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What Is Official Development Assistance (ODA)?

  • Writer: Seoyoung Kwon
    Seoyoung Kwon
  • Jul 31
  • 9 min read



From water infrastructure and climate adaptation to public health, education and institutional capacity building, many international development projects are supported through Official Development Assistance, commonly known as ODA.


Although ODA is often used as another word for foreign aid, it has a more precise meaning. Not every international programme, government loan or cross-border investment qualifies as ODA. To be recorded as ODA, support must meet specific conditions established by the Organisation for Economic Cooperation and Development’s Development Assistance Committee, or OECD DAC.


Understanding these conditions helps explain how development cooperation is financed, delivered and measured.


What is ODA?


The OECD defines Official Development Assistance as support provided by official agencies with the economic development and welfare of developing countries as its main objective.



Official development assistance (ODA) is government aid that promotes and specifically targets the economic development and welfare of developing countries. ODA has been the main source of financing for development aid since it was adopted by the OECD’s Development Assistance Committee (DAC) as the “gold standard” of foreign aid in 1969. The OECD is the only official source of reliable, comparable, and complete statistics on ODA.

ODA is therefore not simply money transferred from one country to another. It is a formal measure of the effort made by governments and other official institutions to support development. It includes grants as well as the grant-equivalent value of qualifying concessional loans.


ODA and international development cooperation


ODA is an important part of international development cooperation, but the two concepts are not identical.


International development cooperation is the broader range of partnerships, policies, finance and activities intended to address poverty, inequality and development challenges. It can include:


  • ODA provided by governments;

  • other official financial flows;

  • South–South and triangular cooperation;

  • private investment and blended finance;

  • philanthropic funding;

  • civil-society and non-governmental initiatives; and

  • knowledge sharing and technical partnerships.


ODA is a specific category within this wider landscape. It follows internationally agreed eligibility and reporting rules, while other forms of development finance may not meet the ODA definition.


In simple terms:

International development cooperation describes the wider field of collaboration for development, while ODA is a defined and measurable category of official development support.

What are the key conditions of ODA?


A practical way to determine whether the support qualifies as ODA is to consider four questions below.


1. Is it provided by an official source?

ODA must be provided by an official agency, such as a national or local government or one of its executive agencies. Funding provided independently by private companies, individuals or foundations is not itself classified as ODA.


2. Is development and welfare the main objective?

The principal purpose of the support must be to promote the economic development and welfare of developing countries.


Projects relating to water and sanitation, healthcare, education, climate resilience, institutional capacity or sustainable infrastructure may qualify when development is their main objective. Military assistance, anti-terrorism operations and activities primarily intended to advance commercial interests are generally excluded.


3. Is the recipient eligible?

Bilateral ODA must principally benefit a country or territory included on the DAC List of ODA Recipients. The list is reviewed periodically by the OECD DAC and mainly includes low- and middle-income countries eligible to receive ODA.


Support may also qualify when it is provided to an ODA-eligible multilateral institution or international non-governmental organisation under the relevant OECD rules.


4. Is the financing concessional?

Where support is provided as a loan rather than a grant, it must be sufficiently concessional.

A concessional loan is provided on more favourable terms than a standard commercial loan. These favourable terms may include:


  • a lower interest rate;

  • a longer repayment period;

  • a grace period before repayments begin; or

  • a combination of these conditions.


The degree of concessionality is measured through the loan’s grant element. The grant element represents the financial benefit provided to the borrower compared with financing offered on market terms.


Under the OECD’s current ODA rules, bilateral loans to the official sector must meet the following minimum grant-element thresholds:

Recipient category

Minimum grant element

Least developed countries and other low-income countries

45%

Lower-middle-income countries

15%

Upper-middle-income countries

10%

Loans to qualifying multilateral institutions

10%

Different discount rates are used to calculate the grant element for each income category. Loans must also comply with relevant International Monetary Fund and World Bank debt-sustainability policies.


How is ODA measured?


