This powerpoint presents the concept of Total Official Support to Sustainable Development, in the context of the Addis Ababa Action Agenda.

1. DAC development finance framework and
Total Official Support for Sustainable
Development (TOSSD)
The New Development Cooperation – what will be measured, by whom and what
will we do with all the data?
Hörsalen, Sida headquarters, 18th September 2015,
Ms. Suzanne Steensen, Ms. Julia Benn and Mr. Fredrik Ericsson
Statistics and Development Finance (SDF)
OECD Development Co-operation Directorate

2. Outline
The SDG era and modernising DAC development
finance measurement framework1
Total Official support for Sustainable Development
(TOSSD)2
Piloting TOSSD: Estimating orders of magnitude3
Increase targeting of resources to countries most in
need4
Modernise the ODA measure5
Mobilise more private finance for development6

3. DAC donor agencies
(concessional &
concessional bilateral
finance)
Private
philanthropy
(foundations
& NGOs)
Non-DAC sovereign
providers
(e.g. BRICS & MINT
countries, other
South-South co-
operation
providers)
Multilateral agencies
incl.
regional & Arab
organisations
(concessional & non-
concessional finance,
& investments)
DFIs
(non-
concessional
loans &
Investments)
Export credit
institutions
Private
actors/investors
(FDI & other private
flows at market
terms)
Sustainable development as the main objective Other objectives
The blue area illustrates the cross-border transfers to developing countries.
The SDG era: The financial architecture of
sources and instruments is more complex
1

4. Sources of external finance beyond ODA
are becoming more prominent
1

5. A Statistical Framework that is “Fit for Purpose”
in the Post-2015 Development Finance Context
The OECD DAC statistical system should:
• Promote transparency and accountability of
development finance – access to statistics is
essential for an accountable post-2015
development framework.
• Carry the right incentive to maximise resources
mobilisation, their smart allocation and catalytic
use.
• Promote international standards for measuring &
monitoring of development finance.
1

6. Historical decision to modernise the OECD DAC
framework: Outcomes of the 2014 DAC HLM
Modernise the ODA measure
Increase targeting of resources to
countries most in need (LICs, LDCs, LLDCs,
SIDS, conflict afflicted and fragile states)
Mobilise more private finance for
development
Develop a statistical measure tailored to
the SDG framework: Total Official Support
for Sustainable Development (TOSSD)
1

7. Total Official support for Sustainable
Development (TOSSD)
A new comprehensive statistical measure that
captures the diversity of resource flows in support of
sustainable development.
• Complements – and does not replace – ODA and will include
concessional and non-concessional financing and capture all
financial instruments
• Cover activities that promote sustainable development,
including contributions to global public goods
• Capture international public finance and public schemes for
mobilising private investments
• Relevant for any provider of development finance, including
private actors that take part in blended investment schemes
2

8. TOSSD and the Third International
Conference on Financing for Development
TOSSD figures as a main feature of the Addis Ababa
Action Agenda (AAAA) under the “International
Development Co-operation” heading (paragraph 55)
endorsed by the General Assembly in its resolution
69/313 of 27 July 2015.
“We will hold open, inclusive and transparent discussions on
the modernization of the ODA measurement and on the
proposed measure of “total official support for sustainable
development” and we affirm that any such measure will not
dilute commitments already made.”
2

9. How would TOSSD complement ODA?2

10. Provider and recipient perspectives
BilateralMultilateral
BilateralMultilateral
ODA
flows
Grants
Other
Offici
al
Flows
(OOF)
Non-
grants
ActivitiesqualifyingasTOSSD
Non-
grant
instrume
nts
Core funding (grants & loans)
Private finance mobilised
Country
Program
mable
Aid (CPA)
CPA grants
Cross-
border
Other
official
flows
Humanitarian aid
Private-sector instruments
Private amounts mobilised
Multilateral outflows
Loans
Private amounts mobilised
Activitiesqualifyingas
TOSSD
CPA loans
Other
cross-
border
ODA flows Equity investment etc.
Non-ODA Grants
Provider perspective Recipient perspective
2

11. Visualising TOSSD example:
A Solar panel project financed through
blended finance
2

12. DAC road map on TOSSD2
• Consultations for shaping the proposed TOSSD
measure: seminars, expert workshops and events
• Pilot studies to scope the analytical concepts,
functional categories, measurement issues and data
challenges
• Assessing necessary adjustments to the OECD DAC
statistical system in support of the TOSSD
measurement framework
• Forging partnerships to mobilise support for
operationalising the TOSSD measurement framework

