- Germany is the second-largest government donor in 2016, spending US$24.7 billion on net official development assistance (ODA, in 2016 prices). This corresponds to 0.7% of GNI. The government announced in 2015 that it would scale up its ODA by €8.3 billion (US$11 billion) between 2016 and 2019. The Development Ministry has so far increased its budget by €1.1 billion (US$1.5 billion) between 2016 and 2017.
- The refugee crisis places a major strain on Germany’s budget. However, unlike in other countries such as Sweden and Norway, refugee costs in Germany have not squeezed the development budget, but have been added to previous development spending levels. Refugee-related expenditures doubled between 2015 and 2016, reaching US$7 billion and contributing to Germany reaching the 0.7% target for the first time.
- Germany places a special focus on displacement and migration, climate change, and food and nutrition security. Development Minister Müller has launched special initiatives for these priorities with additional funding.
- During its current G20 presidency, Germany is demonstrating strong leadership on global health (similar to its G7 presidency in 2015), including it for the first time into the G20 agenda. Previously, it hosted a successful replenishment of Gavi, the Vaccine Alliance, in 2015 and initiated the ’Healthy Systems, Healthy Lives’ roadmap to strengthen health systems.
- Germany places an increased geographic focus on Africa. During its G20 presidency, Germany will lead discussions with the other members of the G20 on increased public and private investments in Africa. The separate ‘Marshall Plan with Africa’, developed by Development Minister Gerd Müller, similarly focuses on stimulating investments in Africa and supporting countries implementing good governance reforms.
- Large shares of the substantial ODA increase of €8.3 billion for 2016 to 2019 have not yet been allocated.
- Development priorities during the G20 presidency will focus on health (pandemic preparedness and anti-microbial resistance), climate and sustainability, women and girls’ empowerment, supply chains, and financial inclusion.
- The ‘Marshall Plan with Africa’ calls for increased ODA to African countries that are open to implementing good governance reforms.
- Federal elections in 2017 are likely to have an impact on Germany’s development cooperation. Elections programs and subsequent negotiation of a coalition will shape the country’s development priorities for the coming years.
the big six
How much ODA does Germany provide?
Germany is the 2nd-largest DAC donor and is scling up its development programs
Germany is the second-largest donor country as of 2016 (see ranking below ). It spent US$24.7 billion on official development assistance (ODA) (in 2016 prices; US$28.6 billion in 2014 prices). Net ODA increased by 36% compared to 2015 as Germany scaled up its overall development assistance program and in-country refugee costs doubled, totaling US$7 billion, compared to 2015. These two trends have led to Germany reaching the 0.7% net ODA/GNI threshold for the first time. As in-country refugee costs are expected to decrease, net ODA will likely slightly fall back to 0.66% of GNI in 2017 and 0.52% in 2018 according to the Finance Ministry.
In 2016, Germany met the 0.7% target for the first time due to increased costs associated with hosting refugees, and a scaling up of its development programs
Despite this steep increase in ODA, Germany is one of the few European countries that does not offset its refugee-related costs with cutbacks in funding for global development. Instead, refugee costs are considered separate and additional to previous funding for development.
In March 2015, the German government announced a record increase of German ODA spending of an additional €8.3 billion (US$11 billion) for 2016 to 2019. More than half of this increase is going to the Development Ministry’s (BMZ) budget. As a result, most recently, BMZ received an additional US$1.5 billion for the 2017 budget, increasing BMZ budget to US$11.3 billion in 2017 - a new peak level. Germany has framed these increases as a response to challenges arising from humanitarian crises and climate change. Large amounts will be employed for short-term support to refugees and host communities in developing countries as well as tackling the root causes of displacement. The majority of this funding is channeled through Germany’s ‘special initiatives’. Parts of the additional funding for 2018 and 2019 have not yet been programmed as Germany is facing general elections in September 2017.
What are Germany’s strategic priorities for development?
