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Economic weakness in high-income countries has cut into aid flows

Ongoing fiscal adjustments and budgetary problems among high-income countries have led to a decline in aid for two consecutive years for the first time since 1997. According OECD (2013) data, net official development assistance (ODA) flows in 2012 fell 4 percent in real terms to $125.6 billion, bringing the total decline since 2010 to 6 percent. As a share of Gross National Income in donor countries, ODA for developing countries fell to 0.29 percent in 2012 from 0.31 percent in 2011. Cuts to aid budgets were steepest among high-spread Euro-area economies, with Spain having cuts its aid budget by 50 percent, Italy by 35 percent, Greece by 17 percent, and Portugal by 13 percent. ODA increased among only nine reporting economies, with Korea (18 percent), Luxembourg (10 percent), and Australia (9 percent) reporting the largest increases. Turkey almost doubled its assistance to North African countries after the Arab spring.

The outlook for aid remains gloomy for poor countries. The OECD expects aid flows to recover only modestly in 2013 and to remain stable during 2014 to 2016. The bulk of the increase in flows is expected to benefit middle-income Asian economies, with flows to countries with the largest Millennium Development Goals gaps declining. Bilateral aid to Sub-Saharan economies declined 7.9 percent in 2012 in real-terms.

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