Economic Impact and Effectiveness of Development Aid

The inquiry will seek to assess the impact of official development assistance (ODA) on the economic growth and development of recipient countries and in particular the impact of the UK’s ODA.

Net aid flows from traditional donors -- the members of the OECD Development Assistance Committee (DAC) -- totalled US$129 billion in 2010, the highest ever recorded in real terms and equivalent to approximately 0.36% of donors’ Gross National Income. The UK’s contribution of US$13.7bn, equivalent to 11% of the total, represented 0.56% of UK’s Gross National Income. Non-DAC members contributed a further US$7bn.

The Inquiry, which will not examine the role of humanitarian aid, will seek to answer questions such as:

  • How far and in what ways does official development assistance (ODA) affect the economic growth of recipient countries? Where possible to identify, what has been the impact of British ODA? How robust are results from studies in this area?
  • How does economic growth in countries which experience large surges in ODA compare to similar countries which do not?
  • What lessons, if any, can be learnt from the experience of former aid-receiving countries that have graduated from reliance on ODA?
  • What factors determine the effectiveness of ODA in recipient countries? Are they dependent on the scale and form of aid flows? How is aid effectiveness monitored?
  • Do conditions imposed by government donors on recipient countries improve the effectiveness of ODA? What has been the British government’s experience?
  • How should ODA be allocated? How far do (and should) the Millennium Development Goals (MDGs) shape aid allocations?
  • How useful is the UN target of rich countries giving 0.7% of GNP in ODA? If the target was reached would it lead to more official development aid than developing countries could efficiently absorb?


Development Aid: Inquiry timeline

Follow the progress of the Development Aid inquiry on the timeline page