Italy in the Development Cooperation Report 2008

Commitment to the MDGs. Since the adoption of its official guidelines in 1999, poverty reduction has been a principal objective of Italian development co-operation. However, Italy has yet to establish a coherent approach to mainstreaming this goal. A proposal to reform the structure of development co-operation and focus commitments on the MDGs was examined by the Italian parliament but the governemnt crisis blocked the process.

Aid effectiveness agenda. Italy supports the principle of recipient ownership and attempts to align its programmes with local strategies when possible. Its ability to carry out its commitments, however, is hampered by a lack of staff, organisational support and operational flexibility. The 2004 peer review encouraged Italy to build upon its efforts to streamline administration in order to address the parallel need for a clear strategy on harmonisation. Italy aims to reinforce the quality of evaluation feedback, including improved evaluation planning and operational guidance.

Advancing gender equality and women’s empowerment. The 2007 guidelines for Italian development co-operation maintain gender equality and women’s empowerment as a priority. The Directorate General for Development Co-operation intends to increase its commitment to the MDGs on gender. Specific action in favour of gender equality in 2007 included: i) a major seminar on the empowerment of women in West Africa and a new Italian programme on this topic; ii) a workshop on implementing the UN resolution concerning the participation of women in peace building and post-conflict reconstruction in Somalia; iii) specific programmes for the empowerment of women in Afghanistan, Lebanon and Palestine.

ODA 2008 forecast: still at 0.29%

Estimates for 2008 ODA are difficult to forecast during the budget cycle, as ODA budgeted resources are scattered and hidden within many financial headings in different Ministries. Moreover important components such as debt relief and concessional loans are not highlighted in the budget. Finally, during last year, significant financial resources for development cooperation – 1.1 billions euros –were allocated extra-budget cycle, via special decrees, with a share of these funds is to be disbursed in 2008. The 2008 disbursement of 2007 out-of-budget allocations, together with expected extra-budget allocation in 2008 are the main responsible for the ODA peak to 0.28-0.29% in 2008, after its stalling in 2007 – 0.21-0.23%. The forecast peak is neither enough to meet the EU Barcelona 0.33% target with a two year delay nor it is sustainable - likely to decrease in 2009. Since the approval of the 2002 road map for aid increase, included in the 2003-2006 Financial perspective, Italy summed up 4.5 billions euros in aid arrears - the gap between commitments and actual disbursements.

2008 Italian ODA could further increase thanks to extra budget cycle allocations, as it occurred in 2007. Last year ODA appropriations increased between January and June (from 1.1 billion to 1.5 billion euro). According to the current projections on 2008 level, the additional disbursement of 650 million euro will be enough to meet the 0.33% target.

ActionAid evaluation of the ODA reform Bill, under discussion

The ODA bill, under discussion in the Senate, sketches some positive elements, to be enhanced:

· there is a clear reference to partnership, as starting principle for development interventions, but not mention to ownership;

· aid activities are not necessarily tied;

· Deputy Minister for development cooperation, sitting in the Cabinet, is mentioned;

· multi-year strategy for development cooperation is to be approved by the Cabinet;

· the Minister for Foreign Affairs is responsible for development policy by also setting the Italian strategy towards the Financial institutions and the European development fund and by ensuring coordination;

· an implementing Agency is sketched following special financial regulation;

· there is an initial reference to policy coherence for development.

Unfortunately, the new aid architecture designed by the bill has some limitation and contradiction.

General remarks

The new bill does not reform all aspects included in the current law for development cooperation (Law 49) that is likely to be maintained to regulate issues, such as concessional loans or business partnerships in developing countries. There is no clear cut separation between planning institutions and implementing ones, entailing multiple responsibilities and lengths procedures. For instance, the Interministerial Committee for Development Cooperation (ICDC) not only deals with policy coherence but it mainly approves all development initiatives. Similarly, the Minister for foreign affairs issues very detailed and binding instructions to the implementing Agency.

