2. Development Cooperation in 2006

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Chart Five. PIP commitments (2006) and development assistance disbursements (2006)

The final piece of analysis compares 2005 and 2006 actual disbursement profiles to the NSDP profile. This comparison, presented in Chart Six below, shows that in both 2005 and in 2006 health, governance and community and social services were over-funded relative to the profile envisaged in the NSDP. By contrast, transportation, education, rural development and agriculture are again confirmed to be significantly under-funded in both years. The remaining sectors, in both 2005 and 2006, are located very close to the red line that indicates parity between the desired NSDP profile and actual shares of development assistance disbursements.

Chart Six. NSDP financing profile (2006-2010) and aid disbursement profiles (2005 & 2006)

In broad terms, it is therefore possible to state that, with some exceptions, development assistance is relatively well aligned to NSDP priorities and financing needs. Subject to funding levels being maintained for the duration of the NSDP, this will mean that most activities will be funded in accordance with the funding profile identified in the NSDP. Within these priorities, however, there may be considerable variation at sub-sector level. The recent Demographic Health Survey, for example, showed that, even within a well-supported sector such as health, maternal and reproductive health requires increased support but further analysis would be required to show whether, in a well-resourced sector such as health, this priority is receiving adequate funding.

Another CMDG that is currently off-track is water and sanitation, especially in rural areas. It is more difficult to draw conclusions with regard to this activity as rural water supply is not included in the water & sanitation sector presented here (similarly, water-related activities for agriculture are not part of water & sanitation) but the data indicates that this is also a sector that is both relatively under-funded (on a commitments basis) and receiving only about two-thirds of resources indicated in the PIP.

It is therefore possible to conclude that alignment of development cooperation is broadly consistent with the NSDP at aggregate and, to a lesser degree, sectoral levels. It is less clear that development assistance is being re-directed toward sub-sectoral priorities that have been shown to have made less progress while important routine under-funding of some NSDP priorities may require a review of NSDP costings and allocations. Understanding the manner in which commitments, which are closely aligned to the NSDP, are not always translated into disbursements will also be an important issue in the context of securing predictable funding to national priority sectors.

Development Assistance Disbursements Trends

Provisional estimates of annual disbursements reported by development partners in 2006, including the core funds of NGO partners, amount to USD 594.8 million, a decline of USD 15.2 million from the 2005 level or a difference of a little over 2.5%. The introduction of the NSDP in 2006 indicated that the total funding requirement for the five year programme (2006-2010) was USD 3,500 million, implying an annual funding requirement of some USD 700 million. It can therefore be seen that development assistance continues to represent a significant contribution to the funding of national priority development activities, with additional support provided from the Royal Government's own resources.

Table Four, below, shows disbursement trends since 2002 while Chart Seven highlights that there is no single source of the decline in development cooperation since 2005. In the context of this small decline, for example, it is notable that ten development partners and NGO core funding recorded an increase in their year-on-year disbursements, including three of the five largest partners, i.e. China, the United States and the combined agencies of the United Nations. This was more than off-set, however, by a significant decline in reported disbursements from ADB, Japan and the World Bank³.

Table Four. Development Cooperation: Disbursements 2002 - 2006 (USD million)

                        Source: CDC Database (end April 2007)

The decline in 2006 is a reversal in the steadily upward trend in development cooperation receipts recorded in recent years (see Annex Six for data since 1992). The chart below shows that disbursements had increased from a total of USD 472 million in 2001 to 610 million in 2005, an annual increase of 6.6% per year. It must also be noted, however, that the 2006 figure is provisional and at this stage last year, the provisional figure prepared for the 2005 Development Cooperation Report was USD 524.9 million, compared to the revised 2005 figure of USD 610 million. The 2006 figure may therefore be subject to upward revision at a later time.

Chart Seven. Annual Change in Development Cooperation Disbursements 2005-06 (USD million)

Source: CDC Database

The chart below also shows that USD 136.1 million, or 23.8% of 2006 disbursements, were in the form of concessional loans. This is a decline from the previous year's level of 171.2 million, indeed it is the lowest since 2001 and demonstrates the impact of the increased focus on grant financing by the World Bank and the ADB.

Chart Eight. Disbursement Trends 2001 - 2006 (USD million)

Source: CDC Database (2006 data provisional)

The main sectors that benefited from loan finance are shown in Table Five, below, and include transport infrastructure, tourism, rural development and water in addition to a number of social sectors. The Strategic Framework for Development Cooperation Management (paragraph 25) sets out the Royal Government's policy on debt management, emphasising the need to identify grant assistance where possible and to attempt to link loan finance to projects that contribute to economic growth.

Table Five. Loan Disbursements 2006 (USD million)