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How loans can be reported as development aid?

European donors have been accused of profiting from their aid budgets, as an increasing amount of their money for the developing countries is being given as loans which have to be paid back with interest.

In a report published last Thursday (16 January), Eurodad informs that loans offered at preferential terms can be reported as official development assistance (ODA), provided they meet certain concessionality conditions. The paper discusses the main developments in this debate over the past ten years and presents recommendations on how to optimise the developmental benefits of this reform.

The issue of concessional loans has attracted much discussion in recent years. The context of tighter budgets in Europe is incentivising governments to find methods to increase ODA levels without budgetary implications. One possible way of doing this is by reporting a larger share of their loans to developing countries as ODA. The discussion is also gaining prominence in relation to several issues on donors' agendas, including how to leverage development resources by blending public with private funds, and how to capture budget neutral financial instruments and lending to middle-income countries as development finance contributions.