Untied aid in Development Co-operation

Untied aid refers to loans or grants which are freely and fully available to procure from substantially all aid recipient countries and territories, and from all donors adhering to the DAC Recommendation on Untying ODA. Adherents commit to untie their bilateral ODA across a broad range of recipient countries and sectors and are encouraged to go beyond the Recommendation’s formal scope.

Untying aid promotes competition, reduces costs and supports local ownership. Tied aid restricts procurement to the donor country or a limited group of countries, raising costs and reducing aid effectiveness.

Progress is assessed using two indicators: the tying status of ODA commitments (de jure untying) and the geographic sourcing of untied contract awards (de facto untying). Results are available for bilateral ODA covered by the Recommendation and for overall bilateral ODA, based on data sourced from the OECD Creditor Reporting System and contract awards databases.

This chart tracks the annual volume and share of ODA that is untied, partially untied or tied. It shows whether donors consistently align their untying commitments over time and reveals shifts in procurement practices.

Donors can provide funding in different ways. Targeted project-based funding (e.g. infrastructure projects) is closely linked to procurement and therefore can be untied, partially untied or tied. Flexible funding (e.g. budget support, pooled funds) is not directly linked to procurement activities. Recipients decide how to spend it and it is therefore inherently untied. For this reason, flexible funding represents the most effective means of untying.

Investment projects build infrastructure and capital assets in recipient countries. As this type of aid is closely linked to procurement and typically involves large-scale contracts, it is most relevant to businesses and exporters seeking international opportunities. This also means their tying status is particularly scrutinised.

In this chart, the delivery channel indicates the type of institution implementing the project.

Untying practices can differ depending on the financing instrument. Grants are fully donor-financed, which may give donors more latitude to attach procurement conditions. Loans, on the other hand, must be repaid by the recipient country, which can shift the balance of negotiation, potentially leading to more open procurement arrangements.

Untied aid offers recipients greater flexibility in procurement and implementation, supporting local ownership, while tied aid limits where and how resources are spent. 

This chart compares the largest recipients of each, revealing whether access to more flexible forms of assistance is evenly distributed or is concentrated among certain countries.

Beyond formal untying (de jure), looking at where untied ODA contracts are awarded reveals how open and competitive they are in practice (de facto). A disproportionate share of contracts awarded to suppliers from the donor country may suggest a donor country bias, even when aid is formally untied. 

Commercial procurement contracts (for works, services and supplies) are typically awarded to private sector firms through competitive tendering, governed by national procurement regulations. Selection is driven primarily by price and technical quality.

Grants are typically awarded to non-profit organisations, community-based actors or public interest entities through open calls for proposals. Selection is not driven by price but by alignment with developmental, social or humanitarian objectives, and the capacity to deliver them effectively. 

Untying practices are shaped by the development status and capacities of local suppliers in the country where the contract is implemented. In general, the stronger the local market, the more likely it is that contracts are awarded to local suppliers.