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What is ODA?

1. What is Official Development Assistance?

Official development assistance (ODA) refers to the flow of financial resources from the central and/or local governments of donor countries and multilateral agencies to developing countries. ODA is intended to promote the economic development and to improve the quality of life in developing countries. In other words, ODA can be described with the following three key questions:

by whom Central and local governments of a donor country or other public, international agencies
to whom? A developing country in the list of ODA recipients, provided by the OECD-Development Assistance Committee (DAC)
how? Providing grants* or concessional loans** for the recipient country in order to promote its economic development and welfare improvement

* A grant refers to a “free” form of assistance in cash, goods, and/or services provided without stipulations of repayment or redemption. Certain types of costs or expenses involved in implementing given projects of assistance may fall into the category of grants.

**A loan refers to funding provided either in cash or goods with stipulations of liabilities for repayment. Concessional loans made as part of ODA are more favorable to the recipient country than other commercially available loans in terms of interest rates, maturity, and grace periods. In order to count as ODA, a concessional loan must have a grant element of 25% or greater.


2. Why we provide ODA?

Donors provide ODA for a variety of reasons, including humanitarian, political and economic considerations. Over a billion people around the world continue to suffer today from grinding poverty, hunger, and natural calamities. The international community bears a moral obligation not to turn a blind eye to these situations calling for humanitarian concerns. At a more practical level, we must not forget how the continuing globalization today increases the range and kinds of pending issues the entire planet faces including: war, terrorism, climate change, other environmental problems, epidemics, and international financial crises. Solving these problems requires a collective cooperation and the provision of global public goods. In other words, we must recognize that no country can hope to sustain its prosperity and security forever without participating in global efforts to overcome these common problems, first and foremost of which is the ongoing poverty in developing countries.

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