At a glance
ODA Funding trends
European Union Institutions (EUI; including the European Union or EU and the European Investment Bank or EIB) are the fifth-largest donor globally, with total official development assistance (ODA) at US$14.8 billion (current prices) in 2019.
Currently, EUI have two key instruments for ODA: 1) The off-budget European Development Fund (EDF), which is capped at €30.5 billion (US$36.0 billion) for 2014-2020, and 2) the Development Cooperation Instrument (DCI), which is capped at €19.7 billion (US$23.3 billion) for the seven-year period.
In November 2020, European Parliament (EP) negotiators and the German presidency of the Council of the EU struck a political agreement on the next EU long-term budget and new recovery fund, Next Generation EU, that will provide €15.0 billion (US$17.7 billion) in additional funding for flagship programs such as health, research, and education and €1.0 billion (US$1.2 billion) more in flexibility funding for future needs and crises. These changes will apply to the €1.80 trillion (US$2.12 trillion) total deal struck by EU leaders in their July European Council meeting that included €1.07 trillion (US$1.26 trillion) for reinforced long term EU budget and €750.0 billion (US$885.1 billion) for the EU recovery fund, Next Generation EU.
The new deal is pending adoption by the Council; Hungary and Poland are currently blocking the Council from adopting of the deal due to their objection to a proposed mechanism that would tie EU cash to rule-of-law standards. The German presidency is continuing to lead talks in the hopes of overcoming the stalemate in time to prevent delaying the next MFF’s start on January 1, 2021.
The EU’s development policy is set out in the ‘European Consensus on Development’, renewed in 2017. It focuses on interlinking sectors (such as development, peace, and humanitarian assistance), increasing the effectiveness of development assistance by increasing partner country ownership of development strategies, and combining traditional financing with private-sector and domestic resources.
Elections for the European Parliament were held in May 2019. In July 2019, Ursula von der Leyen was elected as the first female EC President. Von der Leyen’s political guidelines for the 2019-2024 EC prioritize: 1) quick agreement on the next MFF, 2) further investments in research and innovation, 3) renewed focus on climate change, 4) increased investments in development cooperation focused on health, education, sustainable growth and security, and 4) strengthened EU global leadership.
For the 2021-2027 MFF, the EC has proposed merging several of the EUI’s development instruments (including the EDF and DCI) under a consolidated Neighborhood, Development, and International Cooperation Instrument (NDICI).
The EP-German Council presidency MFF deal from November 2020, if adopted, would channel €98.4 billion (US$116.1 billion) for EU's external action through 'Heading 6: Neighbourhood and the World'. Within Heading 6, the NDICI, which consolidates all existing development instruments, will receive €70.8 billion (US$83.6 billion).
The EU unveiled a roadmap for its new Africa strategy in March 2020 to serve as the basis for negotiations on a new partnership between the two continents. The EU’s priorities include 1) green transition and energy access, 2) digital transformation, 3) sustainable growth and jobs, 4) peace and governance, and 5) migration and mobility.
In 2020, the EU aims to replace the Cotonou Agreement, which governs the EU’s relations with African, Caribbean, and Pacific (ACP) countries. Instead of a single agreement, the new deal will include one overarching definition of common values and interests, alongside three distinct agreements for each region.
The EU is the largest multilateral donor; spending on migration has driven ODA increases in recent years
The European Union (EU) is a multilateral organization that receives funding from its member states and is simultaneously a donor that channels ODA itself. In 2019, ODA from European Union institutions (EUI, including both the EU and the European Investment Bank, or EIB) stood at US$14.8 billion (in current prices), according to the Organization for Economic Co-operation and Development’s (OECD) Development Assistance Committee (DAC) data. This makes the EU institutions the fifth-largest OECD DAC donor.
These numbers are based on the new methodology for measuring ODA loans which the OECD DAC applied to ODA reporting for 2018 onward. This methodology, called ‘grant-equivalent’, is intended to better reflect “donor effort”, as only the ‘grant’ portion of a loan — expressed as a monetary value — is counted as ODA; the repayments of previous ODA loans are no longer subtracted from the headline figures. Due to the EUI’s high volume of loans, this change in methodology has meant that ODA calculated using the grant-equivalent methodology was 2% lower than it would have been under the previous, ‘cash-flow basis’ measurement system.
