Foreign Aid: Understanding Data Used to Compare Donors

CRS Report for Congress
Foreign Aid: Understanding Data Used to
Compare Donors
Larry Nowels
Specialist in Foreign Affairs
Foreign Affairs, Defense, and Trade Division
Summary
There are various views on how to total U.S. spending on foreign aid and how U.S.
transfers compare with those from other major donors. For the United States, the size
of the foreign aid budget is frequently measured in terms of annual appropriations
approved for international assistance programs. In comparing the United States with
other international aid donors, the most common source of information is the
Development Assistance Committee (DAC) of the Organization for Economic
Cooperation and Development (OECD). There are significant scope and
methodological differences, however, between U.S. appropriations figures and those
used by the DAC. This report explains those differences and discusses other issues
related to the debate over how much wealthy countries contribute to international
development and what share U.S. resources represent.
The humanitarian tragedy caused by the Indian Ocean tsunami in late 2004 and the
subsequent Gleneagles G-8 Summit focused on Africa in mid-2005 elevated the
discussion of a broader issue regarding how much the world’s wealthiest nations
contribute to foreign aid and disaster relief, and how United States’ aid compares with the
transfers of other countries. Because of varying definitions of what constitutes “foreign
assistance,” there is frequent confusion over what is the precise U.S. foreign aid budget
and some controversy over how to compare U.S. levels with those of other donors. A
fundamental point of misunderstanding stems from the substantial differences in both
scope and methodology between what Congress annually appropriates for foreign
assistance and how the OECD’s Development Assistance Committee (DAC) presents data
comparing aid performance of 22 donors, including the United States.
U.S. Foreign Aid Budget
Many regard the annual Foreign Operations appropriations bill, together with
relevant supplementals, as the most reliable figures to use when assessing how much the
United States spends on foreign aid. The Foreign Operations measure combines most
economic, military, and multilateral assistance accounts into a single spending bill, and

Congressional Research Service ˜ The Library of Congress

is a useful “proxy” for the size of the American foreign aid budget. Nevertheless, it does
not represent the precise total of U.S. foreign assistance for two reasons. First, the
Foreign Operations measure includes funding for the Export-Import Bank (Eximbank),
an export promotion program that is not defined by the Office of Management and Budget
(OMB) as “foreign aid.” Secondly, Foreign Operations does not include appropriations
for international food assistance programs and for a portion of international HIV/AIDS
activities that are funded in the Agriculture and Labor/HHS/Ed spending bills,
respectively.
In Table 1, Foreign Operations appropriations have been adjusted to correspond to
the more precise OMB accounting of “foreign aid” funding, excluding the Eximbank and
adding international food aid. OMB does not count international HIV/AIDS spending
provided through the Labor/HHS/Ed appropriations measures as “foreign aid” since the
funds are channeled through domestic-focused agencies. In most years, “foreign aid”
appropriations, by OMB’s definition, are somewhat larger than amounts provided in
Foreign Operations spending bills because international food aid usually runs higher than
resources for the Eximbank.
Table 1. U.S. “Foreign Assistance” Appropriations
(billions of dollars)
FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06
T OT AL 14.03 12.83 12.71 13.35 15.64 16.36 16.33 16.66 24.92 39.89 23.41 22.02
Non-Military 11.01 9.56 9.40 9.97 12.13 11.37 12.31 12.43 18.52 33.60 17.91 17.29
^Sources^:^Ho^u^s^{e an}^d^Sen^a^{te A}^p^p^r^o^p^r^iatioⁿ^s^Co^m^m^{ittees an}^d^{CRS calcu}^latioⁿ^s^{. A}^m^o^uⁿ^t^sⁱⁿ^c^l^u^d^e^Fo^r^e^igⁿ^Op^er^atioⁿ^s
^appropri^a^tⁱ^oⁿ^s^{, l}^e^s^s^Ex^port^-^Im^port^Ban^k^f^uⁿ^d^s^,^pl^u^sⁱⁿ^t^e^rn^atⁱ^oⁿ^a^l^f^{ood as}^sⁱ^s^t^an^{ce prov}ⁱ^d^{ed i}ⁿ^A^g^ri^cu^l^t^u^{re s}^p^en^diⁿ^g^m^eas^u^r^es^.
^F^Y^2003-^F^Y^{2005 i}ⁿ^cl^u^d^{e l}^a^rg^{e s}^u^ppl^em^en^t^a^l^s^f^o^{r pre-}^{Iraq w}^a^{r requ}ⁱ^r^em^en^t^s^,^Iraq^recon^s^t^r^u^c^tⁱ^oⁿ^,^ai^d^s^u^pportⁱⁿ^g^t^h^e^g^l^obal
^w^a^r^on^t^e^{rror, an}^{d t}^s^uⁿ^a^mⁱ^an^{d D}^a^rf^u^r^h^u^m^anⁱ^t^a^ri^an^relⁱ^e^f^.^F^Y^{2006 does}ⁿ^o^tⁱⁿ^cl^u^d^{e pen}^dⁱⁿ^g^em^erg^eⁿ^c^y^s^u^ppl^em^en^t^a^l^(H^.R^.
^{4939) th}^{at cou}^l^{d add m}^o^{re th}^an^{$2 b}^illion^{to th}^e^{FY2006 total w}^h^en^en^acted.
Official Development Assistance
While Foreign Operations appropriations, or the adjusted figures shown in Table 1,
are the most common ways within the U.S. government for measuring the size of
American foreign aid, they represent a methodology that is unique to the U.S. budgeting
system. To overcome discrepancies and inconsistencies among donor budgeting
processes, the Development Assistance Committee of the OECD, has established
common definitions and methodologies for member countries to report amounts of
Official Development Assistance (ODA). For over 30 years, the DAC has been regarded
as an authoritative source of government international aid spending and the standard to
use in comparing assistance provided by the world’s major aid donors.
But as can be seen by comparing foreign assistance appropriations figures with
ODA totals for the United States published by the DAC (Table 2), there are significant
differences. In all years, the difference in total U.S. appropriations and U.S. ODA is
several billions of dollars, and in a few years, appropriations are roughly twice the level
of ODA. Several factors explain these differences.

