On measuring loan concessionality in Official Development Assistance
This article computes and shares several Official Development Assistance variants
Abstract
The definition of Official Development Assistance (ODA), stewarded by the Development Assistance Committee (DAC), just experienced its largest crisis since the early 1970s. Historically, ODA assessed the subsidy element of aid loans using a discount rate of 10 per cent. Low borrowing interest rates for donor governments enabled them to lend at rates low enough to qualify as ODA, yet high enough to turn a profit. This ignited controversy. In 2014, ODA鈥檚 treatment of loans was officially overhauled鈥攆or the better, in the sense of aligning the ODA 鈥榬eward鈥� for a loan to its value. A third way would be better still. The DAC and researchers could improve matters by taking discount rates from the Export Credit Arrangement than from the IMF; and to forgo discounting for default risk, except for innovative loans whose terms bind the lender to share country risk. This article computes and shares several ODA variants.
This work is part of the 鈥楳acroeconomics in Low-income countries鈥� programme鈥�
Citation
David Roodman, On measuring loan concessionality in Official Development Assistance,聽Oxford Review of Economic Policy, Volume 31, Issue 3-4, AUTUMN-WINTER 2015, Pages 396鈥�419,聽https://doi.org/10.1093/oxrep/grv027