To allow for comparison over time, the OECD still publishes net ODA according to the cash-flow basis methodology. According to these figures, net ODA in 2019 decreased by 8% compared to 2018, due to lower volumes of lending. Prior to 2018, net ODA increased by 28% between 2015 and 2017 largely due to increased contributions from several member states (France, Germany, Italy, and Spain) in response to unprecedented flows of migrants and asylum seekers starting in 2015.
The EUI’s development funding comes mostly from two sources. First, the Development Cooperation Instrument (DCI) which is part of the EU’s general budget and provides funds primarily to countries in Asia and Latin America. It is governed by the multiannual financial framework (MFF, which guides ODA funding allocations) and comprises €19.7 billion (US$23.3 billion) for 2014 to 2020. Second, the European Development Fund (EDF), which provides funds for African, Caribbean, and Pacific (ACP) countries, is financed by direct contributions from the member states and thus outside the MFF. It is funded with €30.5 billion (US$36.0 billion) for the 2014-2020 period.
The MFF for 2021-2027 is currently being negotiated by the three institutions: The European Commission (EC), the European Parliament (EP), and the Council of Europe (See: ‘Main actors’). The EC put forward its proposal for the structure, priorities, and budget limits for the next MFF in June 2018. Their proposal suggests combining all the EU’s development instruments (including the EDF and DCI) under a single ‘Neighborhood, Development, and International Cooperation Instrument (NDICI)’, which would be grouped within the general budget under Heading 6 – ‘Neighborhood and the World’. Within this heading, the NDICI would focus on development assistance.
In November 2020, EP negotiators reached a deal with the German Council presidency to provide €71.8 billion (US$84.7 billion) for the NDICI for the seven-year period. If adopted, this would be an increase over the development instruments in the current MFF, even though contributions from the UK will stop after its exit from the EU (‘Brexit’); however, due to the smaller ODA target (92% of NDICI to be ODA reportable compared to the current MFF’s target of 90% of all external action – not just development instruments – being ODA reportable), it is very likely that ODA will decrease in the next MFF.
The EP and the Council have been negotiating the NDICI since October 2019 and the latest November 2020 deal is pending approval by the Council.
Unless otherwise indicated, all data in this section is based on the grant-equivalent measurement system. For more information, see our Donor Tracker Codebook.
Addressing migration-related issues and humanitarian assistance remain top focus areas
The EU’s development strategy is outlined in the European Consensus on Development from 2017. Its overarching objectives are poverty reduction and alignment with the 2030 Agenda for Sustainable Development. The objectives have been translated into four frameworks for action:
- ‘People – human development and dignity’, which includes education, nutrition, access to water, health, decent work, environment, and human rights;
- ‘Planet' – protecting the environment, managing natural resources, and tackling climate change’;
- ‘Prosperity – inclusive and sustainable growth and jobs’, which includes investment and trade, sustainable agriculture, and innovation;
- ‘Peace' – peaceful and inclusive societies, democracy, effective and accountable institutions, rule of law, and human rights for all, which includes humanitarian assistance.
The Consensus highlights the EU’s commitment to strengthening interlinkages between various sectors. It also highlights the EU’s goal of improving the effectiveness of its development policy through performance-based budget support, where tranches of budget support are only provided contingent on meeting certain performance metrics. The Consensus aligns with the EU’s 2012 Agenda for Change, which is aimed at improving the effectiveness of funding assistance by concentrating the EU’s country programs on a maximum of three sectors per country and by prioritizing the use of general budget support as an assistance modality tied to stricter conditions to encourage principles of good administrative and fiscal governance. Finally, the Consensus underlines the EU’s intention to combine traditional development assistance with other resources, including private-sector investments and domestic resource mobilization.
Further strategic priorities are outlined in the Cotonou Agreement, which was signed in 2000. This Agreement governs relations between the EU and 79 African, Caribbean, and Pacific (ACP) countries, focusing on development cooperation, political dialogue, and trade. The Cotonou Agreement expired in February 2020. Negotiations for a new agreement between the EU and ACP states will likely be finalized in 2020. EU and ACP countries have already decided on strategic priorities and a new structure for the future agreement, which will include an umbrella agreement, defining common values and interests, as well as three distinct agreements focusing on each region’s specific needs (replacing the current single agreement with all ACP countries). The priorities proposed by the EU are:
- Africa: Peace and stability, migration, democracy and good governance, economic development, human development, and climate change.