13. Questions?

14. Piloting TOSSD:
Estimating orders of magnitude
• Spring 2014: Denmark volunteered to pilot
estimating possible TOSSD expenditures. Pilot was
conducted beginning of June 2014.
• Summer/fall 2014: Preliminary results presented at
the DAC. Results informed the discussions leading up
to HLM in December 2014.
• Summer 2015: Second pilot conducted in United
Arab Emirates, results still preliminary.
• Fall 2015 (planned): New pilot planned with EU and
possibly others, Sweden?
3

15. Possible TOSSD components identified
• Enablers for Development
– Security and justice, Peacekeeping, Supporting human
rights, Refugee costs, Standard setting organisations
• Face value of market-like financial instruments
– Capital of development loans, other instruments (such
as equity, mezzanine finance etc.)
• Climate change financing beyond ODA
• Administrative costs beyond ODA
• Include export credits? Amounts mobilised from
the private sector?
• Other?
3

16. Result from the Denmark pilot
TOSSD ≈ 9%-31% increase from gross ODA (2012)
3

17. Preliminary result from the UAE pilot
TOSSD ≈ 22% increase from gross ODA (2014)
3

18. Preliminary result from the Australia pilot
TOSSD ≈ 8% increase from gross ODA (2012);
however, pilot was only partial.
3

19. Breakdown of non-ODA TOSSD
expenditures differ across pilot countries
Denmark: Refugee costs and amounts mobilised account for the
majority of possible new TOSSD expenditures.
UAE: Market-like financial instruments account for 90% of
possible new TOSSD expenditures.
Australia: Additional expenditures on peace-keeping account for
the majority of possible new TOSSD expenditures.
3
Denmark UAE Australia

20. Increase targeting of resources to countries
most in need
Reverse declining trends of ODA to LDCs and
improve targeting to countries most in need (LDCs,
LICs, SIDS, LLDCs and fragile states)
• Enhance monitoring of members’ performance – individually
through DAC peer reviews and collectively at Senior Level
Meetings (compendium of measures).
• Strengthen the empirical and analytical basis for better
decision-making about smart ODA allocations.
4

21. Distribution of Net ODA disbursements incl. imputed
multilateral ODA to LDCs (2013)
Number of priority partnerships in LDCs
Spotlight on ODA to LDCs4

22. DAC countries’ net ODA to LDCs as % of GNI (1960-2013) DAC countries’ net ODA to LDCs as % of GNI (2013)
* Countries with stars have reached the UN ODA target of 0.7% of GNI.
Spotlight on ODA to LDCs:
DAC Members’ Performance4

23. Questions?

24. Modernise the ODA measure
Getting the incentives right: modernisation of
reporting on ODA loans
• New measurement system where only the grant equivalent
of ODA loans (differentiation of discount rates and
thresholds by income group):
• Allows better comparison between loans and grants.
• A clear, quantifiable measure of concessionality, that is
tighter than what existed before.
• Ensures access to ODA loans on better terms and conditions
than ever before as it incentivises concessionality.
• Safeguards established to ensure ODA debt sustainability.
5

25. Calculation of the grant element
• Maturity and grace period – the longer, the more
concessional the loan.
• Interest rate:
– Compare the interest rate of the loan with the opportunity
costs of the provider set at 10% in the old system (this
percentage is called the discount rate).
– So, the grant element is 0% for a loan with an interest rate
of 10% (equal to the discount rate). It is 100% for a grant.
– The lower the interest rate, the bigger the difference with
the rate of reference (the discount rate) and the more
concessional the loan.
5

26. Before and after: ODA loans
BEFORE:
FULL FACE VALUE
AFTER:
ONLY THE GRANT EQUIVALENT OF A LOAN
Grant Element
Thresholds
 25%  45% for LDCs and other LICs
 15% for LMICs
 10% for UMICs
Discount Rates  10%
 Used for
assessing the
concessionality
of a loan
 5% base (current IMF discount rate) + adjustment factors of
o 4% for LDCs and other LICs
o 2% for LMICs
o 1% for UMICs
 Used for both assessing the concessionality of a loan (does it
meet the threshold?) and for calculating its ODA grant equivalent
or the concessional portion of the loan.
Measurement
System
 Positive ODA
when disbursed,
negative ODA
when repaid
 Grant equivalent of loan disbursements (grant element
multiplied by amount disbursed).
 Repayment of past loans is not subtracted from ODA but will
continue to be collected and published.
5

27. A better incentive system for lending to poor
countries (Maximum interest rates for ODA loans
6.11%
6.78%
2.55%
3.81%
0%
1%
2%
3%
4%
5%
6%
7%
8%
10 15 20 25 30 35 40
Loan maturity
pre-2015
Under the new
system: maximum
interest rates for
LDCs and other LICs
5