ICDC – Interministerial Committee for Development Cooperation

• The ICDC’s mandate is too similar to the Minister for foreign Affairs’one, especially on planning, control and coordination. This sets potentials for duplication and conflict.

• Despite an high-level political membership, the ICDC does not fully take part into the strategic phase. It mainly focuses on micro-management, wasting its potential as ministerial forum for policy coherence. Despite its limited technical capacities, the ICDC is tasked to approve all development initiatives. While making no reference to project submission procedure, the bill sketches out a burdensome approval procedure for development activities starting from the ICDC, passing by the Minister and finally to the implementing Agency;

Development cooperation strategy

• The Minister of Finance does not submit any input during the planning phase.

• There is no mention to reduce the disbursement procedure to the development banks.

• The Cabinet does not meaningfully take part into the planning phase.

• The drafted contents of the 3-year strategic document do not mention important political issues such as, country strategies and allocations, debt cancellations, concessional loans and actions for policy coherence.

Pool Fund

• The pool fund does not include all-budget resources for development cooperation but at most 20%.

• The Fund managing authority is not clear, though the implementing agency can use those financial resources.

Development cooperation implementation

• The bill does not make clear who is responsible to implement the development cooperation strategy, as the Minister for foreign affairs is responsible for the whole development policy while the implementing agency is only tasked to carry out limited initiatives.

• The Agency is simply one among the implementing actors within the development system. Even if it is to be defined by specific Government decrees its tasks are too limited, as the Agency is not the main body responsible to implement the approved strategy.

• The bill indirectly forbids any decentralized cooperation, axed on field offices, as it explicitly excludes Agency field offices.

• There is no reference on how the Minister for foreign affairs coordinates development initiatives by the Regions that have only to inform the Agency of their initiatives.

• Responsibility to deal and sign agreement with multilateral organizations is unclear.

• Independent impact evaluation of development policies is completely missed.

Actors in development cooperation

• Civil society is only partially engaged during the planning phase.

• Civil society from partner countries is not mentioned as an actor, with access to the financial resources.

• Private sector is just referred to as partner with, apparently, no role as implementing actor.

In order to ensure the whole reform of development cooperation setting the basis for a coordinated, coherent and efficient system, the bill must deal with all the elements of the current Law; clearly divide between strategic and implementing phase with specific responsibility. Therefore, ActionAid recommends to:

• clearly state that all Italian aid is untied, tough country-local purchases can be preferred (Art 1,2);

• clearly state that development cooperation has to pursue ownership (Art 1,2);

Development cooperation strategy

• have the strategic plan approved by the ICDC, not by the Cabinet (Art 3,2);

• maximize ICDC potential, by focussing its mandate only on assessing policy coherence for development (Art 6-bis);

• allow the Agency to provide support during the planning phase (Art 14,1),

• specifically include debt cancellations, concessional loans, country strategies and allocations, development banks disbursements, and Ministerial actions for policy coherence in the multi-year strategic document (Art 3,2);

• state that the Minister for foreign affairs is responsible for concessional loans (Art 3,3) and for the relations with multilateral institutions (Art 9,1);

• actively engage the Minister of Finance in the planning phase (Art 3,5);

Pool Fund

• clearly set the Agency as the Fund only managing authority (Art 14,3,d);

• include all-budget resources for development cooperation in the Pool Fund, including those for financial institutions and regional development banks (Art 6,2),

• set the Agency to manage the Fund dealing with concessional loans (Art 9,1)

Development cooperation implementation

• enhance the link between the strategic document and the Minister for Foreign Affairs that must control its implementation (Art 3,3);

• state that the Minister for foreign affairs act to coordinate development cooperation initiatives by Regions (Art 12,3–bis);

• set the Agency as being the only body responsible for implementing the multi-year strategic plan ( Art 3,2);

• exclude that the Minister for foreign affairs issue binding instructions about implementation to the Agency (Art 14,3, a),

