EUI

Summary

ODA Spending

How is EU ODA changing?

According to OECD data, the EUI's total ODA increased 20% between 2021 and 2022 due to significant support for Ukraine, making the bloc the third-largest DAC donor in absolute terms in 2022.

Due to changes in funding needs, including for responding to the war in Ukraine, the European Commission proposed a revision of the 2021-2027 MFF in June 2023. After negotiations with European Parliament and pushback from European Council leaders, an EUR64.6 billion ( US$70.4 billion) increase, including EUR50 billion ( US$54.5 billion) to support Ukraine, comprising a mixture of loans and reallocated funding.

The EU and Member States are collectively committed to providing 0.7% of their GNI as ODA by 2030. According to CONCORD Europe's AidWatch 2023 report, the bloc reached a record high ODA/GNI ratio of 0.59% in 2022. However, CONCORD also criticized the bloc's inflation of ODA volumes with imputed students costs and IDRCs.

Where is EU ODA allocated?

The EUI channel nearly all ODA bilaterally or as earmarked funding through multilaterals.

Bilateral Spending

'General budget support' jumped dramatically as the main share of the EU's bilateral spending in 2022, more than tripling in absolute terms from the previous year. While absolute volumes for priorities such as 'humanitarian assistance' and 'government and civil society' remained relatively stable from 2021-22, they shrank considerably in relative terms as the bloc prioritized support for Ukraine.

The EUI have committed to spending 0.15-0.2% of GNI on ODA to LICs and states affected by fragility and conflict in the short term, and 0.2% of GNI on ODA to these countries by 2030. However, EUI’s ODA to LICs has been trending downward since 2017. In 2022, support to Ukraine, an LMIC, further decreased the share of funding to LICs.

The EUI channels most of its bilateral ODA to Europe. The MENA region, as well as Sub-Saharan Africa also received significant parts of EUI’s bilateral ODA in 2021. This is in line with the NDICI – Global Europe’s geographic programs, which foresee allocations of EUR17.2 billion ( US$20.3 billion) for 2021-2027 for neighboring countries of the EU and the remainder to be allocated, among other regions, to SSA.

The EUI provide a majority of their ODA in the form of grants (69%, or US$16.7 billion in 2021). The EUI prefer project-type interventions, which accounted for 73% of bilateral ODA (US$17.6 billion) in 2021, much higher than the 43% DAC average.

A portion of EUI ODA is channeled as loans, mostly from the EIB. The majority of EUI’s loans are provided within Europe and Northern Africa.

The EIB is also a key actor for managing funds through the EFSD under the EIP. The EFSD was initially endorsed by the EU with a contribution of EUR4.5 billion ( US$5 billion) from the previous MFF. The EFSD was meant to generate additional public and private investments worth EUR44 billion ( US$49.3 billion) in the EU neighborhood and Africa mobilized through investment windows that address socio-economic causes of migration. The EFSD+, which replaces the ESFD under the 2021-2027 MFF, has nearly EUR15 billion ( US$17.8 billion) dedicated to it from NDICI’s geographic envelopes.

On February 28, 2023, the European Commission and the EIB signed a EUR4 billion ( US$4.2 billion) agreement on lending to businesses in African, Caribbean and Pacific (ACP) countries until 2027 under the EU’s Global Gateway investment initiative. The guarantee agreement will mobilize EUR3.5 billion ( US$3.7 billion) in lending and a EUR500 million ( US$526million) contribution to the ACP Trust Fund established and managed by the EIB, which will enable higher-impact operations. Investments will support jobs, especially for women and youth, as well as green and digital transitions.

This agreement builds on the EUR26.7 billion ( US$31.6 billion) guarantee agreement the European Commission and the EIB signed in May 2022 for investments in partner countries in the EU Neighborhood. These agreements are done under the framework of the EFSD+.

On October 25-26, 2023, the EUI hosted its inaugural Global Gateway Forum, which resulted in over US$3 billion in pledges for global health, clean energy, and education initiatives for partners including Egypt, Ghana, Kenya, Nigeria, Rwanda, Senegal, South Africa, and Tanzania, among others. While the forum resulted in a large volume of pledges, spectators commented on the mismatch between the high-level representation of partner countries and the less senior or absent representatives of the Member States.

