Official Development Assistance (ODA) to developing countries increased to USD $78.6 billion in 2004, its highest level ever. Taking into account inflation and the fall in the U.S. dollar, this represents a 4.6% rise in real terms from 2003 to 2004 and follows a 4.3% increase from 2002 to 2003.`

The total represented 0.25% of Development Assistance Committee (DAC) members' combined gross national income (GNI), the same level as in 2003, but up from 0.23% in 2002 and 0.22% in 2001.

Several factors accounted for the USD$3.1 billion rise in real terms in 2004.  Among these were: 

• Contributions to international organisations increased by USD3.7 billion
• Aid to Afghanistan and Iraq was up by a total of at least USD$1.5 billion
• Technical co-operation grants rose by USD$1.2 billion
• Gross debt relief grants fell by USD$2.1 billion, and
• Net lending fell by USD$1.3 billion.

Fifteen of the twenty-two DAC member countries reported increased ODA in 2004. The United States remained the largest aid donor in volume terms, followed by Japan, France, the United Kingdom and Germany. The only countries to exceed the UN target for ODA of 0.7% of GNI remain Denmark, Luxembourg, the Netherlands, Norway and Sweden.

The United States' net ODA in 2004 was USD 19 billion, a 14.1% increase in real terms from 2003.  Its ODA/GNI ratio rose from 0.15% to 0.16%.  Most of the increase was due to a USD$1.8 billion contribution to the International Development Association (IDA), the grant and soft-loan arm of the World Bank.  Aid to Afghanistan (USD$875 million) and Iraq (USD 2.9 billion) also rose substantially. United States ODA comprised 24.2% of the DAC total in 2004, its highest share since 1986, and nearly double the low point of 12.5% reached in 1995.

Japan's net ODA fell by 4.8% in real terms to USD 8.9 billion or 0.19% of its GNI.  However, in gross terms its ODA rose by 24.5% to USD$16.1 billion. This was due partly to aid for reconstruction of Iraq, though mainly to greatly increased debt relief to some of the most heavily indebted countries in the world.  But this debt relief had little effect on net ODA since the bulk of the forgiven loans were counted as ODA when they were extended.  Increased repayments of ODA loans, notably by countries that have recovered from the Asian financial crisis, also affected Japan's net ODA.

The 15 DAC countries that are members of the European Union (EU) increased their combined ODA by 2.9% in real terms to USD 42.9 billion - some 55% of DAC ODA.  It represented 0.36% of these countries' combined GNI, up from 0.35% in 2003 and broadly on track towards the EU target of 0.39% by 2006, although five EU members still need to increase their ODA substantially to reach the minimum country target of 0.33%. EU members committed themselves to these targets before the 2002 Monterrey International Conference on Financing for Development.

Among EU member countries Belgium has committed to meeting the UN target of 0.7% by 2010 and France by 2012 (with an interim target of 0.5% by 2007).  Sweden has announced its goal to reach an ODA/GNI ratio of 1% by 2006, Spain to attain 0.33% in 2006 and 0.5% in 2008, and the United Kingdom to reach 0.47% by 2007-08 and 0.7% by 2013.

The largest rises in aid in real terms in 2004 by EU countries were in:

• Austria (22.0%), mainly due to debt relief grants
• Greece (13.1%), due to increased technical co-operation and emergency relief
• Luxembourg (10.5%), due to increased contributions to regional development banks
• Portugal (an exceptional 187.5%), due to a large debt relief operation for Angola
• Spain (14.5%), due to the timing of contributions to international organisations
• United Kingdom (8.8%), due to higher project and programme aid expenditure and debt relief.

ODA also rose in real terms in Denmark (3.5%), Finland (5.9%), France (4.3%), Ireland (2.2%) and Sweden (1.4%), and remained practically unchanged in Germany (-0.4%).

ODA fell in real terms in Belgium (-30.3%), after the peak in 2003 caused by a large debt relief operation for the Democratic Republic of Congo.  The fall in Italy (-9.7%) was mainly due to reduced debt forgiveness (down about USD 400 million).  ODA from the Netherlands fell (-4.0%) as India repaid all its outstanding Dutch aid loans.  These early repayments brought the Netherlands' ODA down to 0.74% of its GNI, below its target of 0.8%, which it intends to maintain, on average, over the period 2004-07 through above-target performance in 2005-07.

Aid managed by the European Commission (EC), funded by EU members from the amounts shown above, increased by 7.1% in 2004, continuing a trend towards more efficient disbursement of their resources.

Other DAC members saw the following changes in real terms in their ODA:

• Australia's ODA rose slightly by 2.3%
• Canada's ODA rose by 12.2% as reimbursements declined compared to 2003 when India had repaid its Canadian ODA loans
• New Zealand's ODA rose by 8.2%.  This included a significant increase in grants to South Pacific Agencies.
• Norway's ODA fell slightly (-2.9%)
• Switzerland's ODA fell (-3.0%).  However, this figure may be revised substantially if Switzerland decides to report the initial costs of asylum-seekers from developing countries arriving in Switzerland.

Among non-DAC OECD donors, only Poland has provided preliminary data showing that its ODA rose to USD 124 million in 2004 as Poland joined the EU and started contributing to its development budget.

Further substantial rises in ODA are expected in 2005-6.  If members meet the ODA volume commitments they made at and after the Monterrey conference, the ODA/GNI ratio should improve from 0.25% in 2004 to 0.30% in 2006.  The main sources of the rises are likely to be:

• Contributions to the World Bank's International Development Association - In February 2005, donors agreed to contribute USD 18 billion to IDA to increase its grants and loans by at least 25%. 
• Increases in bilateral aid budgets - Several DAC members are implementing significant expansions of their bilateral aid programmes.  For example, the United States' Millennium Challenge Account is now operational and two other large donors - France and the United Kingdom - are increasing their bilateral ODA as part of ambitious plans to meet the UN 0.7% target by 2012-13. 
• Tsunami aid - The devastating Indian Ocean tsunami has led to exceptional mobilisation of both private and official resources for relief and reconstruction. The DAC will track disbursements arising from the pledges made.
• Debt relief for Iraq - At the end of 2004, the Paris Club agreed to relieve much of the debt owed by Iraq.  Depending on the pace of bilateral agreements between Iraq and its creditors, up to USD$15 billion of this relief may be reportable as ODA by DAC members in 2005.

See Tables and Graphs (in pdf format)