• simplify the disbursement procedure to development funds and banks, by allowing the Agency to directly disburse following the Minister of finance request and the strategic document instructions (Art 3,5);

• allow the Agency to sign agreement with multilateral agency, whether in line with the planning document (Art 11);

• have the Agency to link with multilateral organizations during the implementing phase;

• have all aid specific initiatives approved by the Agency, in line with the strategic document (Art 14,4 f);

• allow the establishment of Agency field offices to be responsible in implementing the country chapters of the strategic document (Art 14,8);

• establish an independent evaluation office, to assess the impact of bilateral and multilateral initiatives (Art 14,4 e);

Actors in development cooperation

• acknowledge civil society organizations from partner countries among the actors for development cooperation (Art 15);

• make compulsory the opinion by civil society during the planning phase (Art 16,3);

• allow the ICDC to hear civil society to assess policy coherence (Art 6-bis);

• compel the Agency to consult with civil society in sketching the implementing initiatives;

acknowledge private sector as implementing actor, if abiding to ILO standards (Art 15).

Italian ODA 2006: few money, better targeted to Africa, but too much technical assistance

According to the last DAC data for 2006, the Italian ODA is at 0.20% of GNI - 3.6 billions dollars - 30% down from 2005 level, when ODA/GNI was at 0.29%. In 2006, Italy ranks at the bottom of European donors list, only Greece ranks worse. The latest release of these official data mark the Italian failure to reach the EU Barcelona target - 0.33% ODA/GNI by 2006. The Italian aid is boosted by debt relief (37.8%) and compulsory contributions to the EC budget (36.1%). For the first time since 1994, Italian bilateral share (55%) is larger then the multilateral one (45%).

In 2007, the Italian ODA is expected to increase up to 0.29%-0.31%, thanks to specially approved decrees paying for arrears to IDA and Global Funds, and allocating resources to development cooperation. According to the latest financial perspective, the Italian Government is committed to reach 0.33% in 2008, yet the target is again unlikely to be met, with ODA levels forecast to decrease from 2007.

In 2006, 77% of Italian bilateral aid is untied, yet by discounting debt relief, only 27% aid is untied - a significant increase from last year when untied aid - debt relief net - was at 62%.

As for 2006 sectoral allocations, technical assistance is still the most important sector ( 8.5% in sectoral aid), while support to education is at just 3.75. Administrative costs increased by 25 million dollars, almost doubling its share in bilateral aid (2.65%). Italian support to Basic Social Services decreased from last year, from 5.03% to 3.36%.

As for geographical allocations, Nigeria is the first recipient (754 million dollars) - 72% debt relief - followed by Iraq and Serbia, where debt relieves are on average above 90%. By discounting debt relief, Nigeria is still the first recipient followed by Lebanon and Afghanistan. Angola, Indonesia and Ghana had negative transfers.

Italian aid to Sub-Saharan Africa increased by 200 million dollar, despite overall ODA level decreased.The share of bilateral ODA to the region significantly increased reaching out 52% from 38%, while the share to Middle East decreased. The aid reorientation advantaged non-LDC countries, as the received the same amount of aid.

Government likely to drop emendament on Aid reform

Following, negative Parliamentary reactions, the Government is willing to drop the emendament on aid reform from the Financial Bill, while the Senate has promised to break the stalemate on aid reform by opening discussions up to civil society. The Government emendament faced strong criticism by the opposition while it was supported by the majority of the civil society organizations. Public hearings are scheduled to start next week.

Government tries to reform ODA Law by using the Financial Bill

After a 3 month long fruitless discussion within an ad-hoc Committee in the Senate to find wide consensus on the institutional setting for the new Italian aid architecture, the Government broke the stalemate during the debate on the Financial bill in the Lower House of Parliament.

The ad-committee was not able to find any bi-partisan agreement on the establishment of the implementing Agency for Development Cooperation and the creation of a pooled-fund for half of ODA financial resources within the budget. Both were opposed by the opposition.

