HOW HUMANITARIAN AND DEVELOPMENT ASSISTANCE MUST … · FINANCING STABILITY: HOW HUMANITARIAN AND...

1FINANCING STABILITY: HOW HUMANITARIAN AND DEVELOPMENT ASSISTANCE MUST RISE TO THE CHALLENGE

FINANCING STABILITY:HOW HUMANITARIAN AND DEVELOPMENT

ASSISTANCE MUST RISE TO THE CHALLENGE

ALL PICTURES IN THIS BRIEF WERE TAKEN IN APRIL 2016 IN DADAAB, KENYA


I welcome this briefing by the ONE Campaign and its call for a global response to humanitarian needs and long-term development that is bigger and bolder. A safe and more secure world requires concerted political leadership with a vision which goes beyond the immediate horizon.

Complex and protracted crisis has become the new normal across many fragile countries and regions. The traditional rapid response model of humanitarian assistance as we know it – getting in swiftly, fixing the immediate problems and getting out – cannot anymore fully meet the new terms of reference. Temporary solutions are being applied to chronic crises all too often.

The global cost of humanitarian financing has surged from $2 billion in 2000 to nearly $25 billion in 2014 and it continues to rise. The ratio of humanitarian aid within Official Development Assistance – an indicator of international aid flows – is above 50% in many states categorised by the UN as “least developed countries”. It is far higher in the most fragile contexts. In spite of this growth, humanitarian assistance cannot respond to all the needs.

In January the UN Secretary-General’s High-Level Panel on Humanitarian Financing published its report, “Too Important to Fail: Addressing the humanitarian financing gap”, for the World Humanitarian Summit. The report identifies three actions for meeting the needs of more than 125 million people in need of humanitarian aid.

First, shrinking overall needs: it is not enough to simply come up with additional funds to pay for the rocketing cost of assisting the rising numbers of needy, vulnerable people. More can and should be done to tackle the root causes of this tremendous humanitarian caseload to shrink the needs over time.

Second, raising more funds by deepening the resource base: let’s have innovative ideas, from the private sector and our international finance institutions and development banks, on how to deal with greater fragility. We need new financial instruments which encourage giving and reward best practice.

Last but not, least, achieving a Grand Bargain on efficiency measures: make more resources available on the front line of needs and spend less on administrative procedures, duplications and overlaps. We desperately need to raise more money to fund humanitarian needs, but we will be in a much stronger position to attract greater funding if we can demonstrate we are doing the very best we can with the available resources.

A very important theme throughout these recommendations is the relationship between humanitarian and development assistance. The evidence has never been clearer that the distinctions between them are often artificial and unhelpful. The wall needs to come down: addressing humanitarian crises is not only a prerequisite of sustainable development but also a necessity if the Sustainable Development Goals are to be achieved.

The refugee crisis in Europe and further afield has demonstrated that somebody else’s problem is no longer just somebody else’s problem – it is a shared problem for all of us. In Europe we are taking this seriously; our founding principle of solidarity is not just for domestic consumption. The EU accounts for more than 20% of the world economy but 50% of development assistance and humanitarian aid. Last year we reached a record high of €68 billion - 15% more than in 2014. So to those who were concerned that an EU faced with the biggest refugee crisis since the Second World War would turn its back on the rest of the world I can say - it did not happen. Yes, we are doing much more at home - but we also do more to help people in need everywhere. I hope we continue on this path and that others join us.

Kristalina Georgieva, Vice President of the European Commission and Co-Chair of the UN Secretary-General’s High-Level Panel on Humanitarian Financing

FOREWORD


The global community is confronting enormous and complex development and humanitarian challenges. The need for humanitarian assistance is at its highest level in decades, and is growing. From the Zika virus, the Syria crisis, global pandemics and violent extremism to extreme weather disasters and protracted conflicts, the need for immediate and life-saving support far outstrips the resources available. And the need for long-term sustainable development is just as immense. Reaching the objective of ending extreme poverty by 2030 and achieving the 17 Global Goals that world leaders signed up to in 2015 will require substantial new resources along with sweeping policy reforms. Confronting these twin challenges of addressing humanitarian crises and supporting long-term development will not be easy, yet the money available for achieving both aims is severely limited. Official development assistance (ODA) for tackling global poverty frequently amounts to less than 1% of government budgets, and on average stands at 0.3% of national wealth.

The fact that the majority of the world’s refugees live in developing countries with massive poverty and development challenges shows how critically interlinked development assistance and humanitarian assistance remain. However, some European governments have been responding to the current refugee crisis by using investments intended for overseas to cover so-called ‘in-donor costs’ at home – meaning, for example, that in 2015 Sweden was the biggest single recipient of Swedish aid. We are seeing new crises frequently competing for funding with long-term development challenges, forcing challenging and sometimes deadly trade-offs.

The current system and level of finance are inadequate and have no hope of meeting current needs. Fresh ideas and new collaborations are required to address the myriad global challenges we are faced with. The international community needs to think bigger and move faster in addressing current crises, and invest more strategically in preventing future ones.

