Enhancing the Quantity and Quality of ODA for LDCs and Addressing - - PowerPoint PPT Presentation

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Enhancing the Quantity and Quality of ODA for LDCs and Addressing - - PowerPoint PPT Presentation

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Ministerial Meeting on Enhancing the Mobilization of Financial Resources for the LDCs Development Lisbon, Portugal October 1-3, 2010 Enhancing the Quantity and Quality of ODA for LDCs and Addressing their Debt Problems Presentation by Elliott

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Ministerial Meeting on Enhancing the Mobilization of Financial Resources for the LDCs Development

Lisbon, Portugal October 1-3, 2010

Enhancing the Quantity and Quality of ODA for LDCs and Addressing their Debt Problems

Presentation by Elliott Harris IMF Special Representative to the UN

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Overview

I. ODA – Quantity and Quality

  • Official Development Assistance (ODA) and Country-programmable Aid

(CPA)

  • Total volumes and sectoral allocation
  • Implications of ODA evolution
  • Aid management
  • Aid Effectiveness
  • II. The Debt Situation of LDCs
  • Impact of the Crisis
  • HIPC
  • Outlook

2

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OFFICIAL DEVELOPMENT ASSISTANCE

Part I

3

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ODA Quantity and Quality

  • Total ODA has increased since 2000

– but not in line with major commitments (UN 0.7 % target, Gleneagles) – Roughly a third to LDCs

  • Total figures (and commitments) include debt relief,

humanitarian assistance, technical cooperation, etc.

– Not all available for development spending by recipient

  • Substantial part of the increase in 2005-06 was linked to

debt relief

– tapering off as major operations, including HIPC, wind down

4

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Table 1. Official Development Assistance, 1980-2008

(Net Disbursements, in billions of US Dollars)1 1980 1990 1995 2000 2005 2006 2007 2008

All Developing Countries 33.4 57.0 59.0 49.5 108.2 106.4 107.1 128.6 Least Developed Countries (LDCs) 8.6 16.5 17.0 12.4 25.8 28.3 32.8 38.5

1 By All Donors

Sources: OECD Database; and IMF staff estimates 5

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SLIDE 6

ODA, Net Disbursements, 1980-2008

(billions of US Dollars)

20 40 60 80 100 120 140

1980 1990 1995 2000 2005 2006 2007 2008 All Developing Countries LDCs 6 Source: OECD-DAC Data base.

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Country Programmable Aid – A More Useful Concept?

  • CPA is the basis for aid programming by donors;

while global commitments expressed in terms of total ODA

  • Excludes the elements that are not available for

spending by recipient

– Roughly two thirds of total ODA

– Somewhat similar share of CPA to LDCs

– Rates of increase similar to or better than total ODA

7

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Table 2. Country Programmable Aid, 2000-2011

(Gross Disbursement, in 2008 US Dollars, Billions)1 2000 2005 2006 2007 2008 2009 2010 2011

All Developing Countries 59.2 74.6 75.0 78.7 85.3 91.7 95.8 98.6 Least Developed Countries (LDCs) 17.2 23.7 24.9 27.8 30.2 33.1 32.2 33.7

1 By All Donors

Sources: OECD Database; and IMF staff estimates 8

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Country Programmable Aid, 2008-20111

(billions of US Dollars)

20 40 60 80 100 120 140

2000 2005 2006 2007 2008 2009 2010 2011 All Developing Countries LDCs

1 Source: OECD-DAC data base. Actual for 2000-2008, and Planned for 2009-2011

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Percentage Changes in ODA and CPA disbursements

  • 10

10 20 30 40 2000 2001 2002 2003 2004 2005 2006 2007 2008

Total ODA - Net Disbursements, 2000-08

All Developing Countries

Source: OECD-DAC.

  • ----- LDCs
  • 10
  • 5

5 10 15

2001 2002 2003 2004 2005 2006 2007 2008 2009

CPA – Gross Disbursements, 2001-09

All Developing Countries

  • ------ LDCs

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Composition of ODA

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Sources: OECD Database; and IMF staff estimates.

Debt relief 5% Humanitarian aid 12% Other 18%

CPA 65%

All countries

Debt relief 25%

Humanitarian aid 11%

Other 17% CPA 47%

All Countries

Debt relief 10% Humanitarian aid 11%

Other 25%

CPA

54%

All Countries

Debt relief 12% Humanitarian aid 14%

Other 1% CPA 73%

LDCs

Debt relief 12% Humanitarian aid 11% Other

5%

CPA 62%

LDCs

Debt relief 8% Humanitarian aid 24% Other 4%

CPA 64%

LDCs

2000 2005 2008

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CPA by Sector

  • Since 2000, the share of CPA allocated to the

productive sectors, economic infrastructure, and agriculture has declined

  • For the LDCs, in 2000 the shares of CPA were:

– economic infrastructure: 34 percent – Agriculture: 7 percent – Other productive sectors: 10 percent

  • That is, roughly half of country programmable aid

went to growth-related sectors in 2000…

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CAP by Sector

LDCs

Education 11% Health 10% Population Policies and Reproductive Health 2% Water Supply and Sanitation 6% Other Social Infrastructure 7% Economic Infrastructure 34% Agriculture 7%

Other Production Sectors (Forestry, Fishing, Industry, Mining, Construction, Trade Policy and Tourism) 10%

Environment 1% Government and Civil Society 12%

2000

Source: OECD-DAC Data base

Education 9% Health 11% Population Policies and Reproductive Health 10% Water Supply and Sanitation 5% Other Social Infrastructure 5% Economic Infrastructure 17% Agriculture 6%

Other Production Sectors (Forestry, Fishing, Industry, Mining, Construction, Trade Policy and Tourism) 3%

Environment 1% General Budget Support 8% Government and Civil Society 19% Multi sector 6%

2008

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CPA by Sector (cont.)