Focus on displacement and migration, climate change, agriculture and food security
The Federal Ministry for Economic Cooperation and Development (BMZ) and the Chancellery highlighted three priority areas for the current legislative term (2013-2017): displacement and migration, climate change, and agriculture/food security (see box). The current government identified global health as a priority sector, with a focus on pandemic preparedness, and will hold the first-ever G20 health ministers’ meeting. Germany also showed strong leadership by creating the ‘Healthy Systems – Healthy Lives’ initiative that was launched at the SDG Summit in September 2015, which resulted in a declaration for health system strengthening at the World Health Assembly in Geneva in May 2016.
Germany’s key development priorities:
- Flight and Migration: BMZ to spend €3 billion on this area in 2016, geographic focus: Syria/Middle East, North Africa, Horn of Africa, Nigeria, Balkans/Ukraine
- Climate change/renewable energy: Pledge of €750 million to the Green Climate Fund (2015-18)
- Agriculture and food security: Investments of over €1 billion per year by 2015, key instrument: Special Initiative ‘One World - No Hunger’
Beyond health and the traditional focus on the global economy and financial markets, the G20 agenda will also include climate and sustainability, women empowerment, supply chains, and financial inclusion. These focus areas fit the six broad sectors spelled out as priorities in the current government’s coalition treaty: 1) rural development, 2) health, 3) gender equality, 4) education and training, 5) resource management and climate protection, and 6) crisis prevention and post-conflict peace building.
Bilateral ODA is preferred; funding for refugees and humanitarian aid is growing
The German government has a strong preference for bilateral aid. Its overarching strategic priorities are partially reflected in the top sectors of bilateral ODA: most funding is directed to hosting refugees in Germany, infrastructure – mainly in the energy sector (see figure), and financial services and business support. Education is the third-largest sector, yet more than half of this funding represents costs for foreign students studying in Germany (‘imputed student costs’). In response to the major influx of refugees to Germany, spending on humanitarian aid and migration has increased since 2015. In 2017, BMZ plans to spend €400 million for programs related to displacement, including humanitarian aid, which is in line with the government’s priority areas.
Other core sectors of the Sustainable Development Goals (SDGs), such as health and agriculture and rural development, receive relatively small shares of bilateral ODA. However, funding for agriculture and rural development is increasing due to Development Minister Müller’s priority focus on this sector. Total spending on agriculture and rural development, i.e., funding channeled through bilateral channels and multilateral organizations, amounts to US$1.1 billion (2015), making Germany the third-largest donor country in this area.
Germany spends around US$1.1 billion on health per year and is the third-largest donor to global health overall. Germany channeled US$516 million, or 46% of its total health ODA, through multilateral organizations. Key recipients of multilateral health ODA are the Global Fund to Fight AIDS, Tuberculosis and Malaria (Global Fund), and Gavi, the Vaccine Alliance (Gavi).
Germany has made a range of international commitments – the largest ones targeting health, food security, and climate protection. Germany committed US$1.1 billion (€800 million) for the Global Fund (2017-2019), US$720 million for Gavi (2016-2020), and US$260 for the Nutrition for Growth initiative (2013-2020). In addition, Germany aims to double its international climate-related finance by 2020, although a concrete financing plan for reaching this target has not been put forward.
Who are the main actors in German development cooperation?
The Development Ministry steers strategy, two large development agencies execute
The coalition dynamics of Germany’s political landscape form an important backdrop to the country’s development strategy and policy. Germany currently has a coalition government made up of Chancellor Merkel’s conservative Christian Democratic Union (CDU), its Bavarian sister party, the Christian Social Union (CSU), and the Social Democrats (SPD). Under the cabinet leadership of the Chancellor, the Federal Ministry for Economic Cooperation and Development (BMZ) sets development priorities; BMZ is led by the Minister for Development, Gerd Müller (CSU). The next federal elections will take place in September 2017.
In 2017, Germany holds the G20 presidency, which has been primarily shaped by the Chancellery. For the first time, the health ministers will meet within the G20 process, underlining Germany’s commitment to global health. This process is led by the Ministry of Health. Further, the Ministry of Finance has been spearheading the ‘Compacts with Africa’ initiative within the G20, which aims to incentivize investments in Africa by the G20 members.