This briefing note analyses some of the trade-offs that are endangering long-term goals and makes recommendations on how development and humanitarian efforts can be more efficiently and effectively resourced. Earlier this year, the High-Level Panel on Humanitarian Financing analysed the immense humanitarian needs and the inadequacies of the response. In its Humanitarian Financing Report, “Too Important to Fail”,1 it suggested a “Grand Bargain” between donors and implementing agencies, with policy recommendations around transparency, coordination, multi-year financing and greater flexibility. ONE supports and echoes many of the Panel’s recommendations in this brief, adds some additional ideas and looks forward to working with partners to make sure that global leaders invest ambitiously for the long term, respond swiftly to crises and embed development as the smartest foreign policy tool in their armoury to prevent future crises.

INTRODUCTION


The costs of unabated humanitarian crises are growing every day. The Institute for Economics and Peace estimates that, since 2008, the total economic impact of violence on the global economy has increased by 15.3%, to $14.3 trillion. Large increases in costs have occurred due to deaths caused by internal conflict, the need for more support for internally displaced persons (IDPs) and refugees, the costs of UN peacekeeping activities and GDP losses from conflict.2 The immediate gaps in humanitarian finance are easy to map. In 2016, for example, the UN Office for the Coordination of Humanitarian Affairs (UNOCHA)’s coordinated humanitarian appeal is for $20.3 billion, to support 89 million people (of an estimated 125 million3 in need) in 39 affected countries — yet as of the end of April only 19% ($3.8 billion) of this was funded.4 In fact, for the past several years, UNOCHA has not been able to achieve anything near its target. In 2015, only 55% of the humanitarian appeal was financed.5 At the same time, humanitarian need is growing. If current trends continue, by 2030 the costs of humanitarian assistance are projected to double to $50 billion, just when the world should be achieving the Sustainable Development Goals (SDGs).6

ESTIMATING THE COST OF GLOBAL NEEDS

FIGURE 1: UNOCHA ANNUAL HUMANITARIAN FUNDING REQUIREMENTS COMPARED WITH AMOUNT FUNDED, 2010-2015

Source: UNOCHA Financial Tracking Service Humanitarian Response Plans: Summary of Requirement and Funding and Consolidated & Flash Appeals

(as at 12 April 2016).

Note: Compiled by UNOCHA on the basis of information provided by donors and recipient organisations. In current prices.

11.25

8.9 9.22

12.84

18.05

19.33

7.24

5.64 5.74

8.33

10.81 10.73

64% 63% 62%65%

60%

55%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

5

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20

25

2010 2011 2012 2013 2014 2015

USD

Billions,currentpric

es

OCHAFundingRequirements

AmountFunded

%Funded

2010 2012 20142011 2013 2015

100%

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80%

70%

60%

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OCHA fundingrequirements

% Funding requirements met

Amount funded

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By contrast, estimating the overall costs of achieving long-term sustainable development globally is complex, and there is no clear answer. The Sustainable Development Solutions Network (SDSN) – a global initiative for the United Nations – estimates that low- and lower-middle-income countries may need some $1.4 trillion annually in order to achieve the 17 Global Goals by 2030.7 The Overseas Development Institute (ODI) estimates that providing social transfers, education and universal health coverage for all will require around $148 billion of domestic and international public finance per year but that there will be an annual financing gap of $84 billion, $73 billion of it in low-income countries.8

Most importantly, levels of poverty on the ground point to the ambitious level of smart investments still needed in order to achieve long-term sustainable development.

MAPPING THE NEED

With conflicts and disasters continuing to strike, the number of vulnerable people in the world is increasing, as is the complexity of the response needed to help them survive extreme poverty and danger. Extreme poverty, fragility, conflict and humanitarian needs are deeply interlinked; see (www.one.org/map) for a map displaying the locations of the world’s extreme poor and displaced people.

Over 900 million people still live in extreme poverty, on less than $1.90 a day9 – and it is estimated that by 2018 more than half of those living in extreme poverty will be in fragile states.10 Furthermore, most fragile states have been found to be significantly far behind on meeting the previous Millennium Development Goal (MDG) targets.11 An increasing proportion of the people living below the extreme poverty line are in sub-Saharan Africa – 43% of the global total in 2012, up from just 15% back in 1990.12 In the least developed countries (LDCs), extreme poverty also typically goes much deeper than in other developing countries, particularly in LDCs in sub-Saharan Africa, meaning that average incomes are a long way below the extreme poverty line.13

Climate-related disasters and global public health emergencies, on top of devastating conflicts, have caused a surge in the number of humanitarian crises. In 2014, an estimated 200.5 million people were affected by natural disasters or displaced by conflict.14 Some 60 million people were forced to flee their homes, including approximately 19.5 million refugees,15 38.2 million IDPs and 1.8 million asylum seekers.16 Data from the UN High Commissioner for Refugees (UNHCR)’s “Mid-Year Trends 2015” report indicate that the number of refugees under the agency’s mandate is at its highest level in 20 years.17 The Syrian conflict has been the biggest source of refugees in recent years, driving 4.8 million refugees to neighbouring countries and leaving 6.6 million people displaced inside Syria itself.18