- Caribbean: Vulnerability to climate change, good governance and human rights, and human development.
- Pacific: Vulnerability to natural disasters and climate change, and maritime security.
Following the significant inflow of migrants and asylum seekers in 2015, the EU increased funding for migration-related issues. This included the establishment of the ‘Emergency Trust Fund for Africa’ (€4.7 billion or US$5.56 billion as of December 31, 2019), the ‘EU Facility for Refugees in Turkey’ (€6.0 billion or US$7.1 billion for 2016-2025, with €4.0 billion or US$4.7 disbursed by the end of 2020), and the ‘EU Regional Trust Fund in Response to the Syrian Crisis’ (€1.5 billion or US$1.8 billion as of November 2018, with a €25 million or US$30 million top-up in 2020). Humanitarian assistance is one of the top sectors of EU ODA, accounting for 9% of the European Union Institutions’ (EUI) bilateral spending in 2018. The European Commission (EC) has proposed doubling the budget for migration and border management from €13.0 billion (US$15.3 billion) in the current multiannual financial framework (MFF) 2014-2020 to €34.9 billion (US$41.1 billion) in the MFF 2021-2027. The July 2020 EU leaders deal reduced the allocation from the EC proposal to €25.7 billion (US$30.3 billion), still almost doubling the current migration and border management budget.
The priorities for the next MFF 2021-2027 are currently being negotiated (see: ‘ODA trends’). The European Commission’s (EC) proposed ‘Neighborhood, Development, and International Cooperation Instrument’ (NDICI) includes four key components: 1) a large geographic component, 2) a thematic component, 3) a rapid response component, and 4) an additional “cushion” for emerging challenges and priorities.
In July 2020, EU heads of state struck a deal on the next MFF, driven in response to the COVID-19 crisis. Under this deal, funding for the European Neighborhood geographic programs (a bilateral and regional cooperation program between the EU and sixteen southern and eastern neighboring partner countries) would receive €53.8 billion (US$63.5 billion) and, through this, Sub-Saharan Africa would receive €26.0 billion (US$30.7 billion). Thematic funding for issues such as human rights and democracy would receive €5.6 billion (US$6.6 billion), €2.8 billion (US$3.3 billion) would be channeled to rapid response actions, and €8.5 billion (US$10.0 billion) would be allocated for ‘emerging challenges and priorities and would be used to address crisis and post-crisis situations, migratory pressures, or other international initiatives or priorities. The German Council presidency then struck a compromise with the European Parliament (EP) that increased funding for EU flagship programs, including NDICI, by €15.0 billion (US$17.7 billion) in total, with an additional €1.0 billion (US$1.2 billion) moved from the budget margins for flexibility funding. These top-ups to the EU leaders’ deal included €1.0 billion (US$1.2 billion) more for NDICI, although it is not yet clear how that top-up will be distributed across NDICI’s programs. The deal now needs to be adopted by the Council but is currently being held up by two member states over their objection to the rule-of-law mechanism.
Implications of ‘Brexit’ on the EU’s ODA
The UK officially left the EU (Brexit) on January 31, 2020 but will continue to follow EU rules and maintain trade relationship during the transition period until December 31, 2020. In the meantime, the UK and the EU will negotiate a deal for future cooperation. Details on how Brexit will affect EU development policy will remain unclear until negotiations progress. It is unlikely that development will be a high priority in the negotiations, so even if a deal is reached on other elements of the EU-UK relationship, there may not be concrete agreements on the future of EU-UK cooperation on development. The EU has not yet decided (nor have member states agreed on their position) on whether and how non-EU countries can contribute to future EU development instruments.
However, Brexit could potentially impact the EU’s development policy in the following way
- Reduce financial resources: If the EU institutions agree to the proposed NDICI, the UK would not be able to contribute to EU ODA via an extra-budgetary instrument, such as the current European Development Fund (EDF). However, it is possible that the UK could become an ‘associated country’ though the potential implications of if this has not yet been decided. Nonetheless, the EC’s latest proposal does not foresee reductions in the EU’s overall external action budget even though the UK will no longer contribute to the EU’s development funding.
- Create a leadership gap: The UK has been a strong supporter of ‘value-for-money’, evidence-based policies, and a strong results agenda within EU development policy, emphasizing multilateral development assistance.
