Debt concerns grow as development aid shifts from grants to loans
Debt concerns grow as development aid shifts from grants to loans UNCTAD
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In 2022, Official Development Assistance loans rose by 11% to $61 billion, while grants fell by 8% to $109 billion – a shift that could increase developing country debt burdens.
Global Official Development Assistance (ODA) surged 22% to a record $287 billion in 2022.
Despite this overall increase, aid specifically targeted at developing regions declined by 2%, or $4 billion.
The nature of aid also saw a significant shift, moving towards concessional loans instead of grants – a trend that could add additional fiscal strain on developing countries still grappling with the economic aftermath of the COVID-19 pandemic.
In 2022, ODA loans rose by 11% to $61 billion, while grants fell by 8% to $109 billion.
The shift is detailed in a new United Nations report, “Aid under Pressure,” which highlights the problematic nature of increasing loan-based aid amid rising international interest rates and growing debt distress.
Currently, more than 40% of the world’s population, around 3.3 billion people, lives in countries where governments spend more on debt interest payments than on health or education.
“This worsens debt sustainability, particularly for countries at high risk or in debt distress,” the report says.
The share of grants in total ODA hits two decade low
The share of grants in total ODA fell to 63% in 2022, marking the smallest percentage in two decades – except for the initial year of the COVID-19 pandemic, which saw a drop to 62%. During the 2012-2021 period, the share averaged 68%.
Historically, the peak year for grant-based ODA was 2006, bolstered by significant debt relief under initiatives such as the Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative.
The shift towards loan-based aid seen in all developing regions
The transition from grants to loans is evident across all developing regions.
Over the past decade, the share of loans in total ODA more than doubled in Latin America and the Caribbean to 49%. This shift is also significant in Asia and Oceania and Africa, where loans increased to 40% and 29%, respectively.
In 2022, grants saw the sharpest decline in Asia and Oceania, falling by 12%, with Latin America and the Caribbean and Africa experiencing decreases of 8% and 6%, respectively. Meanwhile, loan increases were most pronounced in Latin America and the Caribbean, which saw a surge of 49%, followed by Asia and Oceania and Africa with rises of 12% and 1%, respectively.
SDGs, Targets, and Indicators
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SDG 1: No Poverty
- Target 1.2: By 2030, reduce at least by half the proportion of men, women, and children of all ages living in poverty in all its dimensions according to national definitions.
- Indicator: Proportion of population living below the national poverty line.
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SDG 3: Good Health and Well-being
- Target 3.8: Achieve universal health coverage, including financial risk protection, access to quality essential health-care services, and access to safe, effective, quality, and affordable essential medicines and vaccines for all.
- Indicator: Proportion of population with access to affordable essential medicines and vaccines on a sustainable basis.
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SDG 4: Quality Education
- Target 4.1: By 2030, ensure that all girls and boys complete free, equitable, and quality primary and secondary education leading to relevant and effective learning outcomes.
- Indicator: Proportion of children and young people (a) in grades 2/3; (b) at the end of primary; and (c) at the end of lower secondary achieving at least a minimum proficiency level in (i) reading and (ii) mathematics, by sex.
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SDG 8: Decent Work and Economic Growth
- Target 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 percent gross domestic product growth per annum in the least developed countries.
- Indicator: Annual growth rate of real GDP per capita.
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SDG 10: Reduced Inequalities
- Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average.
- Indicator: Growth rates of household expenditure or income per capita among the bottom 40 percent of the population and the total population.
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SDG 17: Partnerships for the Goals
- Target 17.2: Developed countries to implement fully their official development assistance commitments, including the commitment by many developed countries to achieve the target of 0.7 percent of ODA/GNI to developing countries and 0.15 to 0.20 percent of ODA/GNI to least developed countries; ODA providers are encouraged to consider setting a target to provide at least 0.20 percent of ODA/GNI to least developed countries.
- Indicator: Net official development assistance, total and to least developed countries, as a proportion of the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee donors’ gross national income (GNI).
SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 1: No Poverty | Target 1.2: By 2030, reduce at least by half the proportion of men, women, and children of all ages living in poverty in all its dimensions according to national definitions. | Proportion of population living below the national poverty line. |
| SDG 3: Good Health and Well-being | Target 3.8: Achieve universal health coverage, including financial risk protection, access to quality essential health-care services, and access to safe, effective, quality, and affordable essential medicines and vaccines for all. | Proportion of population with access to affordable essential medicines and vaccines on a sustainable basis. |
| SDG 4: Quality Education | Target 4.1: By 2030, ensure that all girls and boys complete free, equitable, and quality primary and secondary education leading to relevant and effective learning outcomes. | Proportion of children and young people (a) in grades 2/3; (b) at the end of primary; and (c) at the end of lower secondary achieving at least a minimum proficiency level in (i) reading and (ii) mathematics, by sex. |
| SDG 8: Decent Work and Economic Growth | Target 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 percent gross domestic product growth per annum in the least developed countries. | Annual growth rate of real GDP per capita. |
| SDG 10: Reduced Inequalities | Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average. | Growth rates of household expenditure or income per capita among the bottom 40 percent of the population and the total population. |
| SDG 17: Partnerships for the Goals | Target 17.2: Developed countries to implement fully their official development assistance commitments, including the commitment by many developed countries to achieve the target of 0.7 percent of ODA/GNI to developing countries and 0.15 to 0.20 percent of ODA/GNI to least developed countries; ODA providers are encouraged to consider setting a target to provide at least 0.20 percent of ODA/GNI to least developed countries. | Net official development assistance, total and to least developed countries, as a proportion of the Organization for Economic Cooperation and Development (OECD) Development Assistance Committee donors’ gross national income (GNI).
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