More than one million refugees, mostly from Syria, Iraq and Afghanistan, arrived in Europe via the Mediterranean Sea alone in 2015, 4.5 times more than in 2014.19 But the vast majority of refugees and displaced persons are living in countries with far fewer resources and much less capacity for addressing their needs than Europe. In fact, developing countries host over 86% of the world’s refugees.20 The top 10 refugee-hosting countries are all developing nations: Turkey, Pakistan, Lebanon, Iran, Ethiopia, Jordan, Kenya, Uganda, Chad and Sudan.21 Sub-Saharan Africa is home to 4.1 million, or 27%, of the world’s refugees, making it the region with the largest share.22 And of the 38 million IDPs globally, 77% live in just 10 countries, of which half are in sub-Saharan Africa.23

As Europe extends €6 billion in assistance to Turkey to help look after 2.78 million Syrian refugees, the lives of millions more refugees who also need support are on pause in camps and towns around the world, often leaving them unable to go to school, go to work or build a life and a home for their families.24 Children, especially girls, and women are particularly vulnerable in refugee settings. Women in refugee camps, such as Dadaab in Kenya, often risk being attacked on their way to collect firewood. A recent ODI report found that refugee children are five times less likely to attend school than other children, with only 50% enrolled in primary school; and girls are 2.5 times more likely to be out of school than boys in countries affected by conflict.25 ONE’s Poverty is Sexist campaign aims to draw attention to the gross inequities that girls and women in poverty face, and which are particularly evident in situations of conflict and instability.

Insecurity, conflicts and natural disasters, such as the conflict in South Sudan or the El Niño drought, have exacerbated extreme poverty and development challenges. More than 2.3 million people, or one in every five, in South Sudan have been forced to flee their homes since the conflict began in 2013,26 including 1.69 million IDPs.27 So far, only 29% ($368.4 million) of the $1.29 billion requested in South Sudan’s 2016 Humanitarian Response Plan has been funded.28 The scale of the drought and flooding caused by El Niño has been so severe that it has left more than 60 million people food-insecure.29 The World Food Programme (WFP)’s analysis suggests that food insecurity will not peak until December 2016 and therefore the humanitarian impact of El Niño is predicted to continue growing.30 Governments and humanitarian partners in 13 countries have requested $3.6 billion, of which $2.2 billion is still outstanding.31

Dealing with humanitarian and refugee crises in developing countries puts an inordinate strain on resources. For example, 25 years after it was set up as a temporary haven for people fleeing Somalia’s civil war in the early 1990s, the Dadaab refugee camp in Kenya is now the largest refugee complex in the world, with 330,000 refugees living there, and the third largest city in Kenya in terms of population size. Opportunities for refugees to integrate are limited due to restrictions on their movements and lack of authorisation to engage in gainful employment, as work permits are not issued to refugees. In May 2016 Kenya announced plans to shut down Dadaab within a year, on the grounds that it compromises national security as al-Shabaab militants are thought to be in the camp. The involuntary return of refugees to places where their lives may still be in danger would be a violation of Kenya’s obligations under international law. The Government of Kenya should reverse its decision to close Dadaab and meet its international obligations to refugees fleeing crises; and the international community should step up to support the country in its efforts to host refugees, including those in Dadaab, improve security and fight poverty in Kenya itself.


2.1% 2.0% 2.2%2.7% 2.8%

3.4% 3.5% 3.7%

4.8%

9.1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

%oftotalODA

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ASSESSING THE RESPONSE

Although humanitarian and development financing needs have been growing rapidly, funding has not risen sufficiently to meet these needs. Furthermore, while there are some important ways in which development and humanitarian responses differ, the synergies between these two efforts must be better understood to make both kinds of finance and policy more effective. Short-term emergency aid is not sufficient to address chronic crises and also respond to all the development needs created by such crises. In addition, the new Global Goals will not be achieved if humanitarian emergencies are not urgently and properly addressed. Some aid-giving countries have started using multi-year funding for humanitarian assistance in order to ensure better coordination between humanitarian and development efforts and to stop applying temporary solutions to protracted crises. However, too many others still have short-term annual financing cycles for humanitarian aid. Humanitarian assistance should be provided in a predictable way by using multi-year funding, allowing partners to save resources, plan ahead and better allocate resources to meet priorities. Humanitarian assistance should also be flexible to allow partners to adapt to rapidly changing situations.

This lack of coordination between humanitarian and development financing has also led to some aid providers making a deadly trade-off between the two, by diverting funds from one to cover the costs of the other. The most striking current example of the trade-offs in funding decisions is the use by some countries of their aid budgets to meet the cost of assisting refugees at home. This is not the answer. Development, humanitarian needs overseas and the costs of assisting refugees at home are all urgent priorities and must all be met. Wherever the most vulnerable people live, they deserve protection and the opportunity to live a productive life. International development is our best long-term bet in foreign policy – lifting people out of poverty helps create the human security and economic prosperity needed to stop countries sliding into crisis.

Source: OECD DAC Tables 1 (Total flows by donor) and OECD DAC Preliminary Release (April 2016).