28. Mobilise more private finance for development
Valorise and incentivise official sector use of
instruments with a leveraging effect by:
• Capturing the budgetary effort associated with
using market-like instruments (e.g. equity, risk
mitigation instruments) in ODA.
• Modernising the taxonomy of financial instruments
• Setting an international standard to measure the
mobilisation effect of official interventions and
collecting data on amounts mobilised in DAC
statistics.
6

29. Better capturing private-sector instruments6
• Need to incentivise the use of private-sector
instruments, through:
– their better identification in the DAC statistical system
(modernised taxonomy );
– regular data collection of amounts mobilised from the
private sector by these instruments, and
– greater recognition of the donor effort involved in their
use.

30. A modernised taxonomy of financial
instruments6
• New taxonomy of financial instruments agreed in
principle by the DAC WP-STAT. Implementation in
2017 for reporting on 2016 flows.
• New categories included to better reflect the use of
private sector instruments such as mezzanine
finance, shares in CIVs and guarantees.
• Better identification of the different levels of
seniority and risk-sharing (e.g. asset-backed
securities).

31. A measure of the mobilisation effect
• Innovative DAC surveys: guarantees (2013) and other
leveraging instruments (2014),
• Methodologies were derived to estimate the volume of
private flows mobilised by guarantees, syndicated loans
and shares in collective investment vehicles;
• HLM mandate to implement a data collection on amounts
mobilised from the private sector and establish an
international standard on measuring mobilisation;
– A new data survey will be launched in a couple of weeks;
– Similar methodologies will be developed for other leveraging
instruments such as equities and mezzanine finance.
More information at: http://www.oecd.org/dac/stats/mobilisation-effect-of-public-development-
finance.htm.
6

32. Dakar-Diamniadio Toll Highway project
(blended finance)6

33. 2015 DAC Survey on Mobilisation
• Measure amounts mobilised from the private sector
by official development finance in 2012-14
• Pilot the methodologies for inclusion into the regular
CRS++ data collection;
• 3 Instruments covered: Guarantees, Shares in CIVs,
Syndicated loans;
• 72 institutions targeted
– 51 bilateral institutions: DFIs, development banks, aid
agencies. DAC and non-DAC countries;
– 21 multilateral organisations.
• Also addressing needs of climate community
6

34. How much is mobilised?
Preliminary findings from the 2015 survey
USD 37.1 billion in total for 2012-2014
• Guarantees is the main instrument;
• Upward trend.
6
7.0 7.8
6.4
2.4
2.6
2.3
1.2
2.1 5.2
10.6
12.5
13.9
0
4
8
12
16
2012 2013 2014
USDbillion
Guarantees Shares in CIVs Syndicated loans
7.3 through
shares in
CIVs
8.6
through
syndicated
loans
21.2
through
guarantees

35. 7.7
14.5
11.2
0.7
2.9
- 5 10 15 20
Unallocated
UMICs
LMICs
Other LICs
LDCs
USD billion
Guarantees Shares in CIVs Syndicated loans
Amounts mobilised mainly in middle–income
countries
• 69.3% to middle–income countries (LMICs + UMICs)
• 9.7% to least developed countries and low-income countries
6
MICs

36. Including the donor effort involved in ODA6
Development Banks DFIs Others
Sovereign recipients
Other
public
recipients
PPPs
Private
recipients
Official
providers
Official &
private
recipients
Instruments
Non-grant
flows (gross)
- loans
- guarantees
- loans
- guarantees
- loans
- guarantees
- mezzanine
- equity
- loans
- guarantees
- mezzanine
- equity
Share-
holders
Official Private

37. Challenges:
Implementation, inclusiveness and effectiveness
• ODA modernisation: did we get the incentives right for highly
concessional funding to where it is most needed?
• TOSSD framework: is it an appropriate framework for
incentivising private finance that contributes to sustainable
development?
• How can we develop an inclusive but effective governance
for the post-2015 measurement framework?
• How to account not just for the quantity, but the quality of
aid and other develoment finance?
– Should there be a second generation of the Paris
Declaration?
– How do we strengthen evidence to support the link
between quantity and results?

38. Thank you.

39. Elements for consideration
• Would TOSSD effectively enhance transparency of
the use and impact of development finance tools,
arrangements and instruments?
• Would the proposed TOSSD measure provide the
right incentive framework to maximise resource
mobilisation in support of the SDGs, including global
public goods?
• What would be the key considerations for an open,
transparent and inclusive process to develop TOSSD?