- Reduce the focus on the poorest countries: The UK has advocated for a stronger focus on low-income countries and fragile states within the EU’s development assistance programs. It also provides significantly more ODA for health than any other EU member state.
- Sustain voluntary contribution: Regardless of Brexit, the UK has agreed to continue voluntary contributions to the EDF under an ‘observer status’ until 2020.
The EU institutions have a strong preference for bilateral financing
The European Union institutions (EUI) show a strong preference for bilateral financing. In 2018, the EUI provided 78% of their ODA as bilateral funds to partner countries. The EUI’s preferred channel is budget support, which, according to the EC, promotes country ownership and aligns EU funding with national development strategies. Though the EUI does not provide much core funding to multilaterals, one quarter of the EUI’s bilateral ODA is earmarked for programs implemented by other multilateral organizations. Earmarked funding through multilaterals is reported to the Organisation for Economic Co-operation and Development (OECD) as bilateral funding.
Bilateral funding focuses on government and civil society, humanitarian assistance, and infrastructure projects
The largest share of the EUI’s bilateral ODA supports the ‘government and civil society’ sector (14% of bilateral ODA). This sector received US$2.8 billion in 2018, an increase of 22% compared to 2017. Funding to this sector is used for public sector policy and administrative management, decentralization, and anti-corruption efforts.
Infrastructural projects received the second-largest share of the EUI’s bilateral ODA in 2018. The EUI disbursed US$2.2 billion (11% of bilateral ODA) to this sector. Humanitarian assistance (US$2.0 billion or 10%) was the third largest sector. Despite the large share of funding to humanitarian assistance in 2018, bilateral ODA declined by 9% compared to the peak of US$2.5 billion in 2016, which followed significant increases between 2015 and 2016.
Roughly three-quarters (76%) of the EUI’s bilateral ODA in 2018 was provided in the form of grants, putting it below the Development Assistance Committee (DAC) average of 91%. One of the EC’s key instruments for the delivery of grants is budget support. In 2018, budget support accounted for 11% of bilateral ODA (US$2.1 billion), a much higher share than the 3% DAC average.
The EUI provide the remaining quarter of their bilateral ODA as loans and equity investments (24% in 2018). This is much higher than the average amongst DAC donors (9%). The EIB Group provides the EU’s loans. While 86% of the EIB’s loans support activities within Europe, the rest supports the EU’s external action. According to EIB data, roughly 10% of EIB loans were channeled to countries outside Europe including countries in the Mediterranean (3%), countries in Africa, the Pacific, and the Caribbean (3%), and countries in Asia and Latin America (3%).
In 2016, the EC established the European External Investment Plan (EIP). The EIP’s core financial pillar is the European Fund for Sustainable Development (EFSD), endorsed by the EU with €4.1 billion (US$4.8 billion) in funding. This guarantee fund is intended to scale up investment in the European Neighborhood and Africa through five investment windows, all of which aim to address socio-economic causes of migration. The windows focus on the following sectors: transport and energy, environment, agriculture, urban development, digital solutions for development, and improved financial access for local micro, small, and medium enterprises (MSMEs). The fund also includes an EFSD guarantee that will be used to mitigate risk and provisions for technical assistance for supporting local authorities and companies in developing projects and making regulatory improvements.
EU’s key instruments for bilateral ODA differ in geographic focus
Among the various EU instruments that provide ODA, the European Development Fund (EDF) and the Development Cooperation Instrument (DCI) have the strongest focus on development and poverty alleviation.
- EDF recipients: The EDF focuses on providing development assistance to African, Caribbean, and Pacific states (ACP). Given that the vast majority are in sub-Saharan Africa, most EDF funding is allocated to countries in the region (77% of total EDF funding in 2018). Funding is also directed towards LICs: of the top 10 recipients of EDF funding in 2018, nine are LICs, according to the EC’s annual report on the implementation of the EU’s instruments in 2018.
- DCI recipients: When considering both geographic and thematic programs, countries in Asia receive the largest share of DCI funding (40% of total funding in 2018), followed by Latin America and the Caribbean (16%), developing countries (unspecified; 14%) and sub-Saharan Africa (13%). Of the top 10 recipients of the DCI, eight are middle-income countries (MICs), two are lower-income countries (LICs).