The Government included both bodies and provision for further untying within an amendment to the Financial Bill. If the Governments keeps this provision, by early next year the Italian instutions for development cooperation will be completely different. It is important to note that by this amendment, the Ministry for Foreign Affairs will enhance its planning role, while the Minister of Finance will keep its share in the financial institutions. The Minister of Finance will provide contribution to, for instance, regional development banks, while agreeing its policy position with the Minister for Foreign Affairs. Moreover the pooled fund, to be exclusively managed by the Agency, will not include loans or multilateral transfers.

However the current ODA Law will be maintained to discipline over other non-management related issues, such as the aims of ODA and the actors for development cooperation. The Parliament will still be called on innovating the ODA architecture on other institutional features, such as the appointment of a Deputy minister for development cooperation, institutional arrangements for policy coherence, provisions for Parliament and civil society meaningful engagement, possibility for Southern CSOs to get access to Italian resources.

Italy unlikely to fill its obligations towards African and Asian Development Funds

Italy is likely not to fullfill its financial commitments towards the African and Asian development Funds, as the Chamber cut 40 million euros to the financial resources appropriated for these Regional banks. Italy has already a 2 year delay towards the African a Asian development funds, but the cut 40 million will be committed to the Italian brand new participation to the Corporaciòn Andina del Fomento.

Officers within the Ministry for Economy and Finance (MEF) - responsible to manage the Italian contributions to multilateral financial funds - think that the approved amount will be enough to comply with the commitments. They think that Italy will get a discount by disbursing all its financial commitments in one installment. If this is not the case, in 2008 the Government will have to present another bill to fill the deficit. Procedures for resources appropriation to the regional development Banks are more complex than those for bilateral and UN related commitments that are managed by the Ministry for Foreign Affairs.
Yet, there is no law -not even in law n°49 - making any reference to any procedure to multilateral development Bank. In the late '90 the MEF proposed to simplify the procedures, but this proposal was ruled out.

Aid reform bill likely to be presented during December

While the upper House of Parliament - the Senate - is discussing the fFinancial bill, the informal Committee within the Committee of Foreign Affairs is attempting to draft the "Aid reform bill". The informal Committee has been working on the reform draft since last June, with initial hope to have a public text for discussion by Septmber.

However the drafting is taking loger, as the speaker for the Aid reform bill, Senator Tonini, is attempting to present a bi-partisan text. If he is successful, the presented text could be quickly discussed by the Senate whereby the ruling coalition has a thin majority. After fears of a stale mate in the informal committee could never finish its work, Sen. Tonini, is optimistic and the text could be publicly available over December.

The main roblematic issue still to tackle is the creation of an independent implementing Agency that the center-right opposition fears as a de-facto limit to the Ministry of foreign Affairs strategic leadership in development cooperation. In order to build a consensual environment, the speaker is accepting proposals by the centre-right coalition, for instance, introducing the Interministerial Committee for Development Cooperation.

Italian tied aid: some examples

According to the current 20 yers old legislation on Italian ODA, all concessional loans must be tied. Yet, following 2001 DAC recommendations on aid-untying in LDCs countries, the Law was informally modified by a decision from the Interministerial Committee on development and planning by accepting the DAC recommendations. The ODA law was not re-drafted and its tying provision is still partially responsible for the tying of Italian aid. The last official report on Italian development cooperation (2005 - 2006 report is to be made available early 2008) list some tied aid cases. In the Kwanza Sul province of Angola, the telecommunication network is being updated by the Alcatel Italy company thanks to a 18 million euro loans. In Vietnam, a 2.3 million a tied loan funds the building of the water system in the city of Quang Ngai and an Italian company is setting up the Vietnamese floods monitoring system – 2.5 million euro.