Since 2018, headline ODA figures have been calculated using the grant-equivalent system. This method is intended to measure how much financial effort a donor makes, rather than simply counting the full face value of every loan.


A grant has a grant element of 100% because the recipient does not have to repay it. For a concessional loan, only the grant-equivalent portion is included in the headline ODA figure.


For example, where a donor provides a USD 100 million loan with a grant element of 40%, USD 40 million is recorded as ODA. The recipient still receives the full loan and repays it according to the agreed conditions. The USD 40 million figure measures the financial benefit of the favourable terms; it is not the amount of debt forgiven.


Loans with lower interest rates, longer repayment periods or longer grace periods have higher grant elements and therefore generate a higher ODA value

What are the main types of ODA?


ODA can be classified according to both its delivery channel and its financial instrument.


Bilateral ODA

Bilateral ODA is provided by an official donor directly to a recipient country or for a programme undertaken on the donor’s behalf. It may include:


  • project-based interventions;

  • budget support;

  • technical assistance and expert support;

  • institutional capacity building;

  • scholarships and training;

  • humanitarian assistance;

  • debt relief; and

  • contributions to specific programmes or pooled funds.


A donor may also appoint a United Nations agency, development bank or non-governmental organisation to implement a specific project. Where the donor retains control over the recipient, country, sector or programme, the funding is generally still classified as bilateral ODA. This is sometimes called earmarked or Bi/Multi funding.


Multilateral ODA

Multilateral ODA consists mainly of core contributions from governments to ODA-eligible multilateral organisations, such as United Nations agencies or multilateral development banks.


Core contributions are pooled with the organisation’s other resources. The organisation, rather than the individual donor, determines how the funding will be allocated among its programmes, countries and operating costs.


This distinguishes multilateral ODA from donor-earmarked funding delivered through a multilateral organisation.


Type

Type of finance

Bilateral aid

Grants: Grants are transfers of cash, goods or services for which the recipient incurs no legal obligation to repay.

Grant-funded ODA may support infrastructure, research, policy development, institutional strengthening, training, equipment, humanitarian assistance and many other forms of development activity.

Loans (Non-grant): Loans must be repaid, but they are offered on more favourable terms than commercial finance.

Only loans meeting the applicable development-purpose, recipient-eligibility and grant-element requirements can qualify as ODA.

Multilateral aid

Contributions and capital subscriptions to international organisation and concessional loans to international organisation

What is the difference between tied and untied ODA?

ODA may also be classified according to the procurement conditions attached to it.


Tied aid requires the recipient to procure goods or services from the donor country or from a limited group of eligible countries.


Untied aid allows procurement to be conducted more openly across countries participating in the OECD DAC framework and substantially all eligible developing countries.


Untying aid can support greater competition, reduce procurement costs and give partner countries more choice over the goods, services and expertise used in development projects.


Why does ODA matter?

ODA remains important because many development challenges require long-term investment that may not attract sufficient commercial finance.


It can help countries:

  • develop essential infrastructure and public services;

  • strengthen institutions and technical capacity;

  • respond to humanitarian emergencies;

  • manage environmental and social risks;

  • adapt to climate change;

  • improve water, food and energy security; and

  • advance inclusive and sustainable development.


ODA is more than a financial transfer. Effective development cooperation depends on whether projects reflect local priorities, build lasting institutional capacity, manage environmental and social impacts and produce sustainable results.



ODA in a Changing Global Landscape


ODA remains an important source of development finance, particularly for countries and sectors with limited access to commercial investment. However, recent figures indicate that the global development cooperation landscape is changing rapidly.


ODA at a Glance

  • USD 174.3 billion in total ODA in 2025

  • 23.1% decrease from 2024

  • 0.26% of providers’ combined GNI

    → Largest annual decline on record

    Source: OECD preliminary 2025 ODA data, published 9 April 2026.



Notes: Data from 2000 to 2024 reflect final statistics reported to the OECD. 2025 data are preliminary (e). 2026-28 values are projected (p).