Table 2. U.S. Official Development Assistance (ODA)
Disbursements
(billions of dollars)
CY 95 CY 96 CY 97 CY 98 CY 99 CY 00 CY 01 CY 02 CY 03 CY 04 CY 05
7.379.386.888.799.159.9611.4313.2916.3219.71 27.46
^Source:^D^e^v^e^l^opm^en^t^A^s^sⁱ^s^t^an^ce^C^o^m^mⁱ^t^t^ee,^O^r^g^aⁿⁱ^zatⁱ^oⁿ^f^o^r^Econ^omⁱ^c^C^ooperatⁱ^oⁿ^an^{d D}^e^v^e^l^opm^en^t^.
^C^Y^{2005 i}^s^prelⁱ^mⁱⁿ^ary^an^{d s}^u^bj^ect^t^o^ch^an^g^e^.
ODA excludes military aid. The DAC collects and reports only non-military, grant and
low-interest loan assistance to developing nations. U.S. foreign aid appropriations
include large amounts of military aid, ranging between $3 billion and $6.4 billion over
the past 10 years. In Table 1, an estimate of the amount of non-military appropriations
is shown, figures that more closely align with ODA data. Further, of the roughly $22
billion appropriated for Iraq reconstruction in FY2003 and FY2004, approximately $2.6
billion for Iraqi national guard and military equipment and training is not counted as
ODA. For this reason alone, ODA will always be substantially less than total U.S.
foreign aid appropriations.
ODA represents net disbursements. Official Development Assistance is reported as
net disbursements, a method that is closest to the U.S. budgeting term of “outlays.” U.S.
appropriations represent the amount of money committed in a particular year, much of
which may not be disbursed, or “outlayed” for several years. This means that ODA
figures will usually lag a year or two behind actions taken by Congress in foreign aid
appropriations. For example, in FY1996 foreign aid appropriations declined from the
previous year, while the U.S. ODA level rose by 27%. The ODA figure most likely
reflected a large appropriation in FY1995 for multilateral development bank (MDBs)
contributions that did not disburse until calendar 1996. Conversely, the significant
increases in foreign aid appropriations beginning in FY2003, including large sums for
Iraq reconstruction, are only partially reflected in the ODA disbursement data for
calendar 2003 and 2004, but had a large impact on the U.S. ODA figure for calendar
2005 which represented a 39% increase over the previous year.¹ The net disbursements
measure takes into account recipient repayments to donors for previous ODA
concessional loans which are subtracted from new ODA expenditures for a particular
year. Because the United States has maintained a largely grant aid program for over two
decades and has forgiven most debt owed by many aid recipients, the net basis for
reporting U.S. ODA is not a significant factor. For other donors, however, it may have
a substantial impact.
ODA excludes aid provided to higher-income countries. Economic aid extended by
the United States and other donors to countries with per capita GNPs of more than
$9,205 and to transition economies in Central Europe and the former Soviet Union are
not counted as ODA. Consequently, U.S. foreign aid appropriations of over $1 billion
per year since 1991 for Russia and the former eastern bloc have not been included in
ODA figures. Moreover, in 1997, because of its rising income level, the DAC moved

