The OECD Development Assistance Committee (DAC) – the group of countries that regulate how aid should be reported – is debating whether to allow donors to report risky loans not only when they are awarded but also if they are restructured or written off.

The system for reporting loans was last reformed in 2014, when new ‘grant equivalent system’ meant that donors could no longer report the full amount of a loan as aid, or ODA. Instead, the greater the risk of the loan, the more ODA that could be reported.  This system takes into account the risk that the loan will not be repaid, but some countries would like to see additional ODA credits if they agree to cancel or reschedule those loans.

Jan van de Poel, Policy and Advocacy Manager at the European Network for Debt and Development (Eurodad) said: “Eurodad and fellow CSOs across the world have written to DAC members expressing our deep concerns about proposals to change the rules on debt relief. If the rules are relaxed there is a serious risk that we will return to well-known problems, such as the inflation of ODA and double-counting. Debt relief should not be counted as ODA for past or for future ODA loans.”

“Allowing the reporting of debt relief as ODA would also incentivise further aid in the form of loans. As developing countries tackle the consequences of the Covid-19 pandemic they need aid to be awarded as grants and they need donor countries to continue to push to meet the 0.7 per cent commitment of GNI.”

CSOs are also very concerned that talks on changing the rules on debt relief are being held behind closed doors.

No official documents have been made publicly available, even though commitments were made at the UN Financing for Development Summit in 2015 to hold ‘open, transparent and inclusive’ discussions on ODA modernisation, including debt relief. Given the high degree of secrecy in which this debate is taking place, it is difficult for stakeholders, including CSOs, to assess the impact of the different proposals on the table.

Van de Poel said: “We understand that there is a push from some DAC members to make a decision on these rules this week, even though most members have had very little time to consider the implications of the changes proposed to these important rules. We call upon the committee to take more time and invite CSOs and other experts into the discussions to make sure rules for reporting debt relief do not jeopardise the credibility of ODA as a measure of donor effort to support the most vulnerable in developing countries.”

ENDS

Media contact: Julia Ravenscroft, Communications Manager: 0486356814/ [email protected].

Notes to editors:

• A recent blog by Jan Van de Poel and Nerea Craviotto, Senior Policy and Advocacy Officer at Eurodad, on the issue of debt relief can be found here.
• A second blog by Eurodad from May, also on the issue of debt relief can be found here.
• More information on the OECD’s grant equivalent system can be found here.