The depth of the global economic crisis triggered by the Covid-19 pandemic is placing enormous pressure on government budgets. Globally, the simultaenous tackling of the public health emergency, funding in growing social protection programmes, and investing in recovery plans is becoming increasingly costly.
Official development assistance (ODA) may be one of the first items axed from donor government budgets. Many countries, especially in Africa and Asia, count on development aid as one of the few financing options available when the volume of other sources falls but fiscal needs expand at times of crisis. ODA could play a critical role both in supporting individual governments and also helping finance and achieve shared goals when the world is facing a major health challenge and needs to boost economic recovery.
During the most severe global economic recession since the second world war, if previous relations between ODA and economic growth in donor countries hold, what are the potential scenarios for bilateral aid in 2021? How have the bilateral and multilateral donors responded so far to help aid-recipient countries deal with the health emergency prompted by the Covid-19 pandemic as well as to fund economic recovery? Can we learn from previous economic crises in analysing the current outlook for aid flows? To answer these questions, this working paper reviews the relevant academic and policy literature, data drawn from donors’ policy documents and media reports, descriptive data analyses and econometric methods.
Liam Carson, Maike Hebogård Schäfer, Annalisa Prizzon and Jessica Pudussery