Surveies on Italian citizens support to AID

The findings of a poll survey commissioned by Catholic NGO platform were published at the end of October. According to the poll, the main development priority for the Italian public is the fight against hunger (47%). 40% make any aid increase conditional to its improved quality and allocation, but 24% favours an increase with attached conditions. Decrasing military expenditures to appropriate additional money for aid is the best option for 64% of the respondent. The UN systems is the one actor, scoring the highest for aid managing (73%). According to the EU barometer, 32% of the Italian public supports the idea that should encourage good governance and to be directed to Sub-saharan Africa (54%).

Deputy minister confirms a 100 million euro increase for NGOs

In the initial draft Financial bill's annexes, the 100 million euros increase for development cooperation was to be allocated to multilateral organizations ( 80 million) and emergency aid ( 20 million).
Yet, according to the recent declaration by Deputy Minister Sentinelli, the increase is to be made available to NGOs, bringing up the budget for civil society initiative to the record figure of 200 million. NGOs financial allocation has increased four times since 2006.

Senate cuts 20 million euro to Italian ODA

On friday 25th, the Senate approved Decree 159, with some emendaments to the government text.

As for development cooperation, the new text cuts 20 million euros previously allocated to the Italian participation to multilateral development funds, such as IDA, GEF or IFAD. The total amount currently availble is 389 million euros, and it is not clear where the 21 million euro were channelled to. The cut got all the government services dealing with the bank, by surprise.

Now the Decree is to be approved by the Lower House of Parliament, but time and political constraints will not allow re-allocatin g21 million back to ODA...

2008 Financial Bill and ODA: Target 0.33% still unlikely

Notes on the 2008 Budget

2008 Budget Cycle and the Fight against Poverty: target 0.33%, action still unclear and uncertain

29 October

By Iacopo Viciani, Luca De Fraia[1]

Reaching 0.33% in 2008, to save Europe in 2010

According to the forecast of the Ministry of Foreign Affairs, the ratio Official Development Assistance / GDP for 2007 is about 0.21-23%, the same level as in 2006, but there are two encouraging signs from the future in Financial Perspectives Document 2008-2010:

1) the planned schedule for the stable re-entry of Italian cooperation policy in Europe, by achieving the objective of 0.33% ODA/GDP, till then reaching 0.51% in 2010. The Financial Perspectives underlines the need to find additional resources for ODA, which, net of previous commitments, should tend towards 0.33% of the GDP (5.2 billion Euros on the basis of the new GDP estimates);

2) The Financial Perspective also groups together ODA expenses with costs due to the renewal of public sector contracts and welfare reforms. This hint that the cooperation allocations – 750 million in 2008 and 150 for subsequent years – has partly become a “compulsory cost”.

Despite these positive elements, the 2008 ODA in budget is difficult to assess due to the unclear nature of the budget and the difficult assessment of the time for disbursement. Therefore it is difficult to say whether the 2008 financial bill allocate enough resources to meet the 0.33% target.

Meeting the EU target with a 2 years delay means to subtract resources from the international aid system. By not meeting the official schedule for aid increase, as included into the 2003-2006 financial perspective, Italy kept 4.5 billion euros away from the international aid system. In terms of financial resources, it is almost equal to the Netherlands ODA[2].

The total ODA expected for 2008 appears to be more difficult to gauge because the allocations for 2008 are affected by the addition financial resources coming from the Decree 159 dated 3 October 2007 (771 million Euros for ODA). However to be in line with the Financial Perspectives 0.33% target net of previous commitments, only 355 million Euros should be counted as possible 2008 ODA. As for the DAC reporting directives all Decree resources to be disbursed in 2008 will count as 2008 ODA.

Despite these difficulties for any precise forecast, the attainment of the 0.33% target already seems to be very unlikely.

If 0.33% is not achieved in 2008, it will be even more difficult to reach 0.51% in 2010. This will delay the re-entry of Italian cooperation into Europe, but the will have negative impact on the overall European performance. If the 2010 Italian ODA had not reached at least 0.44% (approximately 7 billion Euros) in 2010, Europe will miss its 0.56% collective target.