Note: Net ODA includes both bilateral and multilateral flows, and excludes bilateral debt relief.

FIGURE 2: DAC COUNTRIES’ IN-DONOR REFUGEE COSTS AS A % OF TOTAL ODA (EXCLUDING DEBT RELIEF), 2006–15

% o

f tot

al O

DA


FIGURE 3:

Under the current aid accounting rules, established in 1972, OECD Development Assistance Committee (DAC) member countries can report as aid the costs of assisting refugees during their first year in their own country; these are referred to as ‘in-donor refugee costs’. Previously this portion of ODA has been nominal but, as shown in Figure 2, in response to the current refugee crisis in Europe, a number of donor countries are making use of a growing portion of their ODA budget to fund rising refugee costs at home.

DAC member countries include a number of other in-donor costs in their aid reporting, in addition to refugee costs. These include a proportion of the administrative costs of operating aid programmes and spending on students from developing countries and on development awareness activities. The inclusion of these expenditures in aid statistics has long been controversial, as they do not represent an actual transfer to developing countries. It has long been argued, including by ONE,32 that including these costs as part of ODA has resulted in a misleading picture for citizens and governments in recipient countries, as well as taxpayers in aid-giving countries, of how much money is actually sent to and directly benefits developing countries. They can also provide an artificial boost to ODA levels or lead to the diversion of aid resources from vulnerable people in developing countries. For these reasons, ONE has called for these expenditures to be counted as additional to development assistance.

DAC COUNTRIES’ HUMANITARIAN ODA, IN-DONOR REFUGEE COSTS, OTHER IN-DONOR COSTS, DEBT RELIEF AND OTHER ODA, 2010–14

Sources: OECD DAC Tables 1 (Total flows by donor) and 5 (Aid by sector and donor); DAC Secretariat estimations of DAC members’ imputed multilateral contributions

to humanitarian assistance.

Note: ODA in 2014 constant prices. Net ODA includes both bilateral and multilateral flows. The ‘Other in-donor expenditures’ category includes the following spending: ‘I.A.5.1.

Scholarships/training in donor country’, ‘I.A.5.2. Imputed student costs’, ‘I.A.7. Administrative costs not included elsewhere’, and ‘I.A.8.1. Development awareness’. Humanitarian

ODA includes bilateral humanitarian ODA from the DAC 5 database and DAC Secretariat estimations of DAC members’ imputed multilateral contributions to humanitarian

assistance. 2015 data not shown because they are not available for imputed multilateral humanitarian ODA and most of the other in-donor expenditures.

US

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103,045 102,181 98,763 103,401 102,877

13,522 12,38211,046

13,343 16,972

3,686 4,3904,426

4,8166,618

10,189 10,093

10,758

10,25110,0144,055 4,124

3,126

3,518740

0

20,000

40,000

60,000

80,000

100,000

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140,000

160,000

2010 2011 2012 2013 2014

USD

millions,201

4constantpric

es

Debtrelief

Otherin-donorexpenditures

In-donorrefugeecosts

HumanitarianODA

OtherODA(excl.in-donorcosts,debtrelief,andhumanitarianaid)

Debt relief

Humanitarian ODA

Other ODA(excl. in-donor costs, debt relief, and humanitarian aid)

In-donor refugee costs

Other in-donor expenditures

2010 2012 20142011 2013

13,522

3,686

12,382

4,390

10,09310,189 10,75810,251

10,0147403,518

3,1264,1244,055

4,4264,816

6,618

11,04613,343 16,972

103,045 102,181 98,763 103,401 102,877


In-donor refugee costs more than doubled in 2015 compared with 2014. They represented 9.1% of total ODA (up from 2.8% in 2010 and 2.2% in 2008). The total amount that DAC donors spent on in-donor refugee costs in 2015 – $12 billion (in current prices) – would almost cover the next three-year replenishment ask ($13 billion) for the Global Fund to Fight AIDS, Tuberculosis and Malaria. The Global Fund estimates that, with that amount of funding, it could save up to 8 million lives and avert up to 300 million new infections of the three diseases.

In-donor refugee costs accounted for more than 20% of total ODA in the budgets of five DAC member countries in 2015: Sweden (33.8%), Austria (26.8%), Italy (26.1%), the Netherlands (23.0%) and Greece (20.6%). They represented more than 20% of bilateral ODA for 10 DAC countries: Italy (62.8%), Greece (50.9%), Sweden (49.7%), Austria (48.5%), the Netherlands (31.5%), Slovenia (23.6%), Germany (21.6%), Denmark (21.1%), Belgium (20.3%) and the Czech Republic (20.6%). While the proportion of ODA that DAC countries have spent on in-donor refugee costs has tripled since 2010, the proportion of aid they have spent in LDCs has declined in the same period, from 33.3% to 29.5%.