BMZ has 1,025 staff members and is organized across five directorate-generals. The regional divisions are responsible for the allocation of Germany’s bilateral development assistance in accordance with BMZ’s strategy and priorities. Sectoral divisions, for example, the divisions for education or for health, formulate Germany’s sector strategies, interface with multilateral development institutions, and advise on bilateral programs.
GERMANY'S DEVELOPMENT COOPERATION SYSTEM
Germany’s two major state-owned development agencies, GIZ and KfW, play a key role in Germany’s policy development, priority setting, and implementation. Both operate under the political supervision of BMZ:
- GIZ plans and executes Germany’s technical cooperation with partner countries. GIZ’s turnover in 2014 was €2.1 billion (US$2.8 billion), of which 79% was generated through work commissioned by BMZ. GIZ also provides services to BMZ through its so-called ‘Sector Initiatives’ that cover BMZ’s focus areas. GIZ’s staff count of 17,319 (in 2015) is almost 17 times that of BMZ. Almost one-third (5,370) of GIZ employees work in the headquarters in Bonn and Eschborn or in GIZ offices in Germany and Brussels; the remaining two thirds (11,949) is made up of local staff in 90 offices across partner countries.
- KfW Development Bank leads Germany’s financial cooperation. In 2015, KfW committed a total of €6.7 billion (US$8.9 billion) through grants and loans for projects and programs in more than 100 countries. This amount includes funds raised on capital markets (€4.3 billion or US$5.7 billion in 2015) using its own resources. KfW plays a key role in managing bilateral initiatives on the financing side. For example, it has channeled Germany’s earmarked contributions to Gavi since 2011. In 2015, KfW’s private sector arm, the German Investment and Development Corporation (DEG), committed €1.1 billion (US$1.5 billion) to private-sector development in low-income countries (LICs) and middle-income countries (MICs). In 2015, KfW’s overall staff count stood at 5,966, with offices in 70 countries.
Germany’s two major state-owned development agencies, GIZ and KfW, play a key role in policy development, priority setting, and implementation.
Parliament: The role of the German parliament (Bundestag) is to scrutinize development policy-making, resource allocation, and implementation, mainly through its Committee on Economic Cooperation and Development (AWZ). The Budget Committee leads the discussion of BMZ’s budget and decides on it.
Civil Society: Civil society regularly interacts in a number of ways with Government and Parliament, e.g., via petitions and conferences. About 120 development-related civil society organizations (CSOs) coordinate their activities through the Association of German Development NGOs (VENRO). Another important association is the German Forum on Environment and Development, which coordinates advocacy work for sustainable development and humanitarian aid. CSOs are frequently invited to parliamentary hearings and government consultations. Many CSOs implement their own in-country programs and are funded by the German government (mainly BMZ and the Federal Foreign Office). Germany’s funding to CSOs is small compared to other countries’; in 2015 it amounted to US$1.2 billion and represents 7% of bilateral aid.
How is the German ODA budget structured?
BMZ manages more than half of Germany’s ODA
Germany’s ODA is sourced from the budgets of different ministries. The largest share of total ODA comes from the Federal Ministry for Economic Cooperation and Development (BMZ) (51% in 2014). Another 22% is raised by Germany’s development bank KfW on capital markets. The Federal Foreign Office, which manages most of the funding for humanitarian assistance and for UN peace missions, accounts for 9% of ODA overall.
BMZ’s budget is expected to reach US$11.3 billion in 2017, a 15% increase from 2016. Germany plans to increase its ODA by a total of US$8.3 billion from 2016 to 2019.
The German budget provides relatively detailed information on funding channels but shows little detail on recipients and sectors
Compared to other donors, the German budget provides relatively detailed information on funding channels but shows little detail on recipients and sectors. This allows the government to make multi-year commitments to some items based on ‘commitment appropriations’, which implies that certain amounts may be taken out of future budgets to be committed or spent now. They are thus important for organizations seeking multi-year funding commitments. Breakdowns of bilateral cooperation by region and sector are provided to Parliament through so-called ‘confidential remarks’, which are not available to the public.
