OECD Development Co-operation Peer Reviews: Ireland 2020

3. Ireland’s financing for development

Abstract

This chapter looks at Ireland’s official development assistance (ODA) figures, including the overall level and components of aid, the level of bilateral and multilateral aid, and geographic and sector allocations of bilateral aid. In line with commitments in the Addis Ababa Action Agenda and the emerging concept of total official support for sustainable development, it also examines Ireland’s efforts to mobilise finance for sustainable development other than ODA.

The chapter begins with a review of Ireland’s ODA volumes and its efforts to meet domestic and international ODA targets. It then discusses the extent to which Ireland allocates bilateral aid according to its statement of intent and international commitments, and examines the effectiveness of Ireland’s use of multilateral aid channels. The chapter concludes with a review of financing for sustainable development and how Ireland promotes and catalyses development finance other than ODA.

In brief

Ireland’s strong political commitment to reach 0.7% of gross national income (GNI) as official development assistance (ODA) is at risk of remaining unfulfilled. Since 2015, ODA volumes increased but the ODA ratio has stagnated, standing at 0.31% of GNI in 2018, despite a commitment to increase the ratio during periods of economic growth. Strong political support offers an opportunity to move in the right direction, but this requires a plan for when and how to increase spending and a commensurate investment in necessary capacities.

Ireland bilateral aid is well focused. Concentrating on its priority countries in sub-Saharan Africa, Ireland stands out for allocating a high share of its aid to least developed countries (nearly meeting the commitment of 0.15% of GNI) and to fragile states and contexts. Growing the ODA budget is an opportunity for Ireland to increase its financial weight in priority countries in line with its policy influence. Allocations fully match priority sectors and themes, as does the large share of funding to and through civil society organisations.

Multilateral aid is central to Irish development co-operation and plays an increasingly important role. It is also of high quality, with significant voluntary core funding and the use of multi-donor pooled funds where it is earmarked. Ireland’s good focus on its priority organisations could translate also into greater financial weight if the ODA budget grows.

Ireland’s financial instruments to mobilise private finance are limited to date. As its ambitions are growing, Ireland also aims to improve the development relevance of private finance, including through its influence in multilateral settings and in areas where Ireland has specific expertise. A new, whole‑of‑government approach provides momentum to help strengthen tax systems and domestic revenue mobilisation in partner countries.

Overall ODA volume

Strong political commitment to reach the ratio of 0.7% GNI to ODA is at risk of remaining unfulfilled although ODA volume has grown

Ireland has yet to deliver on its political commitment to increase its ODA ratio. The full effects of the financial crisis hit Ireland at a time when ODA had been expanding, leading to a very significant decline of the ODA/GNI ratio from 0.59% in 2008 to 0.51% in 2011 and 0.38% in 2014. Between 2015 and 2018, ODA volumes increased from USD 727 million to USD 891 million (constant 2017 prices) – still below its pre-crisis peak in 2008 (USD 1 042 million).1 Despite this growth in the ODA budget, ODA as a share of GNI did not catch up with the sustained performance of Ireland’s economy. In fact, ODA relative to GNI has stagnated since 2015. It stood at 0.31% in 2018 (Figure 3.1), the same value it is projected to stand at in 2020, based on current budget projections. This contrasts with the commitment under the previous development policy, One World, One Future, to increase the ODA/GNI ratio when economic growth would resume.

Figure 3.1. ODA as a share of GNI has not grown in line with the economic recovery

Note: * ODA as a percentage of GNI is in grant equivalents basis.

Source: (OECD, 2019[1]), Creditor Reporting System (database), https://stats.oecd.org/Index.aspx?DataSetCode=crs1 (accessed November 2019).

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Strong political support offers an opportunity to live up to Ireland’s 0.7% commitment but doing so will require a detailed plan. In A Better World, Ireland reiterates its firm commitment to reach 0.7% of GNI as ODA by 2030. The intent to expand development co-operation permeates the entire policy. In its efforts, the government can build on strong bipartisan support in the Joint Committee on Foreign Affairs and Trade, and Defence (2018[2]), which has called on the government to take action on the 0.7% commitment in its 2018 review. However, reaching a 0.7% ratio of ODA/GNI would mean tripling the current aid budget by 2030 – a massive challenge and all the more so in the face of economic uncertainty around Brexit. A Better World rightly recognises the need to increase capacity as a priority. In addition to projected annual increases of EUR 100-150 million, a significantly increased aid budget will require a plan that:

• identifies specifically where and when spending can grow

• sets out how to adapt structures, systems and capabilities to deliver and maintain quality

• foresees an advocacy strategy to make a case for annual increases vis-à-vis parliamentarians and the public at large

• incorporates scenarios to reflect economic uncertainty while enabling regular increases.