Limited transparency

The reform of the State budget groups together all the Ministries budget heading under 34 missions. The reform was supposed to enhance transparency and had the potential to gather all headings dealing with development cooperation are under the mission title “Italy in Europe and the world”.

Over the last years, different ministerial departments had proposed to include to the budget a table indicating the forecast ODA level. This year this effort for transparency was in line with budget programme 2 of the “Italy in Europe and the world” mission, that is entitled “development cooperation and global challenges”. Instead both the “mission” is too broad and still does not only report ODA financial resources. In fact, the 662 million euro reported under the Mission/programme “development cooperation and global challenges” only indicates the financial resources available from the Ministry of Foreign Affairs (MFA).

There are still unclear and too broad budget headings scattered among Ministries, that “hide” a significant percentage ODA. This is the case, for instance of:

• the Special Fund of Ministry of Finance, financing, among other things, Italian contribution to development banks and funds;
• the Ministry of the Environment budget heading for sustainable development includes resources to support intervention in Italy and worldwide;
• budget heading n° 7493 of the Ministry of Finance - even more important for the Italian ODA. This contains allocations for the EC budget – 3.89 billion Euros – which will subsequently and partly be counted as ODA, - approximately 750 million Euros per year.

• ActionAid asks that the budget include a comprehensive table indicating the forecast ODA, detailing, among others, ODA channelled to the EU budget, ODA allocations in the Special Fund of the Ministry of Finance and the planned debt relief operations.

ODA from Ministry of Foreign Affairs

In the proposed Budget for 2008, the Directorate General for Development Cooperation (DGCS) asked 1.034 billion Euros be allocated as per law 49/1987 to meaningfully contribute to achieve 0.33%. This request was based on the hypothesis that the DGCS will still manage 22% ODA ( as in 2007), in case the 0.33% is achieved (about 5.2 billion euros). 10.034 million Euros is equivalent to an increase by 57% from the resources currently available. Last year law 49/1987 financial resources had the same increase.

The 2008 Financial Bill increases the law 49/87’s allocations to 742 million Euros, (+100 million - +15%). Despite the fact that the financial request by the DGCS has not been fulfilled, 742 million euro under law 49/1987 is the largest such financial allocation since 2000.

According to the 2008 Budget estimates, 98% of whole available resources will be allocated to interventions in developing countries, a further increase from last year’s allocation (92%). The 100 million euros increase is likely to be split between bilateral aid – 80 million – and emergency interventions – 20 million. The financial amount for NGOs is unchanged, as this almost tripled last year (149 million euros).

ODA from the Ministries of the Finance, Environment and Internal Affairs

The Ministry of the Economy and Finance (MEF) requested that approximately 600 million Euros - additional to the resources provided by Decree 159r – to be allocated to its Special Fund in order to guarantee the Italian participation to Development Banks and Funds .

Moreover budget line dedicated to the “European Development Fund” has 350 million Euros (420 million in 2007). According to the MEF, the Financial bill did not provide the Special Fund with the requested 600 million Euros, but the only publicly accessible data for this fund is 335 million euros.

Article 48 of the financial bill authorises the Italian participation to the Advanced Market Commitment and extends Italian participation to the Multilateral Debt Relief Initiative (MDRI) - 40 million per year. It positive that 40 years long international ODA commitments are made, yet it is arguable whether these are adequate.

As for the MDRI, in 2005, the Italian coalition against poverty (Gcap) had already assessed Italian financial commitment insufficient. The Gcap called on the Government for a financial increase by committing the same share as the country contribution to the budget of all multilateral development banks (3.5%) – at least 35 million per year.

Article 48 could have included a paragraph on the Italian 10 year long undertaking of 3.2 billion Euros towards the fight against AIDS, as promised by the Prime Minister at the German G8.

The Minister of the Environment requested around 70 million euros be made available for development cooperation activities. Yet, it is not clear to what extent the Ministry will keep the same level of international activities, as its structural reform is still under discussion.

