Aid + financial flow terms

Aid bundle: aid comes in many forms: as money, as food, in the form of skilled people coming and offering their services (= technical consultancy), or even items that mean that the money never actually leaves the donor country, such as debt relief, or grants for students from poor countries to study in a more economically developed country.

Data relevance: the combination of the above items, and more, which make up the ‘aid bundle’ can differ greatly between recipient countries. Be aware that these differences can mean that some countries get a “better deal” than others, despite seemingly receiving a lower amount of money.

Bilateral aid – Aid given by the government of one country directly to another.

Data relevance: it can also reveal a lot about a country’s political interests, if they are supporting certain countries more than others.

Commitments: Firm, written obligations of what resources will be distributed within ODA — but crucially, this is not always the actual amount that gets distributed. (see: disbursements)

Data relevance: be careful whether you are looking at ‘commitments’ or ‘disbursements’ when looking at amounts spent within ODA. If you are looking at what a donor was planning on giving in a given year, you’ll want to look at commitments.

Concessional loans: Loans given from a high-income country to a low-income country, which can form part of ODA (see above). To qualify as ‘concessional’ loans, they must give the low-income country a better deal than usual loans – this can be either by giving them more time to pay the loan off, or by having a lower interest rate.

Data relevance: money provided through ‘concessional loans’ can, somewhat misleadingly, be classed as ‘official development assistance’, but it is important to note that no money is actually given to the low-income country, and that they actually have to pay it back. So, if a country is providing ODA largely in the form of concessional loans, they’re not really providing that much money to the recipient country, as they will (eventually) receive all of it back.

Development aid: aid, or official development assistance, aimed at alleviating poverty in the long term. Also described as ‘development cooperation’.

Data relevance: be sure to note the difference between ‘humanitarian aid’ and ‘development aid’ – as development aid is typically focused on long term response, it should be entirely possible to provide forward-looking, and timely data, both of which are crucial for low-income countries to be able to plan their budgets appropriately.

Disbursements: the actual amount of money, or resources, given within ODA.

Data relevance: this is most likely the most useful measurement for you of how much money a donor has actually given to a certain country.

Earmarked aid/funds: aid which is given with certain restrictions placed on how, or when, it is used; this can be anything from specifying what the money is used for, specified services, or the timeframe within which it must be used. [Opposite = ‘unearmarked aid’]

Data relevance: for the recipient country, receiving ‘earmarked funds’ might leave them with a lot less freedom than ‘unearmarked funds’ – this is simply a classification to be aware of, when looking into ODA and aid flows.

Foreign Direct Investment (FDI) A long-term investment from one country to another, where an entity based in one country has a ‘controlling’ ownership in a business enterprise in another.

Data relevance: this is not considered as ‘official development assistance’, but is in many cases far larger in amount than ODA flows from rich countries to poor countries, so it is good to be aware of it as a potential financial flow to low-income countries.

Humanitarian/emergency aid: typically provided in response to humanitarian crises or emergencies – such as natural or man-made disasters, with the primary objective of saving lives and alleviating suffering in the short term.

Data relevance: inherently, this is hard to predict, so forward-facing data cannot really be provided, as different donors’ responses differ depending on the particular situation in hand, and how it progresses over time.

Multilateral aid – Aid given from the government of a country to an international agency such as the World Bank, the International Monetary Fund or the United Nations, who are then charged with distributing it among low-income countries.

Data relevance: it is important to bear in mind that international agencies such as the ones listed above are not, though they may seem like it, ‘neutral’. Some – like the World Bank – are very heavily funded by just one country, which means that they are somewhat tied to the interests of that country. Be aware of this when thinking about projects funded by international agencies.

Remittances: A remittance is a transfer of money by a foreign worker to their home country.

Data relevance: Money sent home by migrants constitutes the second largest financial inflow into many developing countries, in some cases far exceeding international aid. When thinking about financial flows between countries, be careful to think about ‘unusual suspects’.

Tied Aid: Aid which has a restriction placed upon it so that it must be used by the recipient country to purchase products or services from the donor country. More information. Opposite: Untied Aid.

Data relevance: providing tied aid is a clear way for a high-income country to establish strong links between itself and the recipient country, whether this be for political, cultural or economic reasons. Either way, putting these restrictions on the aid means that, like with earmarked aid, the recipient country has less freedom to make decisions for themselves on what the resources are spent on (or rather, where).

Unearmarked aid/funds – where the recipient has complete freedom to decide how the money/resources are used (this is a condition for multilateral aid)