Official Development Assistance (ODA)

1) Definition of Official Development Assistance (ODA)

Definition of ODA from 2018 (from OECD)

The ODA grant equivalent is a measure of donor effort. Grants, loans and other flows entering the calculation of the ODA grant equivalent measure are referred to as ODA flows.

 ODA flows 

Official development assistance flows are defined as those flows to countries and territories on the DAC List of ODA Recipients and to multilateral development institutions which are: 

  • provided by official agencies, including state and local governments, or by their executive agencies; and
  • each transaction of which:
    - is administered with the promotion of the economic development and welfare of developing countries as its main objective; and
    - is concessional in character. In DAC statistics, this implies a grant element of at least (see note 4).
    • 45 per cent in the case of bilateral loans to the official sector of LDCs and other LICs (calculated at a rate of discount of 9 per cent).
    • 15 per cent in the case of bilateral loans to the official sector of LMICs (calculated at a rate of discount of 7 per cent).
    • 10 per cent in the case of bilateral loans to the official sector of UMICs (calculated at a rate of discount of 6 per cent).
    • 10 per cent in the case of loans to multilateral institutions (see note 1) (calculated at a rate of discount of 5 per cent for global institutions and multilateral development banks, and 6 per cent for other organisations, including sub-regional organisations) (see notes 2 and 3).

Loans whose terms are not consistent with the IMF Debt Limits Policy and/or the World Bank’s Non-Concessional Borrowing Policy are not reportable as ODA.

ODA grant equivalent measure

The ODA grant equivalent measure is calculated for ODA flows, as defined above. For loans to the official sector which pass the tests for ODA scoring [conditions i) and ii) above], the grant equivalent recorded as ODA is obtained by multiplying the annual disbursements on the loan by the loan’s grant element as calculated at the time of the commitment (see note 4).

Notes:

  1. This includes both loans in the form of core contributions to multilateral institutions (classified as multilateral ODA), loans channelled through multilateral institutions (classified as bilateral ODA), and loans to trust funds administered by these institutions.
  2. The definition of concessionality remains to be clarified for other types of loans [e.g. loans to the private sector], and other non-grant instruments (e.g. equity). Pending clarification, the criterion “is concessional in character and conveys a grant element of at least 25 per cent (calculated at a rate of discount of 10 per cent)” remains in force for these instruments. See Addendum 3 for the reporting methods for PSI.--
  3. Discount rates consist of a base factor of 5%, which is consistent with the discount rate that IMF used in 2014 for calculating IMF grant element, and an adjustment factor of 1% for UMICs, 2% for LMICs and 4% for LDCs and other LICs. There is no adjustment factor for loans to global institutions and multilateral development banks, and an adjustment factor of 1 per cent for loans to other multilateral organisations, including sub-regional organisations. The DAC will regularly assess the need for adjusting discount rates, in particular following any change to the IMF rate.
  4. The method for calculating ODA grant equivalent has so far been defined for bilateral loans to the official sector and for loans to multilaterals, not for loans to the private sector. The approach for measuring the donor effort in the use of private-sector instruments has not been agreed yet and is therefore not reflected in this interim version of the Directives (See Reporting Directives and Addenda section, Addendum 3 for the reporting methods of PSI on a cash flow basis.
2) DAC List of ODA Recipients

The DAC List of ODA Recipients shows all countries and territories eligible to receive official development assistance (ODA). These consist of all low and middle income countries based on gross national income (GNI) per capita as published by the World Bank.

The Development Assistant Committee revises the list on a triennial basis. Countries that have exceeded the high-income threshold for three consecutive years at the time of the review are removed.

3) Demonstrating ODA Compliance

Whether completing the ODA compliance section of a proposal or justifying a change to the project plan, there are key factors that need to be considered to ensure that reviewers and assessors can agree with the assessment of ODA compliance

  • External validation and evidence – provide references and evidence from recognised organisations that demonstrate the development challenge which is being addressed
  • Quantification – provide estimates of the scale of the challenge and the quantified benefits that could be realised if the proposed approaches/interventions are ultimately successful

There are key approaches and resources that can be adopted to support the creation of an ODA compliance statement.

Approaches

  • Have other researchers identified and published papers on the development challenge that is being addressed?
  • Are any NGOs working to support countries and local populations in the area of the development challenge
  • How does the identified development challenge fit with the UN Sustainable Development Goals (SDGs), how does the project contribute to meeting the targets and indicators within the relevant goals, the 17 goals are underpinned by 169 targets, each of which is supported by between 1 and 3 indicators (244 indicators in total)

Resources to Evidence the Need and Potential Benefit