The reductions extended across several forms of development support. Bilateral ODA fell by 26.4%, humanitarian assistance declined by 35.8%, and funding for development programmes, projects and technical cooperation decreased by 26.3%. Least developed countries and sub-Saharan Africa were particularly affected, with bilateral ODA falling by 25.8% and 26.3%, respectively



These figures matter because sudden funding reductions can affect not only new projects but also the continuity of existing services, investments and institutional partnerships.


Mozambique and the Impacts of ODA Cuts


Cuts to ODA can have consequences far beyond the cancellation of individual projects. In countries where aid represents a substantial source of external finance, reductions can place pressure on government revenue, foreign-exchange availability and the delivery of essential public services.


Mozambique remains particularly exposed. ISS African Futures estimates that foreign aid inflows were equivalent to 15.8% of GDP in 2024, compared with 15.7% for foreign direct investment and only 1.2% for remittances. Although foreign investment is substantial, much of it is concentrated in large extractive and energy projects with limited connections to the wider domestic economy. It cannot therefore be assumed that greater investment will immediately replace aid used to finance healthcare, education, water services or humanitarian assistance.




Mozambique’s experience following the 2016 hidden-debt crisis illustrates how an abrupt withdrawal of external assistance can spread through the economy. After donors suspended budget support and concessional finance became more limited, ODA declined from 17.5% to 12.4% of GDP between 2013 and 2018. At the same time, investor confidence weakened, the metical depreciated, inflation reached 17.4%, fiscal space narrowed and public debt increased sharply. These outcomes were not caused by aid reductions alone, but the withdrawal of external finance intensified an already serious economic crisis.


Current funding shortages are again affecting essential services. As of July 2025, Mozambique’s Humanitarian Needs and Response Plan had received only USD 66 million of the USD 352 million required, leaving 81% of its funding needs unmet. Humanitarian agencies consequently reduced the number of people targeted for assistance from 1.1 million to 317,000.


The effects are visible across several sectors. In Cabo Delgado:

  • 145,000 students were at risk of dropping out because of insufficient educational materials and support.

  • Laboratory sample collection serving approximately 250,000 people each month, primarily those living with HIV and tuberculosis, was temporarily halted, alongside disruptions to medicine delivery.

  • More than 8,000 children under five were identified as being at high risk of death from severe acute malnutrition because of shortages of therapeutic food.

  • Funding gaps left 126,000 people without access to safe water, while water deliveries to some remote communities ceased.


These pressures may be compounded by further reductions from major providers. The UK Foreign, Commonwealth and Development Office’s country-programme ODA allocation for Mozambique is planned to fall from £50.6 million in 2025–26 to £5 million in 2028–29, a reduction of approximately 90%. These figures do not represent all UK assistance reaching Mozambique, as they exclude funding delivered through multilateral, regional and other centrally managed programmes. Nevertheless, they indicate a substantial reduction in direct country-level support.


Mozambique therefore demonstrates that cuts to ODA are not simply changes in donor budgets. When reductions occur in a country already facing conflict, climate shocks, disease outbreaks and limited fiscal capacity, they can interrupt essential services, weaken economic stability and reverse development gains built through years of investment. Predictable funding, clear transition plans and close co-ordination with national and local institutions are essential to protect the most critical programmes.

ODA in practice


At JHSUSTAIN, ODA-funded projects demonstrate how development finance can be translated into practical systems, stronger institutions and lasting capacities. In the Nam Ngum River Basin in Lao PDR, for example, development cooperation has supported efforts to strengthen water-resources management, disaster preparedness, institutional co-ordination and stakeholder participation.


Such projects show that ODA is not limited to financing physical infrastructure. It can also support governance arrangements, technical analysis, environmental and social safeguards, data-sharing mechanisms and the capacity of national and local institutions to sustain development outcomes after a project ends.


Effective ODA therefore depends not only on how much funding is provided, but also on how projects are designed, coordinated and implemented. Sound analysis, local participation and long-term institutional capacity are essential to ensuring that development resources produce durable and inclusive results.


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