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Official aid to poor nations climbs by 4.6%
By Alan Beattie in London
April 10, 2005 (Financial Times, London)

Official aid to the world's poor countries continues to rise but will in future be exaggerated by one-off events such as debt relief for Iraq and help for tsunami sufferers in Asia, according to the body that measures it.

The Organisation for Economic Co-operation and Development, the Paris-based intergovernmental think-tank, will reveal on Monday that aid to poor countries was $78.6bn (€60.9bn, £41.7bn) last year, an increase in real terms of 4.6 per cent over 2003. Increases from the US, UK, Spain and Canada more than offset falls from Japan and Germany.

But the OECD will add that the aid numbers for coming years are likely to be flattered by one-off events including relief for tsunami-hit countries likely to be $3bn-$4bn this year and debt relief for Iraq, estimated at $15bn for the year.

According to OECD rules, rich governments' commercial loans such as export credits count as part of a country's aid effort when they are written off, even though a borrower country may not be servicing that debt and it is in effect close to worthless.

"At the time such loans are written off, they are counted at full face value," said Richard Manning, chair of the OECD's development assistance committee. “It does not reflect a real transfer of resources.”

Much of last year's rise reflected higher contributions to the World Bank's soft loan arm, the International Development Association, which is funded by regular contributions from the bank's rich shareholder countries. Increases in aid to Iraq and Afghanistan also played a significant role.

Weighted by size of donor country, the 2004 aid effort averaged 0.25 per cent of national income. Aid has risen for the third successive year after a decade of falls and stagnation, but remains well below the United Nations' 0.7 per cent target which rich countries adopted decades ago.

Mr Manning said that aid would have to grow rapidly in coming years if all countries were to meet the commitments they made at a UN conference in Monterrey, Mexico, in 2002.

Italy, for instance, which last year gave 0.15 per cent of national income in aid down from 0.17 per cent in 2003 will have to more than double aid to meet its commitment to hit its 0.33 per cent target next year. Several rich nations including France, Spain, Ireland and the UK have adopted target dates toreach the 0.7 per centfigure.

Nordic nations remain the most generous aid donors, with Norway giving 0.85 per cent and Sweden 0.77 per cent of national income in aid last year.



















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