Eventually, at most 17 million euro for ODA are in the budget of the Ministry of Internal Affairs. This amount refers to the first year costs for refugees and can be reported as ODA in line with the international reporting directives. Unlikely other donors such as France, this generally represents a limited share of the Italian ODA: 36 million Euros in 2003 and 23 million in 2004.

• ActionAid call on presenting an amendment to art. 48 of DDL 1817 (Financial bill) in order to allow the appropriation of 3.2 billion euros over 10 years as to fulfil obligations from the G8 initiative to the fight against AIDS.

• ActionAid asks that the resources of the Ministry of internal Affairs to sustain refugees costs not be accounted as ODA, as UK and Hungary are doing.

ODA outside the budget: debt relief and concessional loans

Any accurate estimate of Italian ODA should include the out-of-budget financial resources: disbursement of concessional loans and debt cancellation, which since 2000 have respectively represented 5% and 20% of the Italian ODA.

Loans are delivered via a rotational fund, managed by Artigiancassa: the current rotating fund budget has 1 billion Euros available, net from disbursement and commitments. Unlikely the past, it should be pointed out that since 2006 the rotating fund is not replenished. The Italian development cooperation seems to plan to disburse only ODA grants in the future. ODA loans are calculated net between disbursement and paying-back. In the past, loans’ paying-backs resources were more important than disbursements, having a negative impact on ODA ( -515 million euro since 2000). From 2006, new loans agreements and debts cancellation increased the disbursements while reducing the paying backs. Now loans have a positive impact on ODA, but its share is still very small.

Debt cancellations were the most important out-of budget component of the Italian aid. Unlikely the transfers to the development banks or to the EC budget - generally constant and easy to estimate -, debt cancellations have entailed the greater fluctuations of the Italian ODA over the last 6 years.

With debts relief operations worth 6 billion euros from 2000 to 2006, the remaining Italian credits to be cancelled are very limited. Paragraph 1310 of article 1 of last year’s Budget Law positively modified article 5 of Law 209/2000 (debt cancellation), further broadening its scope of application. Estimates by the Ministry of the Economy indicate that debts to be cancelled could reach 1.5 billion Euros - a significant amount equal to 0.11% of the GDP.

Estimates for cancellations in 2008 are difficult to be made as there is no public document indicating either total credit still to be cancelled or cancellation agreements being negotiated during the year. Estimates by the MEF, forecast just 5% of future ODA to be made of debt relief .

• ActionAid recommends that asses the opportunity to replenish the rotating fund with 40 million euros – in line with previous years contributions.

• ActionAid recommends that the “Report on the implementation status of law 209” include a section concerning the total usable credit subdivided by country, with an indication of possible date of negotiations for cancellation.

ODA as disbursement and not merely budget availability: Decree 229 and the problem of planning

ODA is calculated not on available budget resources but on disbursements, which may also include the unspent financial resources from the previous year. This is why article 18 of Decree 159, allocating at least 771 million euro as ODA reportable for 2007, adds further complication to estimates 2008 ODA.

The disbursement of 771 million Euros will push Italian ODA up by +0.06% of the GDP. However, it is probable that due to time and legal constraints, these resources will neither be paid out in 2007, and will thus be carried over to 2008[3].

In terms of time constraints, the State General Accounting Office (GAO) does not generally authorise any payment before the decree is turned into a law – at latest by December 3rd -, and on the other hand, Ministries must inform the Accounting Office of any financial cost to be paid within the year by 7 December at the latest. Moreover the disbursement of the contribution to development banks and funds - 410 euro - appears to be even more complex, as it will need an additional decree indicating how the amount should be divided.

