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

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

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

Part I OFFICIAL DEVELOPMENT ASSISTANCE 3

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

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

ODA, Net Disbursements, 1980-2008 (billions of US Dollars) 140 All Developing Countries LDCs 120 100 80 60 40 20 0 1980 1990 1995 2000 2005 2006 2007 2008 Source: OECD-DAC Data base. 6

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

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

Country Programmable Aid, 2008-2011 1 (billions of US Dollars) 140 All Developing Countries LDCs 120 100 80 60 40 20 0 2000 2005 2006 2007 2008 2009 2010 2011 1 Source: OECD-DAC data base. Actual for 2000-2008, and Planned for 2009-2011 9

Percentage Changes in ODA and CPA disbursements Total ODA - Net Disbursements, 2000-08 CPA – Gross Disbursements, 2001-09 15 40 30 10 20 5 10 0 ------- LDCs All Developing Countries 0 -5 ------ LDCs All Developing Countries -10 -10 2000 2001 2002 2003 2004 2005 2006 2007 2008 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: OECD-DAC. 10

Composition of ODA 2000 2005 2008 All Countries All Countries All countries Debt relief Debt relief 5% 10% Humanitarian Debt relief Humanitarian 25% aid 12% aid 11% CPA Other 47% CPA CPA 54% Other 65% 18% 25% Humanitarian Other aid 17% 11% LDCs LDCs LDCs Debt relief Debt relief Debt relief 8% 12% 12% Humanitarian aid Humanitarian Humanitarian 14% aid aid 24% 11% CPA CPA CPA 73% 62% 64% Other 1% Other Other 4% 5 % Sources: OECD Database; and IMF staff estimates. 11

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… 12

CAP by Sector LDCs Environment Other 2000 2008 1% Production Sectors (Forestry, Population Fishing, Industry, Policies and Mining, Population Reproductive Construction, Multi Policies and Health Government Education Trade Policy and sector Reproductive 2% and 11% Tourism) Education 6% Health Civil Society 10% 9% 10% Government 12% Health and Civil 10% Society Health 19% 11% General Water Supply Budget Agriculture and Sanitation Support 7% 6% 8% Environment 1% Other Production Agriculture Sectors Economic Other Social (Forestry, 6% Water Supply Infrastructure Fishing, Industry, Infrastructure and Sanitation Economic 34% Mining, 7% 5% Other Social Infrastructure Construction, Infrastructure 17% Trade Policy and 5% Tourism) 3% Source: OECD-DAC Data base 14

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 15

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, or be concentrated on “priority partners” 16

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 17

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 18

Part II THE DEBT SITUATION OF THE LDC S 19

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. 20

Public and Publicly Guaranteed Debt 1 (in percent of GDP) 120 100 80 60 40 LDCs external All LICs external LDCs public All LICs public 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1 Source: IMF staff estimates. Public and publically guaranteed external debt. Based on latest DSAs, covering 71 LICs. 21

Debt Service Ratios 1 (In percent) Debt Service-to-Revenue Debt Service-to-Exports 25 35 LDCs 30 20 LDCs 25 15 20 - - - - All LICs - - - - All LICs 15 10 10 5 5 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1 Source: IMF staff estimates. Public and publically guaranteed external debt. Based on latest DSAs, covering 71 LICs. 22

Crisis Impact: Debt Burden Ratios 1 • Debt ratios are expected to rise, then return to a declining path Total debt service PV of total public debt (in percent of revenues) (in percent of GDP) Pre-Crisis Post-Crisis Pre-Crisis Post-Crisis 14 40 12 35 30 10 25 8 20 6 15 4 10 5 2 0 0 2008 2013 2018 2023 2008 2013 2018 2023 1 Based on analysis of 37 countries, done by IMF staff in March 2010. 23