THE FUTURE OF DEVELOPMENT FINANCE:Modernising Measures and Instruments
Ms. Suzanne SteensenManager Development Finance Architecture Unit
Statistics and Development Finance DivisionOECD Development Co-operation Directorate
Outline
Context of reform: the post-2015 era1
OECD contribution to the third Conference onFinancing for Development3
Modernisation package: the OECD DAC 2014 HighLevel Meeting agreement2
DAC donor agencies(concessional &
concessional bilateralfinance)
Privatephilanthropy(foundations
& NGOs)
Non-DAC sovereignproviders
(e.g. BRICS & MINTcountries, otherSouth-South co-
operationproviders)
Multilateral agenciesincl.
regional & Araborganisations
(concessional & non-concessional finance,
& investments)
DFIs(non-
concessionalloans &
Investments)
Export creditinstitutions
Privateactors/investors
(FDI & other privateflows at market
terms)
Sustainable development as the main objective Other objectives
The blue area illustrates the cross-border transfers to developing countries.
The SDG era: The financial architecture ofsources and instruments is more complex1
Sources of external finance beyond ODA arebecoming more prominent
0
100
200
300
400
500
600
700
800
900
1000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
USD
bill
ion
Remittances
Private grants
Bonds and securities
FDI
Export credits
OOF - excl. export credits
Total ODA
24%
17%
4%
28%
8%
18%
1%
20%
11%2%
1%
14%
29 %
23%
1
A Statistical Framework that is “Fit for Purpose”in the Post-2015 Development Finance Context
The OECD DAC statistical system should:• Promote transparency and accountability ofdevelopment finance – access to statistics is essential foran accountable post-2015 development framework.•Carry the right incentive to maximise resourcesmobilisation, their smart allocation and catalytic use.•Promote international standards for measuring &monitoring of development finance.
1
Historical decision to modernise the OECD DACframework: Outcomes of the 2014 DAC HLM
Modernise the ODA measure
Increase targeting of resources to countriesmost in need (LICs, LDCs, LLDCs, SIDS,
conflict afflicted and fragile states)
Mobilise more private finance fordevelopment
Develop a statistical measure tailored tothe SDG framework: Total Official Support
for Sustainable Development (TOSSD)
2
A. Modernising ODA
CONCESSIONALITY and REPORTING ON LOANS INODA
• New measurement system where only the grant equivalent ofODA loans (differentiation of discount rates and thresholds byincome group):• Allows better comparison between loans and grants.• A clear, quantifiable measure of concessionality, that is
tighter than what existed before.• Ensures access to ODA loans on better terms and conditions
than ever before as it incentivises concessionality.• Safeguards established to ensure ODA debt sustainability.
2
A. Before and after: ODA loans
BEFORE:FULL FACE VALUE
AFTER:ONLY THE GRANT EQUIVALENT OF A LOAN
Grant ElementThresholds
25% 45% for LDCs and other LICs 15% for LMICs 10% for UMICs
Discount Rates 10% Used for
assessing theconcessionalityof a loan
5% base (current IMF discount rate) + adjustment factors ofo 4% for LDCs and other LICso 2% for LMICso 1% for UMICs
Used for both assessing the concessionality of a loan (does itmeet the threshold?) and for calculating its ODA grant equivalentor the concessional portion of the loan.
MeasurementSystem
Positive ODAwhen disbursed,negative ODAwhen repaid
Grant equivalent of loan disbursements (grant elementmultiplied by amount disbursed).
Repayment of past loans is not subtracted from ODA but willcontinue to be collected and published.
2
B. Better targeting of ODA
Reverse declining trends of ODA to LDCs andimprove targeting to countries most in need (LDCs, LICs,SIDS, LLDCs and fragile states)
• Enhance monitoring of members’performance – individually throughDAC peer reviews and collectively atSenior Level Meetings(compendium of measures).
• Strengthen the empirical andanalytical basis for better decision-making about smart ODAallocations.