It is important to note that the GAO is already channelling the decree’s funds to the MFA while still waiting for the final approval. In terms of planning, on October 15^th the DGCS committed 195 millions out of 225 as contributions to international organizations. The availability of a significant unexpected financial amount - equal to the whole multilateral heading - obliged the DGCS to quickly review its planning. The procedural advantages of the commitment to multilateral channels help explain the DGCS choice. It is important to note that article 18 limited the DGCS choices of multilateral organizations, excluding the possibility to allocate the 225 million euros to the Global Fund for the fight against AIDS, Tuberculosis and Malaria.

Despite being already committed, these resources could be still disbursed in 2008. Should the 225 million be carried over in 2008, the total resources on law 49/1987 at the beginning of 2008 would be 997 million Euros, very close to the 1.034 billion Euros required by the DGCS.

• ActionAid recommends that at the beginning of 2008 the law 49/87 financial availability should be equal to 1.034 billion euro.

ODA out-of-the-budget cycle allocations

The approval of the budget does not exclude any ODA increase over the year. For instance, during 2007, 75 million were allocated for law 49, thanks to the ODA activities under the “military missions” decrees, and 260 million euros were made available to pay the arrears to the Global Fund under the July extra-budget decree. In 2005, two decrees - January and March - had made available 951 million Euros to cover the Italian contribution to development banks and funds, when only 588 million Euros were available for law 49/87.

In 2008, ODA extra-budget allocations are expected to count to approximately 500 million: 400 million Euros from the authorisation of the Italian participation in development banks and funds – and 100 million Euros from the ratification of the revised Cotonou agreement.

3 scenarios for ODA in 2008

Due to the uncertainty in disbursement and the limited public information available, there are three possible estimates of 2008 ODA, net of debt cancellations and concessional loans:

• “Maximum” scenario, the financial resources in decree 159 will be paid out in 2008 and all the ODA planned resources outside the budget will be paid out.
• “Minimum” scenario, the financial resources in decree 159 will be paid out in 2007 and the extra-budget resources planned for 2008 will not be paid out.
• “Intermediate” scenario, the financial resources in decree 159 will be paid out in 2007 and the extra-budget resources planned for 2008 will be paid out.

“Maximum” scenario	“Minimum” scenario	“Intermediate” scenario
3.6 billion Euros – 0.23% GDP	2.4 billion Euros – 0.15% GDP	2.9 billion Euros – 0.19% GDP

Thanks to the MEF’s estimate, we can add the forecast debt cancellations for 2008, and make a comparison of ODA/GDP trends between 2007 and 2008. The 2008 debt relief is assessed to be worth around 1 billion Euro – due to the last arrears from Iraq and the Democratic Republic of Congo. Finally, the disbursement of the resources by decree 159 will heavily influence ODA/GNI trends between 2007 and 2008.

“Maximum” scenario	“Minimum” scenario	“Intermediate” scenario
4.5 billion Euro – 0.29% GDP	3.3 billion Euro – 0.21% GDP	3.9 billion euro – 0.25%
ODA/GDP 2007: 0.21-0.23%	ODA/GDP 2007: 0.28-0.31%	ODA/GDP 2007: 0.28-0.31%

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[1] ActionAid would like to thank experts within the Ministries of Foreign Affaire, Finance and Environment, for the availability and invaluable contribution.

[2] The 2003-2006 financial perspective planned to reach the following ODA/GNI levels: 0.19% (2.2 billion euro) in 2003, 0.23% (3 billion) in 2004, 0.27% (3.7 billion) in 2005 and 0.33% (4.2 billion) in 2006. As for 2007, as there is no planned level, the ODA/GNI% is assumed to be equal to the EU minimal since 2006 – 0,33%. Actually, Italy attained 0.17% (1.9

billion euro)in 2003, 0.15% (1.9 billion) in 2004, 0.29% ( 4 billion ) in 2005, 0.20% (2.9 billion) for 2006. In 2007, ODA is forecast to 0.23% (3.7 billion).

[3] Article 18 allocates 910 million euro to international activities. 40 millions to the Africa Peace Facility, 5 million to help Russia destroy chemical weapons, and 94 million for UN peacekeeping missions are not reportable as ODA.