June 2023 ODAReform.org Newsletter
Dear Friends,
It is now one month since we launched the website ODAReform.org to support our campaign to clean up the measurement of Official Development Assistance and to establish fair and sound accounting methodologies, overseen by a robust and politically independent governance system.
We want to thank you for all your messages of support and kind comments about the site: they really have been appreciated. But we also want to hear your ideas on how we can improve it…and more of that below.
Of course, for much of April we were absorbed with the design and content of the website, but we did take a few hours to look at the OECD press release of 12 April 2023 on the preliminary 2022 ODA data. Devex approached us for our immediate reaction and quoted part of the text we sent to them: https://www.devex.com/news/ukraine-war-triggers-record-aid-levels-and-fresh-criticism-for-oecd-105289. The full text of our on-the-spot comments is reproduced under this newsletter.
Otherwise, since we published the site, our focus has been mainly on the moves taking place in the DAC right now to create fictitious “grant equivalents” for so-called “private sector instruments” (PSI) that go even further down the road of destroying ODA as a measure of true donor effort driving development. This prompted us to send messages outlining our concerns, firstly to Carsten Staur, Chair of the DAC, and then to Katrine Heggedal, Chair of the DAC Working Party on Development Finance Statistics (WPStat). We asked Ms. Heggedal to share the message we sent to her (also reproduced under this Newsletter) with the members and observers of WPStat, so that they are aware of our concerns and indeed our website.
We had already included a general page here on PSI when we launched the website, explaining our concerns that the DAC were effectively ripping away the core definitional pillar of ODA as being “concessional” by relying on some wording hidden (as John Speedy wryly observed): “in a footnote added to a parenthesis in the 5,800-word Annex they attached to their 2016 meeting communique” which whispered:
“The Reporting Directives will be updated to take into account the fact that the “concessional in character” criterion is not appropriate for assessing the ODA characteristics of PSI.”
Alarmed by the direction and pace of DAC moves towards finalised agreements to award themselves ODA points for profitable loans and investments, guarantees, and now even for purchasing bonds at commercial rates – all based on the decidedly dodgy basis of “additionality” – we have recently added the following papers to the website:
· Abolishing Concessionality, Simon Scott
· Stretching ODA by “Extending” Equity Investment, Hedwig Riegler
· The Latest Horror: Equity Investment, Simon Scott
· A New Low: Bond Purchases as ODA, Simon Scott
We are planning further posts on PSI, which will appear on the What's New page shortly.
In closing this Newsletter, I would just like to encourage all of you to send comments, information or documents by writing to us at the email address: ODAReform@icloud.com.
We are open to publishing serious pieces on this issue even where we do not completely agree with the author. We will also respect requests for confidentiality around sources of information or news, as we have come to realise that one of the main causes of the present malaise is the DAC’s continuing habit of negotiating ODA rule changes behind closed doors.
And please do share links to our site and its contents with anyone and everyone you know who may be interested. As I said at the outset, we have been extremely encouraged by your responses and see real hope for moves towards an honest measure of development assistance in the not too distant future.
Best Wishes from the ODA Reform Group
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Full text of our immediate reaction to the OECD press release of 12 April 2023 proclaiming “the fourth consecutive year that ODA has set a new record high” sent to Devex on the same day
“It’s "ODA Day", the date on which the OECD releases the preliminary Official Development Assistance (ODA) data for the previous year. This is a bit like April 1st: you can’t believe everything you read!
This year, the OECD boasts that “Foreign aid from official donors rose to an all-time high of USD 204 billion in 2022”. But did it really?
Three Main Points (from a very quick read of the OECD Press Release):
1. In-house Refugee Costs:
A huge share of the increase was due to the massive rise in spending on processing and hosting refugees in donor countries (accounting for USD 29.3 billion of the total). Yet much of this spending does NOT meet the OECD’s own definition of ODA, which is “government aid that specifically targets the economic development and wellbeing of developing countries as its main objective.” It shouldn’t be counted as ODA!
2. Exaggeration of ODA in Non-grant ODA
The DAC’s methodology for calculating the “grant equivalent” in concessional loans is highly flawed, and results in the massive exaggeration in the scoring of ODA in concessional loans, so that for each one Dollar of donor effort/cost in extending such loans, donor governments have been scoring and estimated 5-9 Dollars of ODA credit.
This overcounting of ODA in loans, and proposals to start counting ODA for so-called "private sector instruments" that involve no concessionality at all (in contradiction to the original definition of ODA), incentivises donors to turn to these instruments, which risks starving developing countries of the grants they so desperately need. The 2022 figures validate this trend:
"Bilateral sovereign loans by DAC countries on a grant equivalent basis, increased by 36.1% in real terms between 2021 and 2022, and represented 9.3% of bilateral ODA…[and] sovereign lending by EU Institutions more than doubled (+110%) and represented 24% of its bilateral ODA.”
Soon, Finance Ministries will wake up to the possibilities the DAC has created for their governments to be SEEN as being generous in terms of supporting development, while spending little or no money at all! And grant-giving will dwindle.
3. Statistical Nonsense!
For an organisation like the OECD, which has established such a robust reputation for high quality statistics over the years to allow itself to launder such corrupted ODA statistics is shameful, and is in breach of its own statistical guidelines: https://www.oecd.org/statistics/good-practice-toolkit/Brochure-Good-Stat-Practices.pdf. Yet, this is what is happening. The database of the Creditor Reporting System is a “dog’s breakfast”, and the process of aggregating non-comparable data is indefensible. Just one example: the Secretariat aggregated the grant equivalents [wrongly calculated of course] of new donor loans to sovereign entities with the full-face value of loans to private sector entities.
All of this points to why the “donors club” of the OECD's Development Assistance Committee needs to be stripped of its responsibilities for defining and counting ODA, and the task passed to a robust body of politically independent statisticians.”
Message to Chair of WPStat dated 4 June 2023
“Dear Katrine,
It is just over a year now since I met you and some of your colleagues from the DAC's Working Party on Statistics at the OECD for a discussion of the recent reforms to the statistical rules governing ODA. I would like to take this opportunity to congratulate you on your subsequent accession to the chairmanship of WP Stat.
As you may be aware, I recently wrote to the DAC Chair asking for information about further changes that had been agreed to the rules on counting so-called "Private Sector Instruments" (PSI) as ODA.
Mr Staur informed me that discussions were still underway and undertook to advise me of the outcome in due course. However, thanks to some welcome transparency, unclassified documents outlining some of the proposals have been posted on the OECD website. Accordingly, I am broadly aware of the ideas being discussed.
Unfortunately they seem to me to go even further down the road of destroying ODA as a measure of true donor effort driving development.
With help from a number of others, including one of your predecessors as WP Stat Chair, Hedwig Riegler of Austria, and a former head of the aid statistics division in the OECD, Simon Scott, I have started a website to point out the need for "ODA Reform” at both technical and institutional levels.
I am writing today to ask that, in a spirit of transparency, you alert all members and observers of the Working Party on Development Finance Statistics to the existence of this website by copying this message to them.
The following website pages should be of particular interest to your group in relation to their current discussions on PSI:
- General page on the subject here
- Ms Riegler's detailed analysis of the proposals on scoring equity investment, downloadable here
Your colleagues may also wish to note that further posts will be appearing on the What's New page.
I would welcome any comment and especially any necessary correction to these posts from you or your fellow Working Party participants. These can be sent to the team at ODAReform@icloud.com.
Thank you very much for your co-operation.
Kind regards,
Steve Cutts”
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