Figure 3.2. Since 2016, Ireland’s ODA allocated to and through multilaterals is trending upward while ODA allocated to and through CSOs and other bilateral ODA has remained stable

Source: Based on data from (OECD, 2019[1]), Creditor Reporting System (database), https://stats.oecd.org/Index.aspx?DataSetCode=crs1 (accessed November 2019).

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Ireland implements DAC recommendations on aid quality but could improve reporting. By providing 100% of its aid as grants, Ireland meets the recommendation on terms and conditions of aid in regard to respecting the debt capacity of recipient countries. Ireland also provides almost all of its aid untied2 and advocates for greater progress on this internationally. While Ireland declares its entire portfolio as untied and statistical reporting to the OECD is of good quality, its description of some data (OECD DAC, 2019[3]) as well as transparency (Chapter 5) could be improved.

Bilateral ODA allocations

Ireland focuses its bilateral aid on its geographic and thematic priorities, almost reaching the UN target of allocating 0.15% of ODA/GNI to least developed countries

Focusing on its priority countries in sub-Saharan Africa, Ireland stands out for allocating high shares of its ODA to least developed countries (LDCs) and fragile countries and contexts. Ireland’s eight priority countries are consistently among its top ten ODA recipients, along with crisis-affected countries for which Ireland mobilises humanitarian assistance (Table B.3). However, Ireland’s share of unallocated bilateral aid has increased significantly in recent years (from 34% in 2013-2014 to 49% in 2017-2018), while the share of aid allocated to the top ten recipients dropped over the same period (from 41% to 29%). The increase of unallocated bilateral ODA mainly related to Ireland having started reporting in-donor refugee costs. Ireland provides 75% of its country allocable aid to LDCs, compared to the DAC average of 39% (Table B.3). Together with its imputed multilateral aid, this corresponds to 0.14% of Ireland’s GNI, which is slightly below Ireland’s international commitment of 0.15% of GNI to ODA but well above the DAC average of 0.09% (Table B.7). Among DAC members, Ireland is also the donor that allocates the largest share of its allocable bilateral ODA to fragile countries and contexts (55% in 2018, against a DAC average of 35%).

If ODA grows, there is potential to increase Ireland’s financial weight in line with its policy influence. Most countries now receiving development co-operation from Ireland have a very significant donor presence. This means that Ireland’s ODA represents a relatively small share of total aid received in all of its priority countries and about 1% of total ODA in most of these countries. Only in Sierra Leone is Ireland among the top ten donors (Figure 3.3). At the same time, Ireland plays a very constructive role even in such contexts (Chapter 5, Annex C). An increased budget could further bolster Ireland’s influence in its partner countries. If Ireland chooses to engage in new partner countries, it can be useful to consider its potential added value as a donor; ODA can be an indication of this. This would also match Ireland’s commitment to supporting those furthest behind. For its humanitarian assistance, Ireland already follows the good practice of targeting ODA to forgotten crises (in addition to providing valuable core support).

Figure 3.3. Ireland is not a main ODA provider in its top ten partner countries

Note: Private development finance from philanthropy is excluded. The order of partner countries is based on gross disbursements of aid received from Ireland.

Source: Based on data from (OECD, 2019[1]), Creditor Reporting System (database), https://stats.oecd.org/Index.aspx?DataSetCode=crs1 (accessed November 2019).