Multilateral Spending and Commitments

Only a very small share of the EUI’s ODA is channeled in the form of core contributions to multilateral organizations.

The European Commission's leadership is supportive of strengthening multilateral institutions. In September 2022, the European Commission pledged EUR715 million ( US$710 million) to the Global Fund, which marked a 30% increase from the European Commission's previous pledge.

The EUI’s recent commitments to multilateral organizations are summarized below.

Politics & Priorities

What is the current state of EU politics?

In May 2019, elections for the EP were held and in July 2019, Ursula von der Leyen was elected as the first female Commission President. She styled her Commission as a ‘geopolitical commission’, which has been reflected in the increased ‘geographization’ of the new development budget, NDICI-Global Europe. Von der Leyen’s political guidelines for the 2019-2024 European Commission prioritize:

• Further investments in research and innovation;
• Renewed focus on climate change;
• Increased investments in development cooperation focused on health, education, sustainable growth, and security; and
• Strengthened EU global leadership.

In addition to the Commission, the EU Council Presidency rotates among Member States on a biannual basis, with each country setting short-term policy agendas for the bloc.

On July 1, 2023, Spain assumed the Presidency of the Council of the EU, setting out priorities of:

• Reindustrializing the EU and ensure its open strategic autonomy;
• Advancing green transition and climate adaptation;
• Promoting greater social and economic justice; and
• Strengthening European unity.

Who is responsible for allocating EU ODA?

What are the EU's developmental priorities?

The EU’s development strategy is outlined in the European Consensus on Development from 2017. The Consensus aims to improve the effectiveness of EU development policy through performance-based budget support and underlines the EU’s intention to combine traditional development assistance with other resources, including private sector investments and domestic resource mobilization. The EU also aims to make development funding from different European countries more effective by deepening the cooperation between national governments. Its overarching objectives are poverty reduction and alignment with the 2030 Agenda for Sustainable Development. The objectives have been translated into four frameworks for action:

• People: human development and dignity, which includes education, nutrition, health, access to water, decent work, and human rights;
• Planet: protecting the environment, managing natural resources, and tackling climate change;
• Prosperity: inclusive and sustainable growth and jobs, which includes investment and trade, sustainable agriculture, and innovation; and
• Peace: peaceful and inclusive societies, democracy, effective and accountable institutions, rule of law, and human rights for all, which includes humanitarian assistance.

The EUI aim to adopt an "integrated approach" to External Action, which is meant to be holistic and partnerships-driven, at both bilateral and multilateral level.

By issue

In response to intensifying global challenges (including climate change and migration) and recognition of changing economic and geopolitical interests on the global front, in May 2018, the European Commission proposed a new long-term budget for 2021-2027. Within the European Commission’s long-term budget for 2021-2027, NDICI - Global Europe streamlines the previous external financial instruments from the 2014-2020 programming period to deliver more efficiently on priority sectors and global challenges. NDICI - Global Europe's priority areas include:

• Human development;
• Social inclusion;
• Gender equality;
• Climate change;
• Environmental protection; and
• Migration-related actions.

With the onset of the COVID-19 crisis, the EU and its Member States acting together as ‘Team Europe’ began increasingly prioritizing global health. The EU has been particularly involved in supporting efforts to guarantee equitable access to safe and effective vaccines around the world.

Read more about the EUI's spending on Global Health

In December 2021, in response to China’s Belt and Road Initiative, the EU launched its Global Gateway Initiative to mobilize EUR300 billion ( US$354.8 billion) in investments in clean energy, digital and transport infrastructure, health, education, and research systems across the globe. The Global Gateway is meant to be a trusted brand promoting democratic values, good governance, and transparency. Funding for Global Gateway will come in part from the EU budget, including the EFSD+; EUR145 billion ( US$171.6 billion) of the funding would come from planned investments by EU Member States and development finance institutions.

