Shifting official development assistance during COVID-19: earmarking, donor concentration and loans.

Abstract

In contrast to bilateral aid, aid disbursed from multilateral institutions increased significantly at the onset of the COVID-19 pandemic. Yet, at a time when a coherent and effective multilateral response is needed most, the COVID-19 pandemic revealed a shifting landscape of donor agencies that struggle with basic functions, such as cross-national coordination. While multilaterals are uniquely positioned to transcend national priorities and respond to pandemics, functionally we find official development assistance (ODA) from these entities may increasingly mimic the attributes of bilateral aid. We explore three important, but not comprehensive, attributes of aid leading up to and during the COVID-19 pandemic: (1) earmarking, (2) donor concentration and (3) aid modality. We examine ODA disbursements over time in 2020 constant prices from 2010 to 2021 and plot share of inflow that is earmarked against each United Nations multilateral against their average annual financing volume. We then assess market diversity with two measures: the Shannon-Weiner Function and Gini-Simpson Index. Finally, we examine financing vehicles used to disburse and look at 'grant share' of total ODA from all formal donors over time. We find that while the absolute number of formal multilateral actors and market diversity have been increasing since 2011, there has been a concurrent market consolidation led by the World Bank Group at 37% of market share in 2021. This coincides with an increasing prevalence of earmarking of aid inflows to the multilateral system and, unique to multilaterals but concerning given increasing debt risk, a rise in loan-based ODA disbursements. In theory, this consolidation may streamline revenue pooling and allow for a more collective approach to mitigating pandemic risk but, paired with increased earmarking, has the potential to sideline both collective goals (eg, the Sustainable Development Goals) and counties' core mandates (such as the pursuit of universal health coverage).