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Ireland’s allocations align well with its priorities, with the exception of climate change. The ODA portfolio has a strong thematic focus on human development, governance and civil society, humanitarian assistance, and agriculture – all of the intervention areas identified in A Better World (Table B.5). Ireland has also succeeded in massively increasing its share of commitments targeting gender equality and women’s empowerment from 46% in 2013-14 to 80% in 2017-18 (Figure 3.4). At the same time, 23% of Irish bilateral, allocable aid supports the environment, compared to a DAC average of 33% in 2017. Despite significant efforts, the share of climate-relevant actions has progressed only moderately, from 17% in 2013‑14 to 22% in 2017-18 (Chapter 2; Table B.5). However, mainstreaming climate change in a portfolio focused on social infrastructure and services is less straightforward than for programmes on agriculture or energy. In fact, Ireland’s share of adaptation-marked programmes is already higher than the DAC average in all its priority sectors (Figure 3.5). Ireland could explore further the potential to reflect climate change in health and/or social protection and to screen more programmes. Ireland plans to increase its climate contributions through more targeted global and regional initiatives, such as with small island developing states in the Pacific and the Caribbean.

Figure 3.4. Ireland mainstreams gender equality and women’s empowerment across all sectors

Note: The figure is based on commitments of Ireland’s bilateral, sector-allocable aid that have gender equality and women’s empowerment as a principal or significant objective.

Source: Based on data from (OECD, 2019[1]), Creditor Reporting System (database), https://stats.oecd.org/Index.aspx?DataSetCode=crs1 (accessed November 2019).

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Figure 3.5. Ireland mainstreams climate change adaptation more than the DAC member average in its priority sectors

Note: The selected sectors are those where Ireland spends most of its aid. Percentages are based on commitments.

Source: Based on data from (OECD, 2019[1]), Creditor Reporting System (database), https://stats.oecd.org/Index.aspx?DataSetCode=crs1 (accessed November 2019).

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In line with its policy, Ireland’s share of bilateral ODA allocated to and through civil society organisations (CSOs) is one of the highest among DAC members, at 38% in 2018. This benefits mainly Irish non-governmental organisations (NGOs), which received 64% of total CSO funding between 2015 and 2018. Country-based development NGOs received 9% and international CSOs received 26% of the total. Among DAC members, Ireland is consistently providing the highest share of bilateral ODA allocated to CSOs (i.e. core contributions that are programmed by CSOs) – 23% in 2018 compared to a DAC average of 2%. The share of Irish bilateral ODA implemented through multilateral organisations is increasing. Conversely, the share of Ireland’s government-to-government co-operation is much smaller than that of other DAC members, due to challenging contexts in some partner countries and the phasing out of general budget support as a delivery mechanism. While this could raise questions regarding Ireland’s outlook on development effectiveness, in fact, the share of Ireland’s development co-operation allocated through public sector channels in some of its priority countries is higher than or similar to the DAC average.

Multilateral ODA allocations

Irish multilateral funding is of high quality and is growing in importance

Multilateral ODA is central to Irish co-operation and plays an increasingly important role. The share of Ireland’s aid to multilateral organisations has grown from 36.4% of its total ODA in 2014 to 43.2% 20183 (Figure 3.2), mainly because Ireland’s assessed contributions to the European Union budget over the period increased. At the same time, Ireland’s share of bilateral aid implemented through multilateral organisations grew from 19.5% in 2014 to 27.0% in 2018,4 as Ireland increased humanitarian spending for country-pooled fund mechanisms. The total share of Irish aid implemented by multilaterals thus rose from 48.7% to 58.6% over this four-year period. While fully acknowledging the importance of Ireland’s multilateral engagement, the parliamentary joint committee underscored the need to ensure the effectiveness of this largest part of Irish ODA. A Better World, reflects the committee’s recommendation (Chapters 2 and 5).

Ireland’s multilateral funding is of high quality. Beyond assessed contributions, Ireland’s main modality for partnership with its priority multilateral partners is through voluntary core funding. In addition, its multi‑bi funding includes multiple regional and country-based pooled funds. This contributes to a co-ordinated response rather than making donor co-ordination more challenging by imposing tight earmarks.

Ireland has a good focus on its priority organisations. From 2014-17, ten organisations accounted for 79.4% of total allocations. The European Union (EU) is by far the most important multilateral channel (60%). Other main partners are United Nations (UN) agencies with mandates that match Ireland’s priorities on responding to humanitarian needs, gender equality, food security and human development and also the World Bank. Ireland’s ambition to expand the geographic focus of its ODA and pursue regional approaches (Chapter 2) has translated into membership of the Asian Infrastructure Investment Bank in 2017 and the African Development Bank in 2020. However, overall allocations to regional institutions outside Europe remain very limited (Chapter 2).

