Financial or other assistance given or lent, on favourable terms, by richer, usually industrialized, countries to war-damaged or developing states. It may be given for political, commercial, or humanitarian reasons, or a combination of all three. A distinction may be made between short-term aid (usually food and medicine), which is given to relieve conditions in emergencies such as famine, and long-term aid, or development aid, which is intended to promote economic activity and improve the quality of life - for example, by funding irrigation, education, and communications programmes.
In 1970, all industrialized United Nations (UN) member countries committed to giving at least 0.7% of their gross national product (GNP). However, by 2000 only five had reached this target: Denmark, the Netherlands, Norway, Sweden, and Luxembourg; the actual average among the industrial countries in the same year was around 0.32%. The four largest donors to poor countries in 2000 were Japan, which spent $13 billion on official development assistance, the USA ($9.6 billion), Germany ($5 billion), and the UK ($4.5 billion/£2.94 billion). Each country spends more than half its contribution on direct bilateral (by agreement with another country) assistance to countries with which they have historical or military links, hope to encourage trade, or regard as strategically important - Russia or Indonesia, for example. The rest goes to international organizations such as UN and World Bank agencies, which distribute aid multilaterally. The World Bank is the largest dispenser of aid.
In the UK, the Department for International Development (DFID) is responsible for the promotion of overseas development and the reduction of poverty. The department superseded the Overseas Development Administration in 1997.
The UK has not yet achieved the UN target of a 0.7% GNP spend on aid; between 1978 and 1979 it achieved 0.51%, but this has since fallen, standing at 3.1% in 2000. In December 1999, the DFID announced its decision to write off all debts owed by the world's poorest countries. Its programme budget for 2000-01 was £2,806 million, an increase of more than 13% over the previous financial year. In 2001, the DFID pledged to allocate at least 75% of its bilateral development resources to low income countries.
The European Union is the world's second largest multilateral donor, spending around €5 billion/£3.3 billion a year on official development assistance. The aid programmes of the EU, with those of its member states, account for two-thirds of all official development assistance in the world. However, in the 1990s aid to middle income countries (for example, South American and Caribbean nations) increased at the expense of low income countries. In 1999 the EU's share of official development assistance to low income countries stood at 55%, a decrease from 75% in 1986. Meanwhile, middle income countries received 1.2% and Central and Eastern Europe, and the former Soviet Union, received 5.74% in 1999. In 2000 the EU adopted a new overall development policy focusing assistance on poverty reduction.
The combined overseas development aid of all European Union (EU) member countries is less than the sum (some $20 billion) the EU spends every year on storing surplus food produced by European farmers.
In 1996 the International Development Agency (IDA) received project aid amounting to $37,472 million, the largest share of which went to Africa, with 45% of the project portfolio and 35% of committed funds, followed by South Asia, with 15% of the portfolio and 32% of the funds). Eastern Europe and Central Asia received 15% of the project portfolio and 6% of the funds.
In 1996, the IMF and World Bank launched the Heavily Indebted Poor Countries (HIPC) initiative to provide debt relief for low-income member countries, in order to release funds from servicing debts (paying the interest on loans) for development and schemes to fight poverty. The Cologne Debt Initiative, or HIPC2, agreed by members of the Group of Eight (G8) industrialized nations in 1999, sought to expand and speed up the process. By April 2001, 22 such countries were benefiting from debt relief of about $20 billion provided by the IMF, World Bank, and other creditors.
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