¹ For purposes of ODA accounting, only $1.5 billion and $3 billion of Iraq reconstruction funds
disbursed in calendar 2003 and 2004, respectively. For 2005, the total rises significantly to $10.2
billion.

Israel out of the ODA list of countries. This partially explains the sharp drop in U.S.
ODA disbursements in CY1997, and between $350 million and $1.2 billion in annual
economic assistance to Israel has not been counted as ODA in more recent years.
ODA includes some funds not counted in “foreign aid” appropriations. Certain
amounts of international programs funded out of domestic and defense appropriations
rather than Foreign Operations appropriations are counted as ODA. For example,
humanitarian, disaster, and civic aid included in annual DOD appropriations ($62 million
in FY2006) and Department of Health and Human Resources and the Centers for
Disease Control appropriations for international HIV/AIDS, malaria, and tuberculosis
($590 million in FY2006) are included in ODA figures reported to the DAC. Indeed, the
share of total U.S. ODA represented by USAID and State Department programs has been
declining in recent years, with other non-foreign policy agencies providing more out of
their budgets. For CY2005, the United States reported that USAID’s share of ODA was

42% and State Department’s 13%. The remaining 45% was disbursed by other U.S.

agencies, including 18.5% for the Defense Department.
ODA reports data on a calendar year, not fiscal year basis. The timing for passage
of Foreign Operations measures can have a significant impact on amounts reported to the
DAC. If a Foreign Operations bill is enacted several months after the beginning of the
new fiscal year, but passed on time (before September 30) the following year, it is
possible that rapidly disbursing appropriations, such as contributions to the MDBs, from
two fiscal year appropriations will be included in a single ODA calendar year total.
Comparing ODA Transfers of Major Donors
DAC statistics published annually compare donors in a number of ways: total dollar
amounts; aid as a percent of gross national income (GNI); aid dollars per capita; grant
composition; multilateral contributions; income level of recipients; purposes of aid; etc.
The most commonly cited comparisons are the total volume of ODA disbursements and
ODA disbursements as a percent of GNI.
The fact that the United States, as illustrated in Figures 1 and 2, is the leading donor
in terms of volume, but nearly last in terms of GNI percentage, sharpens a continuous
debate over whether the U.S. provides an appropriate share of international ODA. Those
who argue that the United States is the largest provider of foreign assistance emphasize
the volume of ODA disbursements as the most relevant indicator, pointing out that U.S.
ODA in 2005 represented 25.8% of the $106.5 billion in total DAC disbursements.
Moreover, the 2005 figures, they emphasize, do not yet fully reflect significant new U.S.
foreign aid initiatives for HIV/AIDS programs and the Millennium Challenge Account
that will push ODA levels higher in the coming years.
They further reject the exclusive focus on public or government-transferred aid,
noting that private transfers — in the form of direct investments and aid from non-
governmental organizations (NGOs) with funds raised through charitable contributions
— have become far more significant sources of development financing over the past two
decades. At the very least, those calling for consideration of charitable donations made
by private citizens to NGOs for overseas activities maintain that they should be an
additional indicator of a country’s international development commitment. According
to DAC figures, the United States accounted for $6.3 billion of a total of $10.2 billion

