Thank you for joining us for the launch of the 2020 Official Development Assistance (ODA) Levels and Trends release.
Today, we are discussing support for developing countries – which translates to support for the global recovery – in the midst of an unprecedented developmental challenge.
In the context of the COVID-19 crisis, ODA remains essential, and the OECD has consistently called on donors to at least maintain and ideally increase commitments despite budgetary pressures.
Whereas some predicted ODA would be on the chopping block, in fact, foreign aid from official donors rose to an all-time high of USD 161 billion in 2020, up 3.5% in real terms from 2019. This boost was due in part to additional spending mobilised to help developing countries deal with the COVID-19 crisis and an increase in bilateral sovereign lending by some donors.
In April of 2020, when we were watching the unprecedented COVID-19 crisis unravel, the OECD predicted that ODA commitments would be maintained. This was because of the historical evidence showing that aid levels showed countercyclical trends during previous periods of economic downturn, health crises and natural disasters.
In fact, over its 60-year history, ODA has been the most stable source of external finance for developing countries. We also demonstrated how ODA trends are not necessarily tied to GNI; they are driven, above all, by political will and global solidarity.
Many donors have demonstrated this political will exists and can be built upon, at this critical moment. Foreign aid has risen in a year that also saw all other major flows of external income for developing countries – such as foreign direct investment, trade and remittances – decline due to the pandemic. Available data show a 13% decline in total external private finance and an 8.5% decline in trade volumes in 2020. This is against the backdrop of rising debt risks, strained domestic resources, stagnating global growth, protracted conflicts and climate-related crises.
However, we can and need to do better. Increased financing needs, coupled with a decline in resources, has widened the SDG financing gap in developing countries, estimated to have increased by at least 50% due to the pandemic, to 3.7 trillion in 2020 US dollars.
Financing the recovery has also been widely unequal. The fiscal response to COVID-19 was on average 7 times smaller in low-income countries than in advanced economies, allowing debt-to-GDP ratios to rise by 20 to 30 percentage points of GDP.
It is crucial to strengthen ODA investments and better align them to support a sustainable, green and inclusive recovery for developing countries. Governments globally have provided 16 trillion dollars’ worth of COVID stimulus measures. Meanwhile the global vaccine distribution facility COVAX remains underfunded. Moreover, we have only mobilised 1% of this 16 trillion for ODA, which helps developing countries cope with a crisis that is unprecedented in our lifetimes. This crisis is a major test for multilateralism and for the very concept of foreign aid. We can, and we must, do better.
The international community is facing a test to avoid a “lost decade” and build forward better, greener, and more inclusive. The 60 year trendline shows the political will exists to maintain ODA. Now we need to leverage this to make the kind of investments that will produce a truly global recovery. This year, due to COVID-19, over 100 million people were pushed into extreme poverty in 2020, and 270 million faced starvation. Vaccine rollout is unequal and vaccine programs for developing countries remain underfunded. We need to make a much greater effort to help developing countries with vaccine distribution, with hospital services and to support the world’s most vulnerable people’s incomes and livelihoods. This is precisely the moment to scale up ODA levels to match these demands.
This is my last ODA Press Conference as OECD Secretary-General.
I leave the OECD with the trust that, in 2021 and beyond, donors will continue to build on this year’s momentum to supportg developing countries now and in the coming years, so that we can build a truly global recovery.