2
C. Valorising the use of private sectorinstruments
Valorise and incentivise official sector use ofinstruments with a leveraging effect by:
• Capturing the budgetary effort associated with usingmarket-like instruments (e.g. equity, risk mitigationinstruments) in ODA.
• Setting an international standard to measure themobilisation effect of official interventions andcollecting data on amounts mobilised in DAC statistics.
2
D. Total Official support for SustainableDevelopment (TOSSD)
A new comprehensive statistical measure that captures the diversity ofresource flows in support of sustainable development.
• Complements – and does not replace – ODA and will includeconcessional and non-concessional financing and capture all financialinstruments
• Cover activities that promote sustainable development, includingcontributions to GPG
• Capture international public finance and public schemes for mobilisingprivate investments
• Relevant for any provider of development finance, including privateactors that take part in blended investment schemes
Ultimate features can only be determined once the post-2015 agendahas been agreed and ongoing consultation with stakeholders beyond theDAC.
2
D. Dakar-Diamniadio Toll Highway project(blended finance)
World Bank (IDA)
African Development Fund
Agence Francaise pour ledeveloppement (AFD)
African Development Bank
World Bank (IFC)
Commercial Bank
Syndicated loan(non-concessional)
Concessional loan
Grant
Concessional loan
Already captured in the current system
To be captured in the new system
2
Concessional loan
D. Solar panel (blended finance)
Asian Development BankPrivate investor
Guarantee
World Bank(IDA)
Non-concessionalloan
Already captured in the current system
To be captured in the new system
2
Conference on Financing for Development(13-16 July, Addis Ababa)
INVESTMENT
TAX
AID
Record statistics, enhance countries engagement in theinternational tax agenda (BEPS, AEOI, illicit financial flows) and
respond to capacity needs
Need for the rightincentives tofurther unlockprivate investments(frameworks,private sectorinstruments,measurement – e.g.TOSSD)
ODA is coreand should bebetter targetedand used morecatalytically(quality of aidis essential)
3More and better aid, more and better investments and more and better tax (AIT)
Thank you!
For more information please visit our website at:http://www.oecd.org/dac/financing-
development.htm
Additional slides (Recent trends and facts)
A better incentive system for lending to poor countriesMaximum interest rates for ODA loans
6,11%
6,78%
2,55%
3,81%
0%
1%
2%
3%
4%
5%
6%
7%
8%
10 15 20 25 30 35 40Loan maturity
pre-2015
Under the newsystem: maximuminterest rates forLDCs and other LICs
Distribution of Net ODA disbursements incl. imputedmultilateral ODA to LDCs (2013)
Number of priority partnerships in LDCs
Spotlight on ODA to LDCs
DAC countries’ net ODA to LDCs as % of GNI (1960-2013) DAC countries’ net ODA to LDCs as % of GNI (2013)
* Countries with stars have reached the UN ODA target of 0.7% of GNI.
Spotlight on ODA to LDCs: DAC Members’ Performance
Total gross concessional flows toACP countries and other countries
-
10
20
30
40
50
60
70
80
90
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
2012
USD
bill
ion
ACP Other countries
Gross bilateral ODA and multilateral outflows from DAC members and multilaterals
Composition of total gross concessional flows toACP countries
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
20
40
60
80
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
2012
USD
bill
ion
Grants Loans Grant share
Gross bilateral ODA and multilateral outflows from DAC members and multilaterals
- 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0 5,5 6,0 6,5 7,0 7,5 8,0 8,5 9,0
USD
Bill
ion
Loans
Grants
Gross concessional flows to ACP countries:Top 20 donors
2013 Gross bilateral ODA and multilateral outflows from DAC members and multilaterals
Gross concessional flows to ACP countries:Top 20 ACP countries
-
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0U
SD B
illio
n
Loans
Grants
2013 Gross bilateral ODA and multilateral outflows from DAC members and multilaterals
Top Related