Figure 1. ODA Volume from Majorin grants by private NGOs in 2003.(Many analysts believe, however,
Donors, 2005
that the DAC figures significantly
^$1³^.¹^$2⁷^.⁴⁶^Uⁿⁱ^t^ed^Kⁱⁿ^g^do^m^Ja^p^aⁿ^Uⁿⁱ^t^ed^S^t^a^t^esunderstate the amount of U.S.
^$1⁰^.⁰⁶^$1⁰^.⁷⁵^Fr^aⁿ^ceprivate donations.) Adding these
^$5^.¹³^$9^.⁹²^N^e^t^h^er^l^a^nd^s^Ge^rm^aⁿ^yfigures to the total volume of ODA
^$3^.⁷³^$5^.⁰⁵^Caⁿ^a^d^a^It^a^l^ywould push the United States even
^$3^.²⁸^Sp^aiⁿ^Sw^e^d^enhigher as the leading donor. Some
^$2^.⁷⁸^$3^.¹²^No^r^w^a^yalso believe that personal
^$1^.⁹⁸^$2^.¹¹^Be^lg^iu^m^D^e^nm^ar^kremittances of immigrants working
^$1^.⁶⁷^$1^.⁷⁷^Au^s^t^r^a^lⁱ^a^Swⁱ^t^z^e^rlaⁿ^dabroad should also be included in
^$0^.⁹^$1^.⁵⁶^Fⁱⁿ^l^and^Au^s^t^rⁱ^acalculations of financial flows to
^$0^.⁵⁴^$0^.⁶⁹^Gr^e^e^c^e^Ir^e^l^aⁿ^ddeveloping nations. The Hudson
^$0^.³⁷^Ne^{w Z}^e^a^l^aⁿ^d^Po^r^t^ug^a^lInstitute estimates that in 2004,
^$0^.²⁶^$0^.²⁷^Lu^x^e^m^b^ou^rgremittances from workers living in
⁰^$5^$1⁰^$1⁵^$2⁰^$2⁵^$3⁰^So^u^r^c^e^:^O^E^C^Dthe United States totaled $47 billion.
^bi^l^lⁱ^oⁿ^s^of^do^l^l^a^r^s^di^s^b^u^r^s^e^dOverall, the Institute’s study finds
that total U.S. flows to developing
nations in 2004 reached $99 billion,
of which official ODA represented only $19.7 billion, or 20% of the total. (The Index
of Global Philanthropy, 2006. p. 15.)
Moreover, some believe that there are many in-kind and intangible contributions
that are difficult to quantify in monetary terms. The United States plays a particularly
large role in some of these activities, especially where American military assets are used
for transportation, logistical support, and security of aid workers in emergency and
conflict situations. They point to the Indian Ocean tsunami disaster in which the U.S.
military played a critical role in the delivery of urgently needed relief supplies. Some of
the expense associated with the military’s efforts will not be reflected in U.S. ODA
figures. Aside from the money issue, some policymakers emphasize that a discussion
about aid burden sharing should not be about the quantity of ODA. The focus, they
contend, should be about the quality of development programs and government policies,
especially in the area of trade, that provide benefits to poor countries far beyond the value
of ODA.
Those that argue that the United States should provide more foreign aid generally
regard ODA as a percent of GNI as the best measure of U.S. aid. On this basis, as a share
of national wealth, the U.S. ranks second to last among 22 major aid donors. Even if
private donations are added to the total, in 2003 the percent of GNI would increase to
0.21, but still place the United States in the 21^st position. While acknowledging the
importance of private direct investment in the promotion of economic growth in poor
countries, these analysts point out that private flows are even more unpredictable than
public transfers and are distributed in a relatively uneven pattern with large
concentrations in more advanced economies, such as India and China. Private direct
investment in low-income countries, they point out, has fallen over the past decade.
Likewise, some of these critics do not believe that worker remittances should be included
in foreign aid calculations due to the random nature of these transfers and their lack of
integration into broad development strategies. Remittances generally come from wages
paid to immigrants worker and should not be seen as charity, according to this view.