Germany’s multilateral spending is mostly comprised of assessed contributions to the European Development Fund (EDF) and multilateral development banks. They account for around 20% of the BMZ’s multilateral budget. These budget lines are fixed by legally binding, multi-year commitments and thus cannot be influenced. The remainders are voluntary contributions. Within this category, only the Global Fund to Fight AIDS, Tuberculosis and Malaria (Global Fund) has an individual budget line with binding multi-year commitments from BMZ. For other multilateral organizations, there are no individual budget lines and contributions are included in the commitment appropriations, which need to be protected from year to year.
Overview: 2017 BMZ Budget
Bilateral Spending 4,124 5,472 Financial cooperation 2,22 2,946 Technical cooperation 1,289 1710 Crisis response 500 663 Other contributions 115 152 Multilateral Spending 1,565 2,076 European Development Fund 822 1,09 Multilateral organizations related to climate change and biodiversity 254 337 The Global Fund to Fight AIDS, Tuberculosis and Malaria 230 305 UN organizations 193 256 World Food Programme 28 37 The Global Agriculture and Food Security Program 20 27 International Fund for Agricultural Development 18 24 Development Banks 924 1,225 World Bank Group 661 878 African Development Bank 190 252 Asian Development Bank 72 96 Cooperation w/ CSO's, private sector & others 987 1,310 Other committments 853 1,132 Tackling root causes of displacement 395 524 One World – No Hunger 220 292 International efforts to fight climate change 163 217 Stability and development in the MENA region 70 93 Other 5 6 Administrative and personnel expenses 88 116 Total spending 8,541 11,332
What are important decision-making opportunities in Germany's annual budget process?
Major ODA increases or changes are confirmed early in the year; Parliament debates the budget in the fall
- Cabinet agrees on caps for federal and ministerial budgets: In February/March each year, the Federal Ministry of Finance develops caps for the overall federal budget and individual ministerial budgets. At this point, decisions on overall increases in ODA and main allocations are taken. A key stakeholder during this period is the Finance Minister. The Development Ministry gives input. Generally speaking, major funding decisions will be budgeted in at this time of the year.
- Negotiations within ministries: Ministries develop their budgets in April and submit them to the Ministry of Finance. Allocations to individual international organizations, for example, are determined during this period. In parallel, between April and September, the Federal Ministry for Economic Cooperation and Development (BMZ) plans its bilateral spending (see ‘How is ODA spent’ section) and multilateral funding envelopes.
- Draft budget and medium-term financial planning: In June, the Cabinet negotiates the budget and publishes the government’s budget draft before the summer break. Suggested increases that were put into the budget earlier need to be protected at this time. Key players in this period are the Chancellery, the Finance Ministry, and the Development Ministry (BMZ).
Between April and September, BMZ plans its bilateral spending and multilateral funding envelopes
- First reading in Plenary and proposed amendments: Parliament debates the budget from September to November. However, in 2017, this process will be delayed by federal elections. Depending on when a governing coalition will be formed, budget discussions could be held off until December. By this time, BMZ has developed funding envelopes for each country, which form the basis for parliamentary discussions on country allocations.
- Amendments reviewed and recommendations to committees: The Development Committee makes recommendations on budget amendments in September/October. In October, the BMZ budget is debated by the Development Committee and Budget Committee.
- Amendments, decisions on each ministerial budget, and voting: The Budget Committee takes final decisions in November, making members of both committees (especially those of the two ruling parties) central stakeholders during this phase. The final budget draft is voted on in plenary and signed by the President.
How is Germany's ODA spent?