  • …But by 2008, those shares had declined sharply:

– Economic infrastructure: from 34 to 17 percent – Agriculture: stagnant at 6 percent – Other productive sectors: from 10 to 3 percent

  • That is, the share of country programmable aid allocated

to growth-related sectors has been roughly halved between 2000-08.

– Aid to the social sectors was relatively constant at just over one third. – Allocations to government/civil society from 12 to 19 percent – General budget support increased from 1 to 8 percent

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The Evolving Development Finance Landscape

 prospects for substantial scaling up of traditional ODA are relatively bleak, and other sources of development finance are growing far more rapidly

  • Relative importance of traditional aid relationships will decline
  • More actors, possibly more fragmentation, aid relationships more

difficult to manage

  • More financing from specific sources for specific purposes

– earmarking/special funds-global programs

  • Donors are concentrating their ODA on priority partners, possibly

less aid to other partner countries

  • More emphasis among donors on performance and results

– aid allocation will increasingly favor those that show the best development results,

  • r be concentrated on “priority partners”

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Implications for Aid Management Strategies

  • Scaling up investment in productive capacity in face of limited

concessional aid

– May require new borrowing on less or non-concessional terms – New debt must not generate an unsustainable debt situation – Need to strengthen debt management strategy and the institutions for public investment choice and implementation .

  • Dealing with more fragmented aid, variety of actors

– Take the active lead in aid harmonization – aid harmonization action plan – Set priorities for donor assistance, reflecting national development strategy

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Aid Effectiveness

  • Progress in implementing the aid effectiveness agenda is

mixed – substantial progress in untying aid to LDC – Paris Declaration monitoring reports show uneven progress relative to the LDCs

  • Degree of alignment often depends on existing national

development strategy and assertive country leadership; varies by country

  • Particular problems in the use of country systems and

developing mutual accountability systems

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SLIDE 18

THE DEBT SITUATION OF THE LDCS

Part II

19

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Crisis Impact on Debt Situation

  • Debt vulnerabilities have increased ….

– Key debt ratios have deteriorated…

  • Crisis has lowered nominal GDP
  • Some countries have faced higher borrowing requirements

( higher current account and fiscal deficits)

  • Exports receipts affected by contraction in trade
  • But the general trend of improvement has not been

derailed

  • Key debt ratios are expected to improve over the medium-

to long term.

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Public and Publicly Guaranteed Debt 1 (in percent of GDP)

20 40 60 80 100 120 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 LDCs external All LICs external LDCs public All LICs public

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1 Source: IMF staff estimates. Public and publically guaranteed external debt. Based on latest DSAs, covering 71 LICs.

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Debt Service Ratios 1

(In percent)

5 10 15 20 25 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Debt Service-to-Exports

LDCs

  • - - - All LICs

5 10 15 20 25 30 35 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Debt Service-to-Revenue

LDCs

  • - - - All LICs

1 Source: IMF staff estimates. Public and publically guaranteed external debt. Based on latest DSAs, covering 71 LICs.

22

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Crisis Impact: Debt Burden Ratios 1

5 10 15 20 25 30 35 40 2008 2013 2018 2023

PV of total public debt (in percent of GDP)

Pre-Crisis Post-Crisis 2 4 6 8 10 12 14 2008 2013 2018 2023

Total debt service (in percent of revenues)

Pre-Crisis Post-Crisis

  • Debt ratios are expected to rise, then return to a declining path

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1 Based on analysis of 37 countries, done by IMF staff in March 2010.

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Crisis Impact on Debt Situation

  • But the crisis is not expected to result in systemic debt

difficulties across LICs or LDCs

– The share of LICs that face higher debt vulnerabilities remains significant but has not changed. Of these: – in about half, higher debt vulnerabilities would be reduced by HIPC/MDRI

  • (only about 10 countries would face higher vulnerabilities once the remaining HIPCs have received relief)

– In the other half, concerted and sustained efforts needed

  • better policies and institutions;
  • better fiscal positions,
  • more favorable financing terms

– Effectiveness of traditional debt relief, if needed, depends on participation of all creditors

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Risk of Debt Distress

(Number of Countries)

13 12 8 6 11 12 7 2 2 4 6 8 10 12 14 Low Moderate High In debt distress

HIPC and non-HIPC Countries by Risk of Debt Distress Rating

HIPC Non-HIPC 13 14 10 7 24 24 15 8 5 10 15 20 25 30 Low Moderate High In debt distress

LDCs and all LICs based on Risk Rating

Least Developed Countries

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Source: IMF staff estimates, based on latest DSAs for 71 countries.

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Crisis Impact: Long-Term Debt Sustainability

  • The impact of the crisis is expected to taper off over the long

term

  • Risk rating downgrades rare so far because of:

– Long-term perspective in DSAs – Assumption of prompt recovery and long-term growth unaffected (though still uncertain) – Fiscal space in the first place; assumed to be restored – Continued availability of aid

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How To Address Higher Vulnerabilities?

 Some countries’ debt vulnerabilities are already addressed in the

DSA baseline (Afghanistan, Burkina Faso, Burundi, Djibouti, The DRC , The Gambia,

Lao, PDR, Maldives, Sao Tome & Principe, Yemen)

 For the remaining countries, vulnerabilities in the medium and

long term could require a combination of measures

 For post-completion point HIPCs and non-HIPCs  On the borrower side:

Growth enhancing policies

Improvements in policies and institutions to raise a country’s capacity to carry debt

Fiscal consolidation

 On the creditor/donor side

Better terms on new financing

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SLIDE 27

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Thank you