TUAC / TUDCN SEMINAR ON FINANCING FOR DEVELOPMENT Wednesday 29 October 2014 – Room E Guillaume Delalande Development Finance Architecture Unit, DCD/SDF.

Context and rationale for the reform The main topics of the reform – The reform of ODA and concessionnality – Broader measures of donors’ contribution to development (TOSD) – Action plan to reverse the downward trend of ODA to LDCs Expectations from the HLM in December 2014 Overview of the presentation

The context of the reform : gearing up to a post-2015 financing for development framework Major changes in the Development Finance Landscape – New actors – New instruments The necessity to modernize measurement in a post-2015 world – A need to maintain the credibility of ODA as a reliable measure of “provider effort”; A need to maintain the international commitment of 0.7% ODA to GNI; – A need to valorise broader efforts towards development through a comprehensive measure of Total Official Support for Development; – Develop a comprehensive measurement system for development finance statistics, which captures providers’ efforts and as well as recipients’ perspective. – An optimal use of the different types of finance: recognise providers’ efforts in using market-like instruments to incentivize private sector flows; Status quo is not an option

The mandate from our ministers (DAC 2012 HLM) – 4 objectives Investigate whether any resulting new measures of external development finance (including any new approaches to measurement of donor effort) suggest the need to modernise the ODA concept. Agree on a clear, quantitative definition of “concessional in character” Elaborate a proposal for a new measure of total official support for development (TOSD). Explore ways of better representing both “donor effort” and “recipient benefit” of development finance.  By end 2014/early 2015

Implementation of the HLM mandate: Process up until 2015 Numerous studies to inform the technical / political level discussions among DAC members and beyond (e.g. UN) Intensive outreach and consultation (Expert Reference Group, side events at WB/IMF spring meetings, Mexico GPP ministerial, Organisation Internationale de la Francophonie, CommonWealth, Partner Countries workshop…) Modernisation of the DAC statistical system – methods discussed at Working Party on Development Finance Statistics (WP-STAT) and with providers beyond the DAC and developing countries Proposals for new measures for consideration by DAC Senior (October 2014) and High-level (December 2014) meetings

Is it ODA ? Official Development Assistance is defined as those flows to countries and territories on the DAC List of ODA Recipients (available at and to multilateral development institutions which are: i.Provided by official agencies, including state and local governments, or by their executive agencies; and ii.Each transaction of which: a)Is administered with the promotion of the economic development and welfare of developing countries as its main objective; and b)Is concessional in character and conveys a grant element of at least 25 % (calculated at a rate of discount of 10%)

Concessionnality - 2 dimensions being discussed and membership is divided. – The discount rate – Risk free and risk adjusted (Assessment based on lenders’ funding cost plus a premia?) – The measurement of loans: Grant equivalent vs. Cash flow High level working group on concessionality chaired by Mark Lowcock is expected to negotiate a political compromise in time for the HLM – first meetings held on 29 Sept and 21 october. Modernisation of ODA: concessionnality and measurement of loans

ODA modernisation: Incentivise greater use of market-like instruments by recognising donors’ effort in ODA Have gained more and more attention and should be included to incentivise greater use. Broad agreement that at least current disincentives in current statistical system should be removed (e.g. if donor reports an equity investment as ODA, any positive sales proceeds from successful investments score as negative ODA). A proposed two-phased approach for measuring donor effort: –Recognising in ODA, governments contributions to DFI. –An assessment instrument by instrument (e.g. guarantees and insurances)

Valorising broader contribution for development: Sources of external finance beyond ODA are becoming more prominent

Total Official Support for Development (TOSD) Summary Scope: The totality of official resources in support of sustainable development, regardless of the terms under which they have been granted. TOSD would have the objective of promoting the “economic development and welfare of developing countries” but also of addressing global challenges (GPGs, enablers). The latter allow the blending of interests – some degree of self-interest would be permissible (trade and exports). Complements ODA: ODA will remain the cornerstone of donor accountability (no backing away from existing commitments!). Name competition: International public finance for development?

LDCs & the composition of external finance in developing countries (2012)

LDCs: Reversal of recent trends Consensus on the need to collectively reverse the downward trend of aid to least developed countries (LDCs) DAC ODA to LDCs / GNI

The HLM in December 2014 At the HLM, DAC Ministers and Heads of Agency are expected to: – Conclude on concessionality (how to treat concessional loans in the DAC statistics); – Endorse in principle the main features of TOSD (to be shaped by the final SDGs); – Agree on an action plan to reverse the downward trend of ODA to LDCs; – Measure donor effort in using market-like instruments to incentive private sector flows; – Propose for an international standard for mobilisation / leveraging effect of private sector / market-like instruments and a system for tracking such resources; 13

Thank you !