Furthermore, the aid money spent by DAC countries on in-donor refugee costs since 2010 ($37.8 billion) is almost equivalent to the entire UK aid budget over the past two years ($39.2 billion) and equals more than the entire German aid budget over the same period ($36.9 billion); the UK and Germany are the world’s second and third largest ODA providers. If current spending on in-donor refugee costs continues on the same trend as from 2010, ODA spent in this way could amount to $52.4 billion in 2020, $10 billion more than the amount the 28 DAC countries spent on the 48 LDCs in 2015 ($42.7 billion).33

As the refugee crisis continues in 2016, the amount of aid spent on refugees in aid-giving countries is likely to rise. Sweden – one of the first countries in the world to meet the 0.7% ODA/gross national income (GNI) target and currently investing more than 1% of its GNI in ODA – considered spending up to 60% of its total aid budget on refugees at home in 2016. As a result of intense pressure against such a huge diversion of aid, including from civil society, the Swedish government eventually decided to cap in-donor refugee costs at 30% of total aid.34 This has, however, massively affected its 2016 contribution to the Global Fund, the world’s largest financier of anti-AIDS, TB and malaria programmes, reducing it by more than 30%.35 As Figure 4 shows, while Sweden was by far the most generous aid-giving country in terms of total ODA/GNI in 2015, its contribution drops below the government’s commitment to invest 1% ODA/GNI when in-country refugee costs are excluded.

In Norway, another longstanding aid champion, the government budget for 2016 saw refugee costs climbing to almost 20% of the ODA budget, with some increases to the total aid budget to offset costs but not enough to cover the full impact.36 The Netherlands is already spending more than 20% of its aid on in-donor refugee costs, and has decided to use all future aid increases to cover such costs in 2016 and 2017.37 As Figure 4 shows, if in-donor refugee costs are excluded in 2015, the Netherlands falls in rank below the UK in terms of ODA/GNI, dropping below the 0.7% bar.


FIGURE 4: DAC COUNTRIES’ ODA AS A % OF GNI, INCLUDING AND EXCLUDING IN-DONOR REFUGEE COSTS, 2015

Some of the biggest aid providers are proving that it is possible to do both – support refugees and increase long-term development assistance. The EU budget for 2016 increased both funding for the refugee crisis and development aid. EU aid will reach an all-time high of €9.16 billion in 2016, a 5.2% increase compared with 2015.38 Although Germany reports in-donor refugee costs as ODA, it keeps these on separate budget lines,39 so it has been able to keep rising domestic refugee costs additional to its planned aid increases of €8.3 billion over the next four years.40 Similarly, in 2016 France decided to increase its budget for covering the costs of refugees arriving in the country by 23%, without taking this from its ODA budget, which will also slightly increase because of the financial transaction tax (FTT). As a result of this increase, France’s share of aid spent on in-donor refugees slightly decreased from 4.6% in 2014 to 4.1% in 2015.41

Like France and Germany, in Canada development assistance and in-donor refugee costs have so far come from different budget lines and there has therefore been no diversion of aid resources to cover domestic refugee expenditures. The Canadian government did, however, include some domestic refugee costs in its aid reporting in 2015, accounting for 5% of its total aid budget. Luxembourg, which has consistently met the 0.7% target over the past decade, is strongly opposed to including in-country refugee costs in aid reporting. As the UK is not participating in the EU’s relocation scheme and is taking a relatively small number of refugees (20,000 Syrian refugees over 2015–2042), in-donor refugee costs have so far represented a small share of UK ODA, accounting for 2.2% in 2015; however, this was almost double the proportion in 2014. In-donor refugee costs also account for a relatively small proportion of US ODA – 3.9% of the total US aid budget in 2015.

Source: OECD DAC Preliminary Release (April 2016).

Note: Net ODA excludes bilateral debt relief, and includes both bilateral and multilateral flows.

0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% 0.80% 0.90% 1.00% 1.10% 1.20% 1.30% 1.40% 1.50%

PolandSlovakRepublicCzechRepublic

GreeceSpain

SloveniaKoreaItaly

PortugalUnitedStates

JapanIcelandAustria

NewZealandCanada

AustraliaFranceIrelandBelgiumGermany

SwitzerlandFinland

NetherlandsUnitedKingdom

DenmarkLuxembourg

NorwaySweden

ODA/GNI ODA/GNI(excludingrefugeecosts)0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% 0.80% 0.90% 1.00% 1.10% 1.20% 1.30% 1.40%

ODA/GNI ODA/GNI (excluding in-donor refugee costs)


The world is facing unprecedented human security needs. Fighting poverty, recovering from natural and man-made disasters and protecting displaced people are putting an unprecedented strain on resources. Government leaders, foundations, civil society, academia and the private sector need to be more creative about how resources are raised and more effective in how they are deployed – and governments must live up to their funding commitments as a first step forward. The following recommendations should be taken up by governments and implemented without delay, and stakeholders should work together so that the world has the necessary resources to respond in real time to disasters and invest in the long-term human security of everyone on the planet.

Governments must keep their promises on ODA, starting with their commitment to spend 0.7% of national income on development aid overseas. They must also commit to providing enough resources to maintain human security and fight extreme poverty for the most vulnerable people in the global South, including in countries that are supporting refugees. Governments should make sure that aid is focused on fighting extreme poverty and prioritise the most vulnerable and marginalised in developing countries by allocating half of all aid to LDCs (while retaining the other half for middle-income non-LDCs).

