Italy’s ODA has been increasing since 2012, but costs of hosting refugees in Italy inflate ODA levels

Following sharp decreases between 2008 and 2012 due to the economic crisis, Italy’s ODA has been steadily increasing since 2012, more than doubling by 2016. In 2016, it spent US$5.1 billion (in 2016 prices), ranking as the sixth-largest donor country amongst the OECD’s Development Assistance Committee (DAC) members. This corresponds to 0.28% of Italy’s GNI. The government pledged to gradually increase the ODA/GNI share to reach 0.3% by 2020.

The government of former Prime Minister Matteo Renzi pledged to gradually increase the ODA/GNI share to reach 0.3% by 2020

Between 2015 and 2016 alone, ODA increased by 26%, rising from US$4.0 billion to US$