ODF is the leading source of external financing for most LDCs
For most LDCs, ODF – comprising of both bilateral and multilateral finance - is the largest source of external financing, followed by remittances. In 2023, ODF accounted for 55% of total external financing to LDCs – much higher than for developing countries in general, where ODF plays often a more limited role in overall external finance. Total ODF disbursements to LDCs increased from USD 50 billion in 2015 to USD 85 billion in 2023, although trends and levels vary significantly across countries.
In many LDCs, ODF equals or surpasses tax revenue
In most LDCs, ODF is comparable to - and in some cases exceeds - domestic tax revenues. On average, LDCs have a tax-to-GDP ratio of around 13%, while the ODF-to-GDP ratio stands at approximately 10%. In some countries, the ODF-to-GDP ratios reaches exceptionally high levels, sometimes approaching 40%.
Adaptation-related ODF for LDCs has grown but remains a fraction of total needs
ODF is a fundamental resource to support climate change adaptation in LDCs. Adaptation-related ODF can be reported using the Rio marker methodology applying either a principal or significant adaptation objective, as used by all bilateral and some multilateral donors, or by identifying an adaptation component, as used by multilateral development banks and other multilateral institutions (for more information on the methodologies, see this FAQ on Climate and Development Finance).
Adaptation-related ODF to LDCs has shown strong growth, more than tripling from USD 6 billion in 2015 to USD 20 billion in 2023 – although still only covering a fraction of the overall financing needs. Its share of total ODF rose accordingly, from 9% in 2015 to 24% in 2023. As a comparison, over the same period, the share of adaptation-related ODF in total ODF for non-LDC ODA eligible countries also increased, from 7% to 12%.
Most ODF for adaptation in LDCs goes to infrastructure
Across LDCs, the majority of ODF for adaptation is directed to infrastructure (which includes water supply and sanitation, transport and storage, communications and energy), followed by production (which includes banking and financial services, business and other services, agriculture, forestry and fishing, industry, mining and construction, trade policy and regulations, and tourism) and social sectors (which include education, health, population policies and reproductive health, and other social infrastructure and services). In 2022-23, 55% of the adaptation-related ODF to LDCs was provided as grants, compared to just 39% for other developing countries. The share of grant financing varies on the specific country and sector targeted.