Along with other OECD donors, the EU is committed to spending 0.15-0.2% of gross national income (GNI) on ODA in LICs in the short term and 0.2% of GNI to ODA in LICs by 2030; however, EU funding for LICs has not increased since 2016, remaining stable at 22% of total bilateral ODA in 2018. Given that a large share of ODA from EUI is provided to neighboring countries through the European Neighborhood Instrument (ENI) and the Instrument for Pre-accession Assistance (IPA) much of the EUI’s total ODA goes to MICs. Upper MICs received 30% and lower MICs received 24% of the EUI’s bilateral ODA, in 2018 (DAC average: 16% and 23% respectively), while LICs were allocated 22%, according to OECD data. Top recipients are Turkey, Serbia, Syrian Arab Republic, and Afghanistan.
One-quarter of bilateral aid is earmarked for multilateral organizations
While the EUI report virtually all of its ODA as bilateral, they also fund other multilateral organizations through contributions that are earmarked for specific thematic or geographic priorities and are reported as bilateral ODA. In 2018, the EUI channeled one-fifth of their ODA (20%) or US$3.9 billion, as earmarked funding to multilateral organizations (DAC average: 14%).
Major recipients of this earmarked funding were UN agencies, which collectively received US$2.1 billion in earmarked funds from the EU in 2018. The largest contributions went to the United Nations Development Programme (UNDP; US$453 million) and United Nations International Children's Fund (UNICEF; US$265 million). Other multilateral organizations receiving earmarked ODA from the EU included the World Food Programme (WFP; US$343 million), the International Bank for Reconstruction and Development (IBRD; US$328 million), and regional development banks (US$305 million).
Only a small share of EUI’s ODA was channeled in the form of core contributions to other multilateral organizations (2% or US$359 million in 2018). In 2018, this included US$197 million to the Global Fund to Fight AIDS, Tuberculosis and Malaria and US$30 million to Gavi, the Vaccine Alliance.
Unless otherwise indicated, all data in this section is based on the grant-equivalent measurement system. For more information, see our Donor Tracker Codebook.
For more granular and up-to-date development finance data on EUI, including information on where and in which sectors they are spending both ODA and non-ODA funds, please consult the IATI d-portal. IATI is a reporting standard and platform on which organizations and governments voluntarily publish data on their development cooperation.
Council and European Parliament approve strategy and budget presented by the European Commission; EU delegations define priority sectors of bilateral cooperation with partner countries
The European Council, currently led by President Charles Michel and composed of all EU heads of state and government, meets regularly to set high-level political and budgetary priorities for the EU.
The Council of the European Union includes ministers of EU member states, who coordinate member states’ policies to define strategic priorities for the EU. The Council meets in different configurations depending on the issue at stake. Within the Council of the European Union, the Foreign Affairs Council (FAC), which is responsible for the EU’s external actions, includes ministers of foreign affairs, or development if the FAC is meeting in a ‘development’ configuration, from all member states. They meet once a month and vote on legislative acts, coordinate policies, and decide on the annual budget, usually in collaboration with the European Parliament (Parliament). The Council’s meeting agendas are set by the member state that holds the rotating presidency for six months; Germany holds the presidency from July to December 2020 and will be followed by Portugal. Meetings are chaired by the EU’s High Representative of the Union for Foreign Affairs and Security Policy and Vice-President of the European Commission (HR/VP), currently Josep Borrell. The HR/VP is assisted by the European External Action Service (EEAS) to coordinate the EU’s foreign policy tools, including development assistance and humanitarian assistance.
Together with the Council, the Parliament — currently headed by President David Sassoli —decides on the annual EU budget, which includes the Development Cooperation Instrument (DCI). The Parliament has an exclusively advisory role vis-a-vis the European Development Fund (EDF) as the EDF is not currently included within the EU’s general budget, although this is proposed to change in the 2021-2027 Multiannual Financial Framework (MFF). Budget allocations and strategic priorities of the EDF are approved by a Joint Council of Ministers of African, Caribbean, Pacific (ACP), and EU countries.