Protect humanitarian budgets for emergencies by scaling up catastrophe insurance for governments and countries.43 A report by the United Nations Office for Disaster Risk Reduction found that nine out of ten disasters are caused by natural hazards, including floods, storms, heat waves and droughts.44 These perils can be more effectively tackled by using insurance and risk transfer – governments, sub-sovereigns and parastatals can take out large-scale insurance contracts against insurable risks. These contracts are better than humanitarian aid: they pay out predictably and on-time, facilitating better disaster preparedness (in part by leveraging so-called ‘parametric insurance’, which links payouts to measurable

Increase resources to fund both long-term development and humanitarian needs in developing countries, particularly those that are supporting refugees and fighting extreme poverty, and introduce more budget flexibility.

CLOSING THE GAP

RECOMMENDATIONS

1


scientific data, like the windspeed of a cyclone). Large-scale programmes are already in place, and demonstrate that the model works: the CCRIF risk pool in the Caribbean, the African Risk Capacity (ARC) of the African Union45, and the PCRAFI programme in the Pacific all variously transfer the risks of extreme weather and drought from governments to insurers. Scaling these programmes up (covering more countries) and across (covering more types of insurable risk) will improve disaster response, facilitate better planning and protect humanitarian aid for its intended purpose: unexpected or uninsurable risks, including forced displacement and armed conflict. At the household level, the 2015 G7 Initiative ‘InsuResilience’ aims to increase access to insurance against the impacts of climate change for up to 400 million vulnerable people in developing countries by 2020.46

Improve flexibility in budgets. Budgets should have more in-built flexibility to respond to unforeseen crises and events. Despite common concerns about the rigidity of the EU budget, the EU Institutions have led by example in finding extra money to cover domestic refugee costs from multiple sources beyond development aid. In response to the escalating refugee crisis, the EU Institutions quickly amended their 2015 Budget and approved increased funding for 2016.47 They did so by shifting funds from other domestic policy areas within the EU budget and mobilising special instruments such as the Emergency Aid Reserve (EAR) and the Flexibility Instrument. When these resources still did not cover all needs, they also pooled funding from EU member states on top of the EU budget48 by setting up ad hoc instruments such as EU trust funds and the Refugee Facility for Turkey.

Ensure that financing for domestic refugee costs is additional to existing and promised aid. The necessary funds to support refugees arriving in Europe must swiftly be found to ensure that their needs are met and their rights are protected. However, this should not be at the expense of vulnerable people in developing countries or investments in development that will help stem future crises.

Retain the fundamental and valuable principles of ODA. DAC member countries must ensure that ODA remains focused on poverty alleviation. Anything distracting from this, for example the inclusion of domestic refugee costs in their aid reporting, should be detached from the definition of ODA. DAC countries decided at their February 2016 High-Level Meeting (HLM) to begin a process to review the existing rules governing the reporting of in-donor refugee costs. DAC countries should use this opportunity to clean up the ODA rules and exclude the majority of in-donor costs49 as well as debt relief from ODA reporting.

Immediately stop using development assistance to fund in-donor costs, and retain the fundamental and valuable principles around development spending. 2


Commit to more multi-year funding, with less earmarking. According to WFP, more multi-year funding would reduce operational costs by about 30% through reduced procurement costs.51 More importantly, shifting from short-term annual financing cycles to more sustainable and predictable multi-year funding would help improve planning between humanitarian and development efforts, and help build resilience and ensure long-term solutions to disasters and conflicts.

Commit to more flexible delivery mechanisms for finance, in particular direct cash-based assistance. Today only around 6% of all humanitarian aid is provided in the form of cash or vouchers (up from 1% in 2004).52 In many emergency settings, the default model of delivering in-kind aid (for example, food and shelter) is very expensive and leads to huge delays. A High Level Panel report examining this evidence concluded that in a large number of humanitarian engagements, unrestricted, large-scale cash transfers directly to households will save money, empower those affected by crisis and protect frontline agencies’ scarce resources for emergencies, where in-kind assistance is truly necessary.53 For example, a recent study in Ethiopia concluded that cash was 25-30% cheaper to deliver than food.54 Another four-country study found that nearly a fifth more people could have been assisted if everyone received cash instead of food aid.55 Local markets were able to meet greater demand without creating inflation. Cash-based assistance not only addresses some of the inefficiencies of ‘in-kind’ aid, such as implementation costs or meeting affected people’s priorities – digital and mobile money is also improving transparency, security and the speed of delivery.

Commit to greater transparency as well as greater effectiveness, through measures such as reducing management costs and more joint needs assessments; use digital technology to listen more to beneficiaries. To ensure that we can follow the money from resources to results, the High-Level Panel calls for a time-bound commitment by both aid-giving countries and agencies to provide open and transparent data that meet the International Aid Transparency Initiative (IATI) standard, published on one comprehensive global platform.

