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Growing share of European development aid disguised as loans

Countries using loans as aid will affect vital health grants in developing countries like Mozambique, Action for Global Health warned. [Thomas Williams/Action for Global Health]

Countries using loans as aid will affect vital health grants in developing countries like Mozambique, Action for Global Health warned. [Thomas Williams/Action for Global Health]

EXCLUSIVE: About a third of German, and more than half of French development aid payments made since 2005 were in fact loans to poorer countries on which they will receive interests, EurActiv can reveal.

Last year, Germany and France fell far short of their 2015 development aid targets, despite bundling loans and domestic administrative costs with grants as part of their total payment.

In 2005, EU member states committed to increase Official Development Assistance (ODA) to 0.7% of Gross National Income (GNI) by 2015. That was reaffirmed at a meeting of EU leaders in February 2013.

Only the UK, Denmark, Sweden, Norway and Luxembourg hit the 0.7% target in 2013. Those countries used either no, or very few, loans to make up their numbers in 2013.

The UK surpassed the 0.7% target for ODA spending by paying $17.9 billion (€14.45 billion) in 2013. $17 billion (€13.72 billion) of that was in aid grants. In 2013, 7.2% of ODA payments by the UK took the form of loans. Only 5% of Norway’s ODA were loans, and Sweden has never used loans to bump up its ODA.

Total bilateral ODA loans as percentage of bilateral ODA.

 

Germany

Research using Organisation for Economic Cooperation and Development (OECD) figures by Action for Global Health, a NGO, showed that Germany’s aid was just 0.387% of GNI, a total of $14.1 billion (€10.6 billion), in 2013.

Despite Germany’s status as the European Union’s leading economy, $2.8 billion (€2.1 billion) of aid came in the form of loans, which must be repaid and carry interest.

In 2013, Germany was repaid $1.7 billion (€1.3 billion) in ODA loan repayments. Since 2005, Germany has got back an average of €200 million annually in interest on its ODA loans.

A further $1.6 billion (€1.2 billon) is reported as “non-transfer” aid. This figure includes administrative costs incurred in Germany and takes into account debt relief.  The G8 group of major economies committed to write off $100 billion (€80.73 billion) in developing country debts in 1999.

Loans and non-transfer items total $4.2 billion (€3.31 billion) , almost 40% of the total German aid package. LAst year, almost a third (30.3%) of Germany’s aid payments were made in loans.

Of the 0.7%, 0.1% is earmarked for health aid. In 2012, Germany paid out 0.029% of its GNI in health aid, about a third of its 2015 target.

France

Since 2005, more than half (55%) of French ODA was in the form of loans. Between €200 and €300 mllion, on average, in interest on previous loans has been paid back to France annually.

In 2013, France spent $11.4 billion (€8.6 billion), 0.41% of its GNI, on ODA payments, including loans ($3 billion/€2.42 billion)) and non-transfer payments ($2.7 billion). $1.7 billion (€1.37 billion) interest was repaid from previous loans.

Combined, the loan and non-transfer payments are almost the same as the $6.6 billion (€5.2 billion) France paid in traditional aid grants. Health spending in 2012was just under half of the 0.047%, called for in the 2005 agreement.

 

Read whole story here.

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This entry was posted on December 12, 2014 by in Development, Financial services and tagged , , , , , .

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