In June 2021, the Council of the EU adopted conclusions on enhancing the European financial architecture for development that called on the European financial architecture, especially the EIB and the EBRD, to strengthen cooperation with European development finance institutions by following a 'Team Europe' approach and combining resources for better results.

Read more about the EUI's spending on Education

By region

Through its NDICI - Global Europe, the EU aims to support regions and partner countries that are most in need.

One of the EU’s top priorities is strengthening its partnership with countries in Africa. In April 2021, the chief negotiators from the EU and OACPS initiated a deal on a new 20-year treaty to govern EU - OACPS relations. The deal focuses on six key areas of cooperation:

• Human rights, democracy, and governance;
• Peace and security;
• Human and social development;
• Environmental sustainability and climate change;
• Sustainable growth; and
• Migration and mobility.

The provisional agreement, pending formal signature, also takes into account the SDGs and the Paris Agreement.

Read more about the EUI's spending on Climate Change in LICs and LMICs

Similarly, the EU remains an important development partner to countries in Latin America. Key sectors of development cooperation with the region include:

• Developing innovative cooperation approaches;
• Reducing disparities between people;
• Promoting sustainable development;
• Mitigating climate change; and
• Advancing higher education and research.

Under the EU’s Global Gateway strategy, the EUI committed to contributing EUR800 million ( US$842 million) to 16 Caribbean partner countries until 2027.

During the third EU-CELAC Conference from July 17-18, 2023, the EU announced EUR45 billion ( US$50 billion) of funding under the Global Gateway for 135 programs in the LAC regions.

What is the future of EU politics?

The next European Parliament elections will be held in 2024, and could prove decisive for the future of European ODA. As the war in Ukraine continues, some Member States are showing resistance to allocating additional funding to the conflict. Similarly, the rise of eurosceptic and far-right parties in Member State governments could put a damper on the political will to pursue development cooperation at the European level.

Budget

Note: All values that refer to the 2021-2027 MFF in EUR are presented in 2018 prices, the year when the MFF was set up. Exceptions are explicitly stated.

What are the sources of the EU's ODA budget?

The EU’s long-term budget MFF sets political priorities and provides a framework for financial programming for a period of five to seven years. The current MFF has been adopted in December 2020. It covers 2021-2027 and totals EUR1.82 trillion ( US$2.15 trillion). This includes a EUR1.07 trillion ( US$1.23 trillion) EU budget and a EUR750 billion ( US$885.5 billion) instrument, Next Generation EU, set up to support the EU’s post-pandemic economic recovery.

The MFF is divided into headings that cover broad policy areas and reflect the EU’s political priorities. Under the current MFF, External Action will be financed under Heading 6: ‘Neighbourhood and the World’, which receives an allocation of EUR98.4 billion ( US$116.2 billion), including EUR85.2 billion ( US$100.7 billion) for external action. Within that, EUR70.8 billion ( US$83.6 billion) is dedicated to NDICI - Global Europe. NDICI - Global Europe has maintained development funding at a similar level to the past MFF, despite the UK’s departure from the EU in 2020.

NDICI – Global Europe: The NDICI - Global Europe consolidates several of the EUI’s previous development instruments, including the EDF and the DCI, and is now the main instrument for EU cooperation and development with partner countries. NDICI Global Europe supports countries that are most in need to overcome long-term developmental challenges and will thereby contribute to achieving the international commitments and objectives that the European Union has agreed to, particularly in terms of the SDGs and the Paris Agreement. In addition to the MFF, it will receive some funding from EDF reflows, with an indicative allocation of EUR1 billion ( US$1.2 billion). It breaks down into the following pillars:

1. Geographic: EUR53.8 billion ( US$63.5 billion), 93% of which funding must be ODA-eligible. Geographic funding here represents a higher proportion than in the previous MFF. This funding includes EUR17.2 billion ( US$20.3 billion) for the EU ‘Neighbourhood’ and EUR26 billion ( US$30.7 billion) for SSA. These funds are allocated through the ‘programming process’, whereby EU delegations in low- and middle-income countries decide multi-year indicative plans together with country authorities.
2. Thematic: EUR5.7 billion ( US$6.7 billion) for global challenges, human rights and democracy, civil society organizations, and stability and peace.
3. Rapid Response: EUR2.8 billion ( US$3.3 billion); and
4. Flexibility cushion: EUR8.5 billion ( US$10 billion) for emerging challenges and priorities.

