my (and others') critiques.
I sent a detailed rebuttal of these FAQs to the relevant Deputy Secretary General, the full text of which is on the Useful Links page, and I summarise the main points on the OECD Response page.