In line with the High-Level Panel on Humanitarian Financing Report, particularly the “Grand Bargain” principles, improve data and accountability around all aid spending, both development and humanitarian, and improve effectiveness, flexibility and predictability.50

3


1. High-Level Panel on Humanitarian Financing Report to the Secretary-General. January 2016. “Too Important to Fail – Addressing the humanitarian financing gap”. https://docs.unocha.org/sites/dms/Documents/[HLP%20Report]%20Too%20important%20to%20fail%E2%80%94addressing%20the%20humanitarian%20financing%20gap.pdf

2. Estimates by the Institute for Economics and Peace, in purchasing power parity (PPP) dollars. IEP. “Global Peace Index 2015”. http://economicsandpeace.org/wp-content/uploads/2015/06/Global-Peace-Index-Report-2015_0.pdf

3. High-Level Panel on Humanitarian Financing Report, op. cit.4. UNOCHA. April 2016. “Humanitarian Funding Update”. https://docs.unocha.org/sites/dms/Documents/Humanitarian%20

Funding%20Update_GHO_30Apr2016.pdf5. Ibid.6. High-Level Panel on Humanitarian Financing Report, op. cit.7. SDSN. 12 November 2015. “Investment Needs to Achieve the Sustainable Development Goals: Understanding the Billions

and Trillions”. http://unsdsn.org/wp-content/uploads/2015/09/151112-SDG-Financing-Needs.pdf 8. ODI. April 2015. “Financing the Future: How international public finance should fund a global social compact to eradicate

poverty”. https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/9594.pdf9. World Databank. “Poverty and Equity Database”. http://databank.worldbank.org/data/reports.aspx?source=poverty-and-

equity-database10. Based on $1.25/day poverty line. OECD. “Fragile States 2014: Domestic Revenue Mobilisation in Fragile States”. http://www.

oecd.org/dac/governance-peace/conflictfragilityandresilience/docs/FSR-2014.pdf11. Center for American Progress and Save the Children. June 2015. “Fragile Progress”. https://cdn.americanprogress.org/wp-

content/uploads/2015/06/08090335/FragileStates-report_web9.pdf 12. World Databank. “Poverty and Equity Database”. http://databank.worldbank.org/data/reports.aspx?source=poverty-

andequity-database13. ONE. 2015. “DATA Report: Putting the Poorest First”. https://s3.amazonaws.com/one.org/pdfs/DATA_Report_2015_EN.pdf;

Development Initiatives. 2015. “Getting Poverty to Zero: Financing for social protection in least developed countries”. http://devinit.org/wp-content/uploads/2015/05/Getting-poverty-to-zero.pdf; and Investments to End Poverty. 2015. http://devinit.org/wp-content/uploads/2015/09/Chapter-1-Ending-extreme-poverty-by-2030.pdf. These analyses are based on the previous poverty figure of $1.25 a day; the World Bank updated this to a new figure of $1.90 a day in November 2015.

14. OCHA. 2015. “World Humanitarian Data and Trends 2015”, p.2. https://docs.unocha.org/sites/dms/Documents/WHDT2015_2Dec.pdf

15. An estimated 14.4 million refugees under UNHCR’s mandate and 5.1 Palestinian refugees under UNRWA’s mandate.16. UNHCR. “2014 Statistical Yearbook”. http://www.unhcr.org/pages/4a02afce6.html17. Excluding Palestinian refugees not under UNCHR’s mandate. UNHCR. 2015. “Mid-Year Trends 2015”. http://www.unhcr.

org/56701b969.html 18. UNHCR. 2016. “Syria conflict at five years”. http://www.unhcr.org.uk/news-and-views/news-list/news-detail/article/syria-

conflict-at-five-years.html19. UNHCR. 2016. “Refugees/Migrants Emergency Response – Mediterranean”. http://data.unhcr.org/mediterranean/regional.

php 20. UNHCR. “Facts and Figures about Refugees”. http://www.unhcr.org.uk/about-us/key-facts-and-figures.html 21. UNHCR. 2015. “Mid-Year Trends 2015”, op. cit.22. Ibid.23. Norwegian Refugee Council and Internal Displacement Monitoring Centre. 2015. “Global Overview 2015: People internally

displaced by conflict and violence”. http://www.internal-displacement.org/assets/library/Media/201505-Global-Overview-2015/20150506-global-overview-2015-en.pdf

24. UNHCR. 2015. ”Mid-Year Trends 2015”, op. cit.25. ODI. “Education Cannot Wait”. https://www.odi.org/sites/odi.org.uk/files/resource-documents/10497.pdf26. UNOCHA. “2016 South Sudan Humanitarian Needs Overview”. http://reliefweb.int/report/south-sudan/2016-south-sudan-

humanitarian-needs-overview 27. UNHCR. April 2016. “South Sudan Situation”. http://data.unhcr.org/SouthSudan/country.php?id=251 28. UNOCHA Financial Tracking Service (FTS). “Republic of South Sudan 2016”. https://fts.unocha.org/pageloader.

