April 4, 2006

Debt relief lifts aid to record high in 2005-OECD

By Swaha Pattanaik

PARIS (Reuters) - Rich countries' spending on official aid
to the world's poor leapt to a record high in 2005 due to large
debt relief packages for Iraq and Nigeria, the OECD said on

Aid rose 31.4 percent to $106.5 billion, a sum which
represents 0.33 percent of their gross national income and is
half way toward the long-standing U.N. goal of 0.7 percent.

The increase from 0.26 percent in 2004 was driven by a
surge of more than 400 percent in aid in the form of debt
relief. But even after stripping out debt relief, aid rose by
8.7 percent, the Organization for Economic Cooperation and
Development said.

"It is good news and the underlying trend is good but
countries will need to change the mix of instruments," Brian
Hammond, head of statistics and monitoring in the secretariat
of the OECD's Development Assistance Committee, told Reuters.

"We are still expecting quite a lot of debt relief in 2006
but after that countries need to deliver on their longer-term
programs if they are to meet the U.N. goals."

The committee, the main body through which the Paris-based
think-tank deals with issues related to cooperation with
developing countries, is made up of 22 countries and the
European Commission.

The OECD said it expected aid to fall back slightly in 2006
and 2007 since debt relief was seen declining: "There are not
many Iraqs and Nigerias out there so while debt relief will
continue, it will be on a smaller magnitude," Hammond said.

However, the OECD said other forms of aid were likely to
continue their recent steady increase.

The Paris Club of creditor nations agreed large debt relief
operations for Iraq and Nigeria and in 2005 members of the OECD
Development Assistance Committee provided debt forgiveness
grants of nearly $14 billion to Iraq and a little more than $5
billion to Nigeria.

The United States was the largest donor of aid in dollar
amounts, at $27.5 billion, with debt relief, reconstruction aid
to Iraq, reconstruction and anti-narcotics programs in
Afghanistan, and aid to sub-Saharan Africa pushing its aid
spending up 35.6 percent from a year earlier.

U.S. aid as a proportion of national income rose to 0.22
percent, its highest since 1986, from 0.17 percent in 2004.

Still, the United States remained close to the bottom of
the rankings on aid measured as a proportion of income, coming
in only just ahead of Portugal, which was last with 0.21
percent as its aid fell 65 percent from 2004 when it had
undertaken a large debt rescheduling operation for Angola.

The only countries to exceed the U.N. target for aid were
Denmark, Luxembourg, the Netherlands, Norway, and Sweden.

Members of the Development Assistance Committee gave about
$2.2 billion in aid to countries affected by the December 2004
Indian Ocean tsunami, with Japan providing more than $540
million alone.

Japan's total aid spending rose to $13.1 billion in 2005 or
0.28 percent of income from $8.9 billion in 2004, when it
amounted to 0.19 percent of income.