The European Commission (EC) is currently headed by Commission President Ursula von der Leyen. Within the EC, the Directorate-General for Development Cooperation (DG DEVCO, formerly also referred to as EuropeAid) is responsible for the formulation and implementation of the EU’s development policy. Led by the Commissioner for International Cooperation & Development (currently Jutta Urpilainen) and by its Director-General (currently Koen Doens), DG DEVCO manages 50% of the EU institutions’ (EUI) ODA commitments, including the DCI and EDF. Other Directorates-General involved in ODA allocation and implementation includes the Directorate-General for Neighborhood and Enlargement (DG NEAR, covering the EU’s enlargement process and the European Neighborhood Instrument) and Directorate-General for European Civil Protection and Humanitarian Aid Operations (DG ECHO).
EU country offices (called delegations) are part of the EEAS structure and are responsible for the programming of development funding, together with the EC. EU delegations develop seven-year strategies with partner countries or regions regarding EDF and DCI allocations. These ‘multi-annual indicative programs’ within the DCI and ‘national/regional indicative programs’ within the EDF, are developed based on pre-existing national development strategies and with instructions from DG DEVCO and EEAS. They define priority sectors of bilateral cooperation between the EU and the partner country and state indicative amounts allocated to each sector. The agreements established within the EDF also specify the share each EU member state is to contribute (‘contribution key’); the final country agreements therefore also need to be ratified by each EU member state.
On a yearly basis, DG DEVCO and EU delegations jointly prepare Annual Action Programs (AAPs) that set budget allocations and goals for each country and the DCI’s thematic programs. AAPs are usually adopted by the EC leadership during the summer following an agreement over the budget. DG DEVCO may also adopt ‘addendums’ to the AAPs towards the end of the year for additional financing of programs. For the implementation of the EDF, each ACP country appoints a National Authorizing Officer who, together with the EU delegation, is responsible for all program-related matters.
EU ODA comes from the general budget and EDF
The multiannual financial framework (MFF) sets political priorities and provides a framework for financial programming for a period of five to seven years. The current MFF covers 2014 to 2020; the next one will cover 2021 to 2027. Within the current MFF, the European Development Fund (EDF) and the Development Cooperation Instrument (DCI) are two instruments with the strongest focus on low-income countries. Together, they account for 53% of the EU’s 2014-2020 external action budget (when funds under ‘Heading 4 – Global Europe’ one of the policy areas or "headings" of the MFF that cover external action and development) is combined with EDF (which is outside the EU’s general budget):
- The EDF (€30.5 billion or US$36.0 billion for 2014-2020) is outside of the EU’s general budget and is financed by direct contributions from EU member states according to a contribution key. The largest contributors are Germany and France.
- The DCI (€19.7 billion or US$23.3 billion) is the funding source with the strongest focus on developing countries within the EU general budget’s Heading 4, ‘Global Europe’. Heading 4 includes 12 external funding instruments (in total €63.3 billion or US$74.7 billion).
Other external funding instruments covered by Heading 4 – Global Europe include:
- The European Neighbourhood Instrument (ENI) (€15.4 billion, or US$18.2 billion, for 2014-2020), which is accessible to the EU’s neighbor countries and is focused on addressing the root causes of migration.
- The Instrument for Pre-accession Assistance (IPA) (€11.7 billion, or US$13.8 billion, for 2014-2020), which is restricted to EU accession candidates and focuses on capacity-building to prepare candidates for the rights and obligations of EU membership.
- Smaller instruments such as the Instrument contributing to Stability and Peace and the European Instrument for Democracy and Human Rights.
The DCI accounts for 31% of Heading 4 – Global Europe, covering geographic program support to EU partner countries in Asia and Latin America, as well as thematic programs that are open to all ODA recipient countries. Within the latter, the ‘Global Public Goods and Challenges’ (GPGC) program comprises US$6.0 billion for the period 2014-2020 and is largely allocated to ‘food and nutrition security and sustainable agriculture’ (receiving 27% of GPGC funding) and to ‘human development’ which includes provisions for health, education, and gender equality (receiving 25% of GPGC funding). The DCI’s ‘Pan-African Program’ (US$997 million) supports the Comprehensive Africa Agriculture Development Programme (CAADP) under the Joint Africa-EU Strategy. Approximately 4% (US$895 million) of DCI’s funding between 2014 and 2020 is kept as a reserve to fund responses to unforeseen needs.
