Which countries are the most principled about international aid?

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Gabi Thesing, Senior Writer, Forum Agenda

• In today’s uncertain world, the need for international aid is immense.
• Sweden and Ireland top this year’s ODI Principled Aid Index, which evaluates how countries allocate their development aid.
• The pressure on wealthier countries to provide aid is not expected to wane, according to the World Economic Forum’s Global Risks Report 2023.

In a world filled with uncertainty fuelled by war, economic power shifts, climate change and pandemics, the need for international aid is immense.

At the same time, there is a risk that aid is not given unconditionally to those most in need but used for furthering countries’ self-interest, according to London-based think tank Overseas Development Institute (ODI), which has found that Sweden and Ireland are the most altruistic donor countries in the world.

“Are high-income countries prepared to invest at scale to achieve shared mutual interests with low-income countries, which are viewed with suspicion – even as possible foes?’’ Nilima Gulrajani, Senior Research Fellow, and her colleague, Emily Silcock, wrote at the publication of the 2023 Principled Aid (PA) Index. “Or do their allocations suggest that they are weaponizing finance to achieve their tactical, short-term goals?’’

The PA Index assesses how bilateral Development Assistance Committee (DAC) donors strategically allocate their development aid to foster a safer, more sustainable and prosperous world.

It evaluates countries’ dedication to three principles: bridging development gaps, advancing global cooperation, and displaying public spiritedness. A high rank on the index signifies that a country recognizes the interdependence between its own global stability, prosperity and resilience and the success and well-being of other nations, particularly lower-income countries.

COVID-19 catalyst for increased aid spending

The 2023 Index reflects allocations recorded in 2021, during the acute phase of COVID-19, and does not include donor responses to the war in Ukraine.

During that time, wealthy countries noticeably increased their “principled” aid spending largely driven by increases in social spending to countries in serious financial distress, greater investment in controlling communicable diseases and less aid allocated for geostrategic reasons.

Sweden topped the rankings as the most principled aid spender, maintaining a balanced performance across all three principles and pushing Ireland off the top spot. Higher ranked donors’ scores have declined relative to lower ranked ones and Greece – the bottom-ranked country – made dramatic improvements.

Sweden’s star performance may be a one-off though. As the country “begins reforming its development cooperation to align with the new centre-right government’s fiscal, trade and border security priorities, this may tilt allocations towards narrower self-interest, in the process sacrificing the soft power influence it has cultivated over many years as a smart development power at the top of several league tables,” the authors said.

Looking ahead, ODI expects growing investments in the climate crisis and gender equality (scores on both have increased since 2019), as well as humanitarian responses in conflict-affected states like Ukraine and Sudan.

Ukraine war fuels record aid spending

That is already born out in hard numbers. Last year, foreign aid from official donors rose to a record $204 billion, up from $186 billion in 2021, as developed countries increased their spending on processing and hosting refugees and on aid to Ukraine, according to figures from the Organisation for Economic Co-Operation and Development (OECD).

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Fragility and conflict in one country often has consequences around the world. This has been evidenced by the COVID-19 pandemic, numerous climate emergencies as well as the war in Ukraine and the ensuing refugee crisis. Regions affected by conflict are particularly vulnerable to the devastating impacts of these crises.

Urgent relief, supported by public-private partnerships, remains necessary in acute crises but it is essential those efforts are supplemented by long-term investments that help affected communities recover and rebuild.

The World Economic Forum is working with partners to identify and scale solutions in fragile parts of the world. The Humanitarian and Resilience Investing (HRI) Initiative seeks to unlock private capital so it flows into financially sustainable opportunities that benefit vulnerable communities. The Global Future Council on the New Agenda for Fragility and Resilience provides guidance to humanitarian and development actors as well as the private sector to improve support to local actors and facilitate responses that strengthen community resilience.

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Within total Official Development Assistance (ODA), humanitarian aid amounted to $22.3 billion, up by 1% in real terms compared to 2021, reports the OECD. “DAC donors spent $11.2 billion on COVID-19-related activities in 2022, down 45% from 2021. Vaccine donations amounted to $1.53 billion, a fall of 74.1% in real terms compared to 2021. Debt relief grants counted as ODA were very low at $60 million.”

Last year, foreign aid from official donors rose to a record $204 billion. Image: OECD

“In a situation with increasing pressures on scarce development resources, we need to keep our commitment to support the least developed countries, many of which are in Africa,” OECD DAC Chair, Carsten Staur, said. “Russia’s aggression against Ukraine has resulted in a significant increase in funding for receiving refugees in donor countries. Some donors provided all or some of these extraordinary expenditures in addition to their already planned development programs in 2022, which is commendable.”

World will remain in crisis

That said, the pressure on wealthier countries – all of them tackling a global cost-of-living crisis – to support those less able to will not let up, according to the World Economic Forum’s Global Risks Report 2023.

“The next decade will be characterized by environmental and societal crises, driven by underlying geopolitical and economic trends,’’ the report said. “This is the moment to act collectively, decisively and with a long-term lens to shape a pathway to a more positive, inclusive and stable world.”