Official development assistance (ODA) is a statistic compiled by the Development Assistance Committee of the Organisation for Economic Co-operation and Development to measure aid. The DAC first compiled the statistic in 1969. It is widely used by academics and journalists as a convenient indicator of international aid flow. It includes some loans.
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The full definition of ODA is:
Flows of official financing administered with the promotion of the economic development and welfare of developing countries as the main objective, and which are concessional in character with a grant element of at least 25 percent (using a fixed 10 percent rate of discount). By convention, ODA flows comprise contributions of donor government agencies, at all levels, to developing countries (“bilateral ODA”) and to multilateral institutions. ODA receipts comprise disbursements by bilateral donors and multilateral institutions.
– OECD, Glossary of Statistical Terms [1]
In other words, ODA needs to contain the three elements:
(a) undertaken by the official sector;
(b) with promotion of economic development and welfare as
the main objective; and
(c) at concessional financial terms (if a loan, having a
grant element of at least 25 per cent).
This definition is used to exclude development aid from the two other categories of aid from DAC members:
Examples:
If a donor country accords a grant or a concessional loan to Afghanistan it is
classified as ODA, because it is on the Part I
list.
If a donor country accords a grant or a concessional loan to Bahrain it is classified as
OA, because it is on the Part II list.
If a donor country gives military assistance to any other country
or territory it is classified as OOF, because it
is not aimed at development.
There are normally two ways of looking at the volume of ODA:
In real terms the United States is by far the largest donor. It is also the country that produces the greatest value of goods and services, i.e. GNP. However, the U.S. federal government's aid budget is ~0.2% of its GNI, whereas Sweden's is ~1%.
As a percentage Sweden is the largest donor among developed
countries, and together with Luxembourg, Norway, the Netherlands and
Denmark it meets the
International Aid Target of dedicating 0.7 percent of GNP[2]. As
percentage of GDP, Arab states of the Persian Gulf are the most generous, with
Kuwait contributing 8.2% of
its gross national
product and Saudi
Arabia contributing 4% in 2002. [3]
World Bank reports that Iraq was the top recipient of development aid in 2005 followed by Nigeria. However, this is due to the significant debt relief deals that were granted to these nations that year - when donor countries write off a portion of a recipient country's debt, it is counted as official development assistance from the donor country.
Official development assistance has been criticized by several economists for being an inappropriate way of really helping poor countries. The Hungarian economist Peter Thomas Bauer has been one of the most vocal of them.
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