Other external funding instruments covered by Heading 6 include:

• Humanitarian Aid instrument: EUR10.3 billion ( US$12.2 billion) for 2021-2027 to respond to humanitarian crises outside of the EU and to provide assistance, relief, and protection to people affected by natural or manmade disasters and similar emergencies, focusing on the most vulnerable victims.
• CFSP: EUR2.4 billion ( US$2.8 billion) for 2021-2027 to preserve peace, strengthen international security, promote international cooperation, and develop and consolidate democracy, the rule of law, respect for human rights, and fundamental freedoms.
• Pre-Accession Assistance: EUR12.6 billion ( US$14.9 billion) for 2021-2027 as financial and technical support for reform in partner countries. The funding is restricted to EU accession candidates and focuses on capacity-building.
• OCTs, including Greenland: EUR444 million ( US$524 million) for 2021-2027 for External Action toward 25 islands that are not sovereign countries, but associated with four EU Member States: Denmark, France, the UK, and the Netherlands. Since 2021, due to UK withdrawal from the EU, only 13 OCTs linked to Denmark, France, or the Netherlands are counted.

Under the previous MFF, the EFSD (now EFSD+) guaranteed budget was initially EUR1.5 billion ( US$1.7 billion) with an additional EUR2.6 billion ( US$2.9 billion) allocated for blending projects. By 2020, the EFSD expanded to EUR5.4 billion ( US$6.2 billion) overall due to an increase in funding for blending operations to EUR3.8 billion ( US$4.3 billion). Under the current MFF, the EFSD+ will be able to support guarantee operations of up to EUR53.5 billion ( US$63.2 billion) for the period 2021-2027.

In June 2023, the EU Commission released a proposal for measured increases under several headings of the MFF, including a flexible financial instrument worth up to EUR50 billion ( US$55 million) for the Ukraine Facility, and EUR12.5 billion ( US$13.7 billion) to combat root causes of migration in the EU neighborhood, and EUR2.5 billion ( US$2.7 billion) for humanitarian assistance and disaster response.

The EC agreed to EUR7.6 billion ( US$8 billion) for external action, exclusively dedicated to migration management.

After negotiations with European Parliament and pushback from European Council leaders, an EUR64.6 billion ( US$70.4 billion) increase, including EUR50 billion ( US$54.5 billion) to support Ukraine, comprising a mixture of loans and reallocated funding.

While the increase generally maintains ODA levels in the remainder of the MFF, the bloc's prioritization of Ukraine and migration, as well as reallocations of funding from NDICI are expected to strain support for other priorities.

For 2024, the budget foresees EUR16.23 billion (in 2022 prices; US$17.09 billion) for Heading 6 - Neighbourhood and the World. It represents a decrease of 5.7% compared to 2023, with the decreases distributed across all four major programs - Geographic, Thematic, Rapid Response, and Cushion.

What are the steps and timelines for the EU's ODA budget approval?

The annual draft budget includes geographic and thematic programs within NDICI - Global Europe*.

• Note: From January 2021 onwards, the NDICI - Global Europe will merge several of the previous external financing instruments under the EU budget, including the DCI and the off-budget EDF. The process described above applied also to DCI, but not to EDF, which was funded directly by the EU’s Member States.

EU delegations develop seven-year strategies with partner countries or regions regarding how the NDICI - Global Europe budget will be programmed. These MIPs within NDICI - Global Europe are developed in collaboration with EU partner countries based on pre-existing national development strategies and with instructions from DG INTPA and EEAS. They define priority sectors of bilateral cooperation between the EU and the partner country, and determine indicative amounts allocated to each sector based on the seven-year budget allocations in the MFF.

Additionally, every year, DG INTPA and EU delegations, part of the EEAS structure, jointly prepare AAPs that program the funding and goals for each country and region. AAPs are usually adopted by EC leadership during the summer following an agreement over the budget.