Maintaining a good focus in ODA increases could raise Ireland’s financial weight in priority organisations. With a share of 0.5 - 1.5% of DAC member contributions (2014-17 average), Ireland is a relatively small donor to most of its priority multilateral organisations, as most organisations have very large budgets. Exceptions to this are its contributions to the Central Emergency Response Fund, country-based pooled funds and the Office of the UN High Commissioner for Human Rights. While Ireland’s share of core‑funding is slightly higher, only its core funding to the World Food Programme, at 6.1% of all DAC donor core funding, stands out.

Financing for sustainable development

Ireland’s financial instruments to mobilise private finance are limited to date

Ireland’s bilateral use of blended finance instruments has been marginal to date. Ireland has started to leverage ODA to mobilise additional development finance through co-financing with the private sector. However, this is at small scale (amounting to only USD 3.6 million in 2017) and concentrated on the Africa Agri-Food Development Programme (AADP), which is run together with the Department of Agriculture, Food and the Marine.5 Additional, smaller initiatives and engagement through partnerships with others are also growing. These include a catalytic fund set up by the Embassy of Ireland in Kenya; the private sector arms of Irish NGOs such as Vita’s Green Impact Fund and the work by Self-Help Africa; as well as engagements in the Scaling Up Nutrition (SUN) network and the Global Alliance for Improved Nutrition (GAIN). In terms of Ireland’s ability to mobilise additional private finance, the government is currently only tracking the leveraging effects of the AADP.6

Ireland aims to encourage private finance and improve its development relevance, including through multilateral channels

Ireland engages with multilaterals to ensure that private finance is geared towards leaving no one behind and sustainable development in LDCs. It advocates for efforts that benefit or at a minimum do no harm to marginalised and vulnerable populations, in line with global environmental, climate and human rights standards. As such, Ireland is considered a constructive and critical member in multilateral banks and funds. Ireland scrutinises operations with regard to development outcomes, contribution to achieve the Sustainable Development Goals (SDGs), and their ability to leverage additional finance that demonstrate development impact. Good examples of this are Ireland’s engagement in the discussions around the European Fund for Sustainable Development Plus and in influencing EU policy on sustainable finance.

Ireland promotes public and private investments for sustainable development. It issued its first green bond in 2018 and moved early to divest public monies – amounting to about EUR 318 million since 2018 – from fossil fuel companies and industry.7 Dublin is a global financial centre and has been nominated as the European headquarters of the International Network of Financial Centres for Sustainability. Under the banner of the Year of Sustainable Finance, Ireland attracted investors and policy makers to share best practice and innovation around mobilising additional climate finance, for example by promoting evidence‑based sustainable investing, modelling the impact on the SDGs and developing anti‑greenwashing identification tools for investors. Ireland also engages the EU on sustainable finance. Based on a new strategy, Ireland monitors and seeks to influence EU policy to help to put Europe on track to meet the 2015 Paris Agreement and the 2030 Agenda.

Ireland’s vibrant fin-tech sector could provide new opportunities for development co-operation. For example, the industry provides cost-saving solutions for a wide range of companies in Ireland that could help to reduce the costs of banking transfers and remittances.8

Ireland also pushes for development relevance in multilateral discussions on global trade. Ireland actively supports the participation of LDCs in World Trade Organization trade negotiations, weighs in on partner countries’ needs in multilateral trade policy and international labour law discussions, and considers mandatory human rights due diligence as a requirement for all state-run and supported companies including in Ireland’s partner countries. It also uses ODA to support programmes such as TradeMark East Africa that aim to reduce trade barriers and increase business competitiveness. But action on some of these efforts are perceived as slow by external stakeholders, for example on operationalising the human rights due diligence recommendation from 2017. Ireland’s business presence in Ireland’s partner countries (including Enterprise Ireland offices) and Irish foreign direct investment in relevant value chains also remain marginal.

A new whole-of-government approach provides momentum to help to strengthen tax systems and domestic resource mobilisation in partner countries

A Better World commits Ireland to strengthening domestic resource mobilisation (DRM) through effective partnerships. DRM activities remain limited and ODA allocations are small,9 but Ireland aims to double funding to DRM partners by 2020 and to systematically increase its support to strengthening DRM capabilities and tax systems in partner countries. These are to be accomplished in part through planned increases in Ireland’s contributions to the Addis Tax Initiative, the OECD Tax for Development effort and the African Tax Administration Forum. Ireland also provides training for tax authorities in partner countries.