The EDF provides assistance to African, Caribbean, and Pacific (ACP) countries and focuses support on low-income countries (LICs). The EDF includes country and regional programs (US$29 billion for 2014 to 2020), as well as intra-ACP funds (US$4.2 billion for 2014 to 2020) that finance cooperation among ACP states. An estimated 19% of the EDF is kept as unallocated reserves to fund responses to unforeseen needs.
EDF and DCI spending commitments, 2014-2020
|Support to ACP countries||29.1||34.3|
|Country and regional programs||24.4||28.8|
|ACP Investment Facility (managed by EIB)||1.2||1.3|
|Support to overseas countries and territories||0.4||0.5|
|Global Public Goods and Challenges||5.1||6.0|
|CSO and local authorities||1.9||2.2|
|Total EDF and DCI spending||50.1||59.2|
In July 2020, the EU heads of state struck a new deal on the next MFF, driven in response to COVID-19. The proposal included a two-fold response: 1) A reinforced long-term EU budget worth €1.07 trillion (US$1.26 trillion), which includes provisions for increasing spending for health research as compared to the current MFF; and 2) A new emergency recovery instrument 'Next Generation EU' worth €750.0 billion (US$885.1 billion). The MFF amount was reduced from EC’s previously proposed amount (in May 2020) of €1.10 trillion (US$1.30 trillion) due to cuts in funding for health, development, research, migration, and climate.
The European Council’s deal included €98.4 billion (US$116.1 billion) for EU's external action through 'Heading 6 - Neighbourhood and the World'. Within Heading 6, the Neighborhood, Development and International Cooperation Instrument (NDICI), which would merge all external funding instruments, would receive €70.8 billion (US$83.5 billion). This is a slight decrease from the €71.7 billion (US$84.6 billion; excluding the UK’s contribution) in funding budgeted for the equivalent development instruments in the current MFF’s allocation. This budget envelope includes the ‘global challenges’ budget line, which resources many multilateral development initiatives.
In November 2020, the German Council presidency struck a compromise with the European Parliament (EP) that increased funding for EU flagship programs, including NDICI, by €15 billion (US$17.7 billion) in total, with an additional €1.0 billion (US$1.2 billion) moved from the budget margins for flexibility funding. These top-ups to the EU leaders’ deal included €1.0 billion (US$1.2 billion) more for NDICI bringing the total allocation to €71.8 billion (US$84.7 billion), although it is not yet clear how that top-up will be distributed across NDICI’s programs.
The deal now needs to be adopted by the Council but is currently being held up by two member states over their objection to the rule-of-law mechanism.
The European Commission develops the draft budget in April-May; programming runs from November to July
The EU’s annual budget process takes place within the priorities and spending limits set in the Multiannual Financial Framework (MFF). The following process is indicative of how the budget is usually determined. The EU 2021-2027 is currently still being negotiated and may, therefore, differ from the usual time frame outlined below:
EC presents its draft budget: Usually by the end of May, the European Commission (EC) presents its annual draft budget to the European Council (Council) and the European Parliament (Parliament). This budget is developed in a closed process, without consultation from external stakeholders, and must abide by the MFF’s spending ceilings. The annual draft budget includes country and thematic programs within the Development Cooperation Instrument (DCI).
Council and Parliament prepare positions on a draft budget: Once the EC has presented its draft budget, the Council prepares its position and proposals for amendments on the draft between July and September. The Council forwards its position to the European Parliament by mid-September; however, the committees of the Parliament begin holding internal discussions on the draft budget between July and September. This includes the Committee on Development (DEVE), which delivers its opinion along with proposed budgetary amendments on funding to DCI country and thematic programs, and the Budget Committee (BUDG). This period represents a key opportunity for engaging with Members of the European Parliament in the relevant committees around budget allocations to the DCI.
Parliament votes on amendments to Council’s position: Once Parliament has received the Council’s position it has 42 days to approve or amend it. BUDG prepares the Parliament’s position based on the previous inputs from the thematic committees. Usually, in late October, the Parliament votes in plenary on the Council’s position, including the proposed amendments.
Conciliation procedure between Parliament and Council: Parliament forwards the amended text to the Council. If the Council approves all amendments, the budget is considered adopted. If not, a ‘Conciliation committee’ consisting of an equal number of representatives from the Council and Parliament is convened to reach an agreement. The Conciliation Committee has 21 days to find a compromise, after which the Parliament and Council must adopt the agreed budget.