What is development aid and why is it important?

By Daniil Filipenco

What is development aid and why is it important?

Development aid, sometimes known as Official Development Assistance (ODA), is a form of foreign/international assistance that aims to help improve the living standards in the poorest regions of the world.

ODA is used to fund projects that improve social, economic, political, and ecological sectors (access to clean water, healthcare, education, and so on) in certain regions. It can concentrate on minor local initiatives or large national-level policies.

Many people associate international aid with the image of a volunteer offering medical care or distributing goods in the wake of a storm or disaster. While emergency assistance is essential, it is not the sole type of assistance, nor is it considered as a ‘development’ aid because it has different goals.

Defining development aid

Development aid is usually a package of financial or technical support that can be provided in the form of direct grants, initiatives or training. In most cases, advanced economies are those providing the aid but developing countries can also offer it.

Today, development assistance can take numerous forms – money and technical skills to assist in the construction of infrastructure or it may also aid in upgrading the skills required for infrastructure maintenance and construction.

ODA can be assimilated and implemented by ministries, local governments, banks, NGOs, and even private businesses but the goal is always to assist local communities.

Development aid can be delivered directly from the donor nation to the recipient government. Such a process is known as “bilateral” assistance.

Help can also be provided by foreign governments through various international organizations like the World Bank and the Asian Development Bank that have the goal of implementing certain development programs. This form of assistance is dubbed “multilateral aid”.

Development aid statistics for 2021

In 2021, the total Official Development Assistance from official donors reached US$178.9 billion in real terms* – an increase of 4.4% compared to 2020.

* The figures are in real terms which means they have been corrected by taking into consideration inflation and exchange rate adjustments.

The funding took the form of grants, loans to sovereign entities, debt restructuring, donations to multilateral organizations, and equities to private enterprises in ODA-eligible nations.

The COVID-19 vaccine donations alone totaled US$6.3 billion (around 3.5% of total ODA), making it possible to deliver almost 857 million doses to developing nations.

Biggest ODA donors in 2021

Overall, ODA from all the DAC member nations aggregated together remained at the same level as in 2020. The TOP 5 biggest ODA donors in 2021 were:

The Group of Seven (G7) provided 76% of ODA while DAC-EU nations provided 45%. ODA from the nineteen DAC nations that are European Union members totaled US$81.3 billion, a 4.3% increase in real terms over 2020.

It is interesting to note that ODA is being offered as part of the UN’s Sustainable Development Goals which aim to address difficulties that affect all nations (be they underdeveloped or prosperous) and all industries and create a world that is safe, affluent, egalitarian, and eco-friendly.

Why is development aid important?

First of all, it aims to stimulate economic growth and thus reduce poverty which is goal #1 on the international agenda. Development aid’s usefulness has long been a debated issue with multiple pros and cons expressed by various experts. Some key points on the importance of development aid are:

  • It helps to tackle various diseases such as Ebola and malaria
  • In some of the Earth’s poorest regions, development aid helps deal with the consequences of calamities
  • It brings hope to the displaced people
  • Food aid is being given to the world’s poorest countries facing famine and helps to feed, educate and keep children healthy.

Foreign aid and the Sustainable Development Goals

Fig.1 60 years of ODA resilience amidst economic crises

Source: OECD

Following a dramatic reduction in ODA in the last decade of the 20th century, in 2000 the UN established the eight Millennium Development Goals (MDGs) to help to revitalize foreign aid which now focuses on social and, notably, medical aims.

The 17 Sustainable Development Goals (SDGs) were implemented 15 years later. Today these serve as the foundation for all nations’ political, economic, social, and climate change policies as well as for foreign aid involvement.

Tackling poverty and starvation, and providing access to safe drinking water, healthcare and education remain the critical challenges of SDGs.

Final word

The general level of development of nations around the globe has significantly improved. Even those nations described as poor have achieved significant development over the last four decades. The Resilience through Enhanced Adaptation, Action-learning and Partnership Activity (REAAP) program managed to assist over 475,000 people after the drought in Ethiopia, and the Catholic Relief Services (CRS) has funded nutrition and education initiatives for children in Laos via the US FFE initiative among others. While there are always failures to be found, the history of development aid has largely been a success.