Ireland recently launched a whole-of-government initiative to pool its experience in mobilising domestic resources. This initiative is geared towards supporting partner countries’ tax administrations and enhancing their capacity for sustainable DRM. A cross-government DRM group – involving the Office of the Revenue Commissioners, the Department of Finance and the Department of Foreign Affairs and Trade – is supporting the co-ordination, assessment, and set-up of bilateral and multilateral agreements and sharing of information. The offers to partner countries are demand-driven and tailored to partners’ needs, assessed with innovative diagnostic tools, and geared to complementing ongoing reform efforts. Building on its own expertise and interests, Ireland can add the most value by ensuring that its DRM advice and services are focused on building capacity to ensure that increased revenue supports all parts of populations, in particular those furthest behind. Examples of Ireland’s efforts in this direction include its focus on the differential impact on women and men of tax reforms and the training that Ireland provides for dispute resolution and treaty negotiations. Ireland can also leverage its engagement with international financial institutions on tax matters and the global tax architecture and with regional and global DRM actors to share its experience in this area more systematically and foster peer learning.

References

[5] Department of Finance, Ireland (2019), Ireland for Finance: The Strategy for the Development of Ireland’s International Financial Services Sector to 2025, https://assets.gov.ie/24482/278893738e764db79c43eada83c030e3.pdf.

[2] Joint Committee on Foreign Affairs and Trade, A. (2018), Review of the Irish Aid Programme, Houses of the Oireachtas, Dublin, https://data.oireachtas.ie/ie/oireachtas/committee/dail/32/joint_committee_on_foreign_affairs_and_trade_and_defence/reports/2018/2018-02-22_report-review-of-the-irish-aid-programme_en.pdf (accessed on 6 November 2019).

[1] OECD (2019), Creditor Reporting System (database), https://stats.oecd.org/Index.aspx?DataSetCode=crs1.

[3] OECD DAC (2019), DAC Statistical Reporting Issues in 2018 on Flows in 2017, OECD Publishing, Paris.

[4] World Bank (2019), Migration and Remittances Data (database), https://www.worldbank.org/en/topic/migrationremittancesdiasporaissues/brief/migration-remittances-data (accessed on 8 November 2019).

Notes

← 1.  Almost one third of the recent increase in ODA volumes relates to in-donor refugee costs that Ireland started reporting in 2017, based on the new guidelines issued by the OECD DAC and the methodology that Ireland put in place with the assistance of the OECD.

← 2.  Exceptions concern scholarship programmes for study in Ireland as well as the Africa Agri-Food development programme that is limited to Irish companies. Alternatively, Ireland could open up its private sector partnerships to companies based outside of Ireland, as many DAC members do.

← 3.  All DAC countries combined provided 28.4% of their total ODA as multilateral ODA in 2018 (grant equivalent basis and according to preliminary data).

← 4.  All DAC countries combined provided 21.4% of their bilateral ODA through multilateral organisations in 2017 (flow basis).

← 5.  The programme has grown in scope, is now available in 16 African countries and, to date, has leveraged EUR 6.4 million of additional private finance. To expand the programme, Ireland aims to push into sectors such as fintech, where Ireland has expertise, and to connect it to other initiatives such as the European Commission’s Taskforce for Rural Africa. Ireland also aims to place emphasis on female entrepreneurship and climate innovation in the current round of financing.

← 6.  Going forward, the new private sector strategy may be used to identify Irish activities and partnerships that mobilise additional private finance and where mobilisation amounts can be measured, including in the multilateral space. These also may include activities related to the Sustainable Development Goals, such as climate action.

← 7.  Ireland has EUR 4.2 trillion worth of assets under administration; 75% of the 430 firms in the sector are foreign-owned (Department of Finance, Ireland, 2019[5]).

← 8.  Remittances from Ireland accounted for 0.4% of Irish gross domestic product in 2018, or USD 1.7 billion. See (World Bank, 2019[4]) at https://www.worldbank.org/en/topic/migrationremittancesdiasporaissues/ brief/migration-remittances-data.

← 9.  ODA to DRM amounted to USD 451 000 in 2017; the 2013-15 annual average was USD 288 000.