Germany continues to prioritize bilateral aid
Until 2013, the German parliament had capped multilateral spending at one third of total German ODA. Even though this cap no longer exists, the preference for bilateral spending continues and its share relative to multilateral spending has increased steadily since the coalition government came into place in 2013. This preference is driven by Germany’s two large government-owned implementing agencies, GIZ and the KfW Development Bank (KfW), which channel most of the country’s bilateral ODA. As a result, Germany spends small shares of bilateral ODA through non-governmental organizations or as earmarked funding for multilateral organizations, which is reported as bilateral ODA.
Germany’s preference for bilateral spending continues, and its share relative to multilateral has increased steadily since 2013.
Germany channels the largest share of its bilateral ODA – two thirds – as grants (66% in 2015). Though large, this share is less than it used to be, reflecting the rise in loans and equity investments from 10% of bilateral ODA in 2005 to 34% in 2015. This is largely due to increased loans by KfW to small- and medium sized enterprises (SME) in middle-income countries (MICs), reflecting Germany’s prioritization of financial services and business support in its development agenda, and KfW’s strategic focus on finance and SME support.
Who are Germany's ODA recipients?
Bilateral ODA focuses on MICs; shifts expected towards fragile and conflict-affected areas
Germany allocates the largest share of its bilateral ODA to Asia (28% between 2013 and 2015). Funding to sub-Saharan Africa accounts for less than one fifth, which is low compared to other donors’ investments in that region. The portion going to low-income and least-developed countries is also relatively modest (16%). India and China are the largest individual country recipients, but most funding is provided in the form of loans or equity investments. In addition, almost three quarters of all grants to China and more than nearly half of those to India are made up of ‘imputed costs’ for students from those countries enrolled in German universities. The Federal Ministry for Economic Development and Cooperation (BMZ) has not made any new commitments to China since 2010, and bilateral aid was largely phased out in 2014.
To ‘tackle the root causes of migration’, BMZ leadership places an increasing focus on the Middle East, North Africa, and the Horn of Africa. Larger portions of Germany’s ODA will go to these regions in the coming years. In addition, Development Minister Gerd Müller presented a ‘Marshall Plan with Africa’ in January 2017 laying out critical initiatives for better economic and social development in Africa. The plan suggests that countries willing to implement reforms would benefit from increased ODA and German support for private investment in the continent. Agriculture investments and food security programs are prioritized throughout the plan.
How is bilateral funding programmed?
Regional divisions set strategy; country offices and embassies shape programs
Programming of bilateral funding to partner countries is guided by regional strategies (‘Regionalkonzepte’), which are developed by BMZ’s regional divisions. They set the government’s broad strategic objectives for the region. Country strategies (‘Länderkonzepte’), developed for all priority countries, reflect the regional strategies and are developed by country desk officers in cooperation with the embassies, GIZ, and KfW. Bilateral cooperation with countries that are not classified as priority countries is based on the regional strategies. Funding amounts and focus sectors for partner countries are included in the annual budget.
How will German ODA develop?
- Germany plans to increase ODA by a total of €8.3 billion (US$11 billion) between 2016 and 2019. The 2017 BMZ budget already included an increase of €1.1 billion (US$1.5 billion). ODA will continue to increase in 2018 and 2019.
- From 2017, costs for hosting refugees in Germany are expected to decrease, meaning that Germany's ODA as a share of GNI will likely return to below the 0.7% target. This means that increased efforts will be required to maintain current ODA level.
Which development sectors will be in focus?
- Displacement and migration will remain key focus areas and may become more important with a stronger focus on the Middle East (in particular Syria and its neighboring countries), North Africa, Horn of Africa, Nigeria, and the Balkans/Ukraine.
- Agriculture and nutrition security, as well as climate change, are likely to remain key priorities in coming years.
What are key opportunities for shaping Germany’s development policy?
- Germany has assumed the G20 Presidency in December 2016 focusing on economic stability, global health (specifically on pandemic preparedness and antimicrobial resistance), and supporting Africa by boosting investments.
- Federal elections in 2017 will determine the future direction of Germany’s development cooperation. The next government will most likely be formed by two or more parties, and the coalition treaty will inform the next government’s program. If global development features prominently in the coalition treaty, this will be conductive to placing development firmly on Germany’s agenda.