Remarks by Angel Gurría
Paris, France - April 16, 2020
(As prepared for delivery)
Ladies and Gentlemen,
Thank you for joining us for the launch of the 2019 Official Development Assistance (ODA) levels and trends.
Today, we are discussing support for development in the midst of an unprecedented development challenge. And this is only the beginning. The COVID-19 pandemic has spread in a matter of weeks across the world’s major advanced and emerging economies, bringing with it severe suffering; it is now hitting some of the poorest and most fragile nations.
This crisis comes against the backdrop of strained global trade, stagnating global growth, protracted conflict and climate-related crises – not to mention the constrained fiscal space and existing challenges in the health and social structures in many countries.
Even if all countries are fragile in the face of this disease, its impact will not be equal everywhere. The consequences of the epidemic for developing countries will likely be harsher and longer-term. Along with crippling macroeconomic effects, key revenue-generating sectors will suffer – such as trade and tourism – and small and medium enterprises may be particularly impacted. Moreover, certain populations are more vulnerable to the effects of the crisis such as women, those working in informal sectors, or those living in Small Island Developing States.
The Development Assistance Committee (DAC) – was founded after World War II with the vision to provide a strong development co-operation response to the global recovery – this same force is critical again as we collectively overcome the COVID-19 crisis.
On a positive front, the data we are presenting today shows that in 2019, ODA by member countries of the OECD DAC, totalled 152.8 billion US dollars. An increase of 1.4 percent in real terms compared to 2018. This is largely a result of the DAC maintaining its commitment to increase aid to low income countries. Net bilateral aid flows from DAC members to least developed countries rebounded after a drop in 2018. In 2019, we saw an increase in real terms of 1.3% to Africa, 0.4% to low-income countries overall, and 3.8% to lower-middle income countries.
Overall, eighteen DAC member countries increased their ODA in 2019. G7 donors provided 75% of 2019 ODA, and DAC-EU countries increased aid to provide 55% of the total.
However, especially in light of the current circumstances, a much larger effort is needed. DAC Members should maintain, and wherever possible, boost respective commitments to developing countries. We must be more ambitious if we are to support those most vulnerable.
Given the current global economic crisis and the impact on many DAC countries, there is a fear that budgets – including ODA – will be under threat. However, looking at historical trends, ODA has not only been a stable source of development financing, but has also cushioned the immediate impact of previous crises.
For example, we have seen this following the Mexican debt crisis in the early 1980s; the recession of the early 1990s; and the financial crisis in 2008.
Net ODA rose by 69% in real terms between 2000 and 2010 after the Millennium Development Goals were agreed in 2000. And since 2010, even though we have witnessed a slowdown in the rate at which ODA has increased, it has doubled in volume compared to 2000.
The DAC can fulfil this role again today – and remains a strong partner to mitigate COVID-19 related challenges. Donors can support developing countries manage immediate impacts of the pandemic and large negative spill-over effects.
First, greater support to healthcare systems, which can collapse as hospitals and other health providers are saturated, is crucial. Concessional finance for the health sector from all donors averaged 26 billion US dollars per year (in real prices) between 2016 and 2018. Nearly half of this total was for basic health programmes, about 40% for population policies, and the remaining for other health programmes. Total ODA for infectious diseases amounted to 6 billion US dollars in 2018. This represents a 16% decrease in real terms compared to 2017 levels, due to a decrease in funding for Ebola.
Second, health systems in fragile contexts are not weak in isolation, and pandemic response is not just an injection. It requires robust, strategic, and long-term support. The COVID-19 pandemic highlights the multi-dimensional aspect of fragility, and the importance of building broad system resilience. This requires appropriate governance, trust, and sound economic management.
In this respect, the international donor community can learn from the Ebola crisis to make more strategic, sustained funding plans across development and humanitarian aid in fragile contexts. The “Ebola effect” – or increased funding because of the outbreak – ended abruptly in those countries affected by the epidemics in 2015 ; and in 2018, humanitarian funding further dropped by 77%, and has not been offset by development funding. Increased aid commitments should continue beyond the urgency of the immediate crisis.
Third, this crisis will have impacts that require development finance investments well beyond health care. ODA will remain a vital source of support for countries to continue development gains, and offset COVID-19 supply and demand shocks.
According to the IMF, outflows of capital from emerging markets since COVID-19 began are twice as large as during the global financial crisis. The pandemic hit at a time when foreign direct investment flows were already lower than they had been since 2010, and the OECD projects that even under the most optimistic scenario, they will be reduced by at least 30 percent in 2020 . Remittances – a lifeline in many developing countries especially in times of crisis – still face high transaction costs, of an average 7%, which could be reduced or eliminated entirely. And domestic resources – the main source of financing for developing countries – will also be under pressure, increasing debt risk for the 44% of low-income countries already under distress. Actions in the G7 and G20 to work with the international community to tackle debt management are crucial.
Last but not least, supporting countries to mitigate these shocks in the near term, however, does not mean leaving them exposed to other ongoing and future crises. Aid efforts need to be sustained over time and resources must not be diverted from other existing crises– including climate fragility and other development co-challenges. We must not lose sight of the many underlying development challenges that persist, where ODA flows remain important.
For example, inequalities persevere – and are exaggerated by this crisis – and women are disproportionately affected. Aid that targets gender equality as a principal objective, however, has remained consistently low over time at around 4%. In the health sector, aid that integrates gender equality and women’s empowerment has not surpassed 50% in the past decade; and for infectious diseases control specifically, it was only 24% in 2017-18. Given what we know about the critical role of women during health crises – as the bulk of workers in the health sector and primary care givers at home, and facing higher risks of both income loss and of increased violence – development partners should now, more than ever, take action to better support gender equality.
Ladies and Gentlemen:
As never before, the COVID-19 crisis has exposed our global interconnectedness and our shared vulnerability. In our responses we will reveal our priorities, but also our values, our sense of solidarity, and our understanding that we are facing this storm all together.
Only by acting together can we hope to effectively tackle this pandemic and get back on track to achieve the universal 2030 Agenda. The OECD is fully committed to working with all stakeholders to build back better after this crisis – ensure we put people and the planet in the front and centre of our national and international agendas. Thank you.