Those who advocate higher levels of U.S. foreign aid further contend that if the
volume of ODA is used as a point of comparison, it is more appropriate to measure
American ODA against Europe as a whole rather than individual European countries.
Using this comparison, European Union (EU) countries that are members of the DAC,
having a comparable national income ($10.48 trillion) with that of the U.S. ($10.98
trillion), provided more than twice the amount of ODA in 2005 ($55.4 billion vs. the
U.S. $27.5 billion). Using somewhat different terms — ODA per capita — the EU, with
a population 31% larger than the United States, disbursed about $145 per person,
compared with $94 per American.
Some analysts also assert that
Figure 2. ODA as % of GNI, 2005since the Bush Administration has
^0.⁹³^%^Sw^e^d^eⁿ^No^r^w^a^yadded international development as
^0.⁸⁷^%^0.⁹²^%^Lu^x^e^m^b^o^u^r^ga third “pillar” of U.S. national
^0.⁸²^%^Deⁿ^m^a^r^k^Ne^th^e^r^l^aⁿ^d^s
^0.⁵³^%^0.⁸¹^%^Be^lg^iu^msecurity, together with defense and
^0.⁴⁸^%^0.⁵²^%^Uⁿ^it^{ed K}ⁱ^ng^d^o^m^Au^s^t^rⁱ^adiplomacy, the growing importance
^0.⁴⁷^%^0.⁴⁷^%^Fⁱⁿ^l^and^Fr^aⁿ^c^eof aid to American national interests
^0.⁴¹^%^Swⁱ^t^z^e^rlaⁿ^d^Ir^e^l^aⁿ^dshould be reflected in higher
^0.³⁵^%^0.⁴^%^Ge^rm^aⁿ^yresource allocations. These critics
^0.²⁹^%^0.³⁴^%^Sp^aiⁿ^Caⁿ^a^d^acommend the Bush Administration
^0.²⁹^%^Ja^p^aⁿ^It^a^l^yfor committing to significantly
^0.²⁷^%^0.²⁸^%^Ne^w^Z^e^a^l^aⁿ^dhigher foreign aid spending and
^0.²⁵^%^Gr^e^e^c^e^Au^s^t^r^a^lⁱ^a
^0.²²^%^0.²⁴^%^Uⁿⁱ^t^ed^S^t^a^t^eslaunching the HIV/AIDS and
^0.²¹^%^Po^r^t^ug^a^lMillennium Challenge Account
initiatives, but believe the United
^%^o^f^G^r^o^{ss Nat}ⁱ^oⁿ^a^{l I}ⁿ^co^m^e⁰^0.^2%^0.⁴^%^0.⁶^%^0.⁸^%^1%States can and should do more. If
^S^o^u^r^ce:^O^E^C^Dinternational development is a key
element of U.S. national security,
they argue, the private sector should not be responsible for meeting these important
American national interests in many parts of the world. For them, the key question is not
the U.S. ranking as a donor, but whether the United States government is spending
enough on development aid to achieve its stated national security goals.
An Alternative Comparison Method
For the past three years, a private U.S. think tank — the Center for Global
Development — has compiled an alternative way to analyze the impact of the policies
of 21 wealthy countries on developing nations. The Commitment to Development Index
takes a far broader approach than using ODA and private flows data to compare
government performance by examining policies on trade, investment, the environment,
migration, security, and technology, in addition to foreign aid. Based on the Center’s
most recent release in mid-2005, the United States ranked tied for 12^th among 21
countries analyzed. The United States, by this measure, scored high on trade investment
policies that promote development, while scoring low in the areas of aid. (The complete
results of the Center’s study can be found at [http://www.cgdev.org/].)
Beyond the analytical results of the Center’s study, it further illustrates the
complexity of measuring the impact of U.S. and other governments’ policies on
promoting development and reducing poverty that go well beyond the comparison of
ODA data, whether it be based on volume or as a percent of national income.