OVERVIEW

Different types of aid are explained below. You can also find out more about Ireland’s contribution and the debate over aid effectiveness by following the links on the left hand menu.

Development Aid
Humanitarian Aid
Bilateral Aid
Multilateral Aid
Multilateral Operational Agencies
Tied Aid
Untied Aid
Food Assistance
Food Aid
Programming Instruments

Definitions

Development Aid
Development aid can be defined as financial or technical assistance received by a developing country to bring about higher living standards for its citizens. Modification of trade policies on the part of developed countries may also be considered as a form of aid, in as much as improved market access can also bring benefits to a developing country. It is distinguished from humanitarian aid as being aimed at alleviating poverty in the long term, rather than alleviating suffering in the short term. Foreign aid, on the other hand, includes both development aid and humanitarian aid. Development aid can take many forms it can be a project or a programme, a cash transfer or delivery of goods, a training course or a research project, a debt relief operation or a contribution to a non-governmental organisation.

The nations of the Organisation for Economic Co-operation and Development (OECD), made up of the developed nations of the world, have committed to providing a certain level of development assistance to underdeveloped countries. This is called Official Development Assistance (ODA), and is given by governments on certain concessional terms, usually as simple donations. It is given by governments through individual countries’ international aid agencies (bilateral aid), through multilateral institutions such as the World Bank, or through development charities such as Concern Worldwide.

Humanitarian Aid
Humanitarian aid is provided for humanitarian purposes, typically on an urgent basis as a form of emergency management in response to a humanitarian crisis. The primary objective of humanitarian aid is to save lives, alleviate suffering, and maintain human dignity. It may therefore be distinguished from development aid, which seeks to address the underlying socioeconomic factors which may have led to a crisis or emergency. Humanitarian aid is delivered by governmental and non-governmental aid agencies which are funded by donations from individuals, corporations, governments and other organisations. The funding and delivery of humanitarian aid is increasingly being organised at an international level to facilitate faster and more effective responses to major emergencies affecting large numbers of people (eg. see Central Emergency Response Fund). The United Nations Office for the Coordination of Humanitarian Affairs (OCHA) coordinates the international humanitarian response to a crisis or emergency pursuant to Resolution 46/182 of the United Nations General Assembly.

Bilateral Aid
Bilateral Aid is given by the government of one country directly to another. It can be in the form of money, food, equipment and/or technical assistance. Generally bilateral agreements exist between donor countries and recipient governments which constitute the legal basis for a programme of bilateral cooperation.

Multilateral Aid
Multilateral Aid is assistance given to poor countries through international organisations such as the United Nations, World Bank, the International Monetary Fund, or the EU development fund. Each organisation has its own aid programme and is funded by the world’s wealthier, more developed countries.

Multilateral Operational Agencies
International institutions with governmental membership which conduct all or a significant part of their activities in favour of development and aid recipient countries. They include multilateral development banks (e.g. World Bank, regional development banks), United Nations agencies, and regional groupings (e.g. certain European Union and Arab agencies). A contribution by a Development Assistance Committee (DAC) Member to such an agency is deemed to be multilateral if it is pooled with other contributions and disbursed at the discretion of the agency.

Tied Aid
Tied Aid is foreign aid that must be spent in the country providing the aid (the donor country). A developed country will provide a bilateral loan or grant to a developing country, but mandate that the money be spent on goods or services produced in the donor country. Aid is usually tied to the benefit of the donor at the expense of the recipient. By limiting competition, tied aid raises the cost of many goods and services. Moreover, tied aid tends to favour projects that require capital intensive imports or donor-based expertise over smaller and more poverty-focused programmes. Untying is seen as a step towards increased involvement of developing countries in the selection, design and implementation of aid projects and programmes, and therefore more effective partnerships.

Untied Aid
Official Development Assistance for which the associated goods and services may be fully and freely procured in substantially all countries.

Food Assistance
Food Assistance describes any intervention designed to address hunger, in response to chronic problems or short-term crises. Food assistance may involve the direct provision of food, for example in supplementary feeding or food for work projects. Equally, it may involve financial interventions, for example to support food subsidies or price stabilisation schemes.

Food Aid
Food Aid is commodity aid that is used either to support food assistance action or to fund development more generally, by providing balance-of-payments support in substituting for commercial imports, or budgetary support through the counterpart funds generated from sales revenue. Food aid transfers are required to meet the Development Assistance Committee (DAC) criteria for official development assistance (ODA) – grants or loans with at least 25% concessionality (A measure of the "softness" of a credit reflecting the benefit to the borrower compared to a loan at market rate. (cf. Grant Element). Technically, it is calculated as the difference between the nominal value of a Tied Aid Credit (q.v.) and the present value of the debt service as of the date of disbursement, calculated at a discount rate applicable to the currency of the transaction and expressed as a percentage of the nominal value, intended for developmental or humanitarian purposes and organised by development co-operation agencies. (Source: the Food and Agriculture Organization (FAO), in a background paper for the 1996 World Food Summit).

Programming Instruments
There are now several internationally recognized programming instruments. The most important of these instruments is the Poverty Reduction Strategy Paper (PRSP). PRSPs describe a country’s macroeconomic, structural and social policies and programmes to promote growth and reduce poverty. The PRSP process leads to pro-poor changes in public policies and programmes and results in budgetary allocations that take into greater consideration the needs of the poor.

PRSPs are prepared by developing country governments through a participatory process involving civil society and development partners, including the World Bank and the International Monetary Fund. In essence, PRSPs are intended to be locally owned national poverty reduction plans. In low-income countries, the PRSP is becoming the main framework for mobilizing and programming external assistance. Originally intended as a mechanism to link debt relief with poverty reduction measures in heavily indebted poor countries, the PRSP process has now been extended to all low-income countries. A PRSP or an interim PRSP is usually a precondition for debt relief or increased development assistance funding from the donor community.

Often working in support of PRSPs are Sector-Wide Approaches (SWAPs), which involve coordinated efforts to set out strategic approaches in a particular sector (such as health or education). This may involve implementing projects that support sectoral plans or contributing aid funds to a common pot that the developing country would then use to implement its sectoral plan. Whatever the instrument, these strategies place a premium on local ownership and donor coordination and embody a comprehensive approach to development. They also reflect a strong emphasis on strengthening government capacity in developing countries, through the provision of technical assistance and the establishment of policy environments which enable social and economic progress. This is very much in keeping with research evidence and development experience which shows that good governance and a sound policy environment are the most critical underpinnings of sustained development and aid effectiveness.