Definition of ODA
Definition of ODA
Official Development Assistance (ODA)
ODA is defined as aid provided by official agencies—including governments and their executive agencies—with the objective of promoting the economic development and welfare of developing countries. It includes financial and technical assistance given directly to state and local governments of developing countries or to international organizations. In other words, ODA can be described with the following three key questions:
|by whom?||Central and local governments of donor countries or other public, international agencies|
|to whom?||Developing countries in the list of ODA recipients, provided by the OECD DAC|
|how?||Providing grants or concessional loans for the recipient countries in order to promote their economic development and welfare improvement|
International Development Cooperation
International development cooperation encompasses all the efforts and activities that international society takes to safeguard basic human needs, by 1) reducing the development gap between developed and developing countries, between different developing countries, and within developing countries and 2) tackling poverty in developing countries.
Types of Aid
Depending on the delivery channel, ODA is categorized into bilateral and multilateral ODA. There are two types of bilateral ODA: grants and concessional loans. Grants refer to transfers in cash or in kind for which no repayment is required on the part of developing countries. Concessional loans involve transfers made in cash or in kind provided on more generous than capital market terms, and they incur repayment obligations.
Multilateral ODA is divided into contributions and capital subscriptions. Contributions are provisions of funds to international organizations to address economic, social, environmental, and other cross-cutting development issues. Capital subscriptions are provisions of capital to multilateral development banks, through which donors indirectly assist developing countries.
ODA can also be tied or untied. Tied aid refers to official grants or loans for which the associated goods and services must be procured in the donor country or in a restricted group of other countries. In contrast, untied aid does not have these limitations and gives the recipient country freedom to procure goods and services from any country of its choice.
|Channels||Types of Finance||Types of Aid|
|Bilateral Aid||Grants: Transfers in cash or in kind for which no legal debt is incurred by the recipient||
|Loans (Non-grant): Transfers in cash or in kind for which the recipient incurs legal debt|
|Multilateral Aid||Contributions, capital subscriptions, and concessional loans to international organizations|