Exit from aid

‘Exit from aid’ can refer to two different developments: a country may formally cease to be eligible for official development assistance, or it may gradually become less dependent on aid while continuing to receive it.

The distinction matters. The disappearance of aid and the disappearance of dependence are not the same thing.

Formal exit

The OECD Development Assistance Committee maintains the list of countries and territories eligible for official development assistance.

A country may leave that list when it meets the graduation criteria. Under the rules currently applied, a country above the high-income threshold for three consecutive years may be considered for removal when the list is reviewed.

Formal graduation therefore concerns eligibility for ODA. It does not, by itself, describe the structure of the country’s economy.

Receiving aid without depending on it

A country may remain eligible for ODA even when aid represents only a small share of national income.

Botswana and Mauritius illustrate the distinction. Both remain ODA-eligible, but in 2023 net ODA represented about 1.50 per cent of gross national income in Botswana and 0.60 per cent in Mauritius.

They still receive aid. That is not enough to describe their economies as aid-dependent.

Conversely, dependence may persist in a particular sector even when aid represents a small share of the economy as a whole.

Japan and South Korea

Japan joined the World Bank in 1952 and borrowed from it between 1953 and 1966. It ceased to be a borrower in 1967 and later became one of the institution’s major shareholders and creditors.

South Korea received substantial international aid after the Korean War. It left the DAC list of ODA recipients in 2000 and joined the Committee as a donor in 2010.

These histories are not models that can simply be reproduced elsewhere. They do show that the position of aid recipient can change.

Preparing for reduced aid

An exit from dependence can be examined through the recipient’s capacity to replace what external aid finances.

Can domestic resources finance recurrent expenditure? Can infrastructure be maintained without external support? Have skills been transferred? Has productive capacity increased? Can the state obtain financing from several sources rather than a single provider?

The answers may differ from one sector to another.

Aid and its possible end

Development aid is intended to contribute to development. That raises the question of its duration.

If aid strengthens institutions, productive capacity, public revenue and technical skills, its relative importance may fall before it formally disappears.

A reduction in dependence can therefore precede formal graduation from ODA.

Related factsheets

Official development assistance — Economic dependence — International co-operation — Conditionality