aspx?page=emerg-emergencyDetails&appealID=111929. UNOCHA. 2016. “El Niño: Overview of Impact, Projected Humanitarian Needs and Response”. https://docs.unocha.org/sites/

dms/Documents/OCHA_ElNino_Overview_13Apr2016.pdf30. Ibid.31. Ibid.32. ONE produced a detailed analysis of the reporting of in-donor costs and debt relief as ODA in its 2014 DATA Report, ”Fighting

Poverty and Financing Africa’s Future”. https://www.one.org/us/policy/data-report-2014/ 33. All in 2014 constant prices and excluding debt relief. In-donor refugee costs increased by a multiple of 3.77 in 2015

compared with 2010. $13.9 billion (in-donor refugee costs in 2015 (2014 prices)) multiplied by 3.77 equals $52.4 billion.34. Op-Ed by Minister for International Development Cooperation, Isabella Lövin. http://www.dn.se/nyheter/sverige/regeringen-

satter-grans-for-avdragen-i-bistandet/ 35. Government letter of appropriations to Sida, p.11. http://www.sida.se/globalassets/sida/sve/om-oss/sa-styrs-vi/

regleringsbrev-2016.pdf36. Ministry of Finance, Norway. “National Budget 2016”. http://www.statsbudsjettet.no/Statsbudsjettet-2016/English/ 37. Begrotingsstaten Rijksbegroting 2015 and Begrotingsstaten Rijksbegroting 2016. http://www.rijksbegroting.nl/ 38. ONE. 2015. “EU budget 2016: EU boosts funds for refugee crisis and development to historic high – good move, say ONE and

Oxfam” (25 November 2015). http://www.one.org/international/press/eu-budget-2016-eu-boosts-funds-for-refugee-crisis-and-development-to-historic-high-good-move-say-one-and-oxfam/

ENDNOTES


39. Due to the federal nature of Germany’s system of government, in-donor spending and spending for development cooperation are not included at the same level of the state. While in-donor refugee costs are largely part of sub-national budgets, the lion’s share of ODA is included in the national budget. Additionally, Germany has no single ODA budget, but several ministerial budgets which include ODA disbursements. Therefore, there cannot be a direct shift of resources from (national) development cooperation to (mostly sub-national) in-donor refugee spending.

40. BMZ. 2015. “Höchste Steigerung und höchste Etat in der Geschichte des Entwicklungsministerium”. http://www.bmz.de/20150318-2

41. In-donor refugee costs reported as ODA will account for 3.8% of total ODA (€321 million) in 2016, according to French budget documents. http://www.performance-publique.budget.gouv.fr/sites/performance_publique/files/farandole/ressources/2016/pap/pdf/DPT/DPT2016_politique_developpement.pdf

42. Government of the UK. “UK and Syria”. https://www.gov.uk/government/world/syria43. Extract from T. Talbot and O. Barder, Center for Global Development Working Paper (forthcoming). “Payouts for Perils:

Why disaster aid is broken, and how catastrophe insurance can help to fix it”.44. United Nations Office of Disaster Risk Reduction, UNISDR, 2015, “The Human Cost of Weather-Related Disasters 1995-2015.”45. African Risk Capacity. http://www.africanriskcapacity.org/46. BMZ. 2015. “Outcomes of the Elmau Summit.” http://www.bmz.de/g7/en/Entwicklungspolitische_Schwerpunkte/

Klimawandel/index.html 47. European Commission. 2015. “Draft Amending Budget No. 5 to the General Budget 2015: Responding to Migratory Pressures,

COM (2015), 241 final (13 May)”; European Commission. 2015. “Draft Amending Budget No. 7 to the General Budget 2015: Managing the Refugee Crisis: Immediate Budgetary Measures under the European Agenda on Migration, COM (2015) 485 final (30 September)”; European Commission. 2015. “Amending Letter No. 2 to the Draft General Budget 2016: Updating of the Estimated Needs for Agricultural Expenditure and Fisheries; Managing the Refugee Crisis: Immediate Budgetary Measures under the European Agenda on Migration, COM (2015) 513 final (14 October)”.

48. However, funding from member states on top of the EU budget is not additional to programmed ODA.49. Some in-country costs, such as administrative spending, may be important to ensure the effective management of aid.

However, donors should not be allowed to report excessive administrative costs as ODA. In its measure of ‘real aid’, for example, ActionAid caps administrative costs at 8% of total aid (the same threshold used by some donors (e.g. DFID) for their funding partners.

50. High-Level Panel on Humanitarian Financing Report, op. cit. 51. Ibid. 52. Overseas Development Institute and Center for Global Development, 2015. “Doing cash differently: How cash transfers can

transform humanitarian aid.” https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/9828.pdf 53. Ibid. 54. Brandstetter, R. (2004) Evaluation of OFDA cash for relief intervention in Ethiopia, Final Report, Checchi and Company

Consulting and Louis Berger Joint Venture.55. M. Hidrobo, J. Hoddinott, A. Margolies, V. Moreira and A. Peterman. 2012. “Impact Evaluation of Cash, Food Vouchers, and

Food Transfers among Colombian Refugees and Poor Ecuadorians in Carchi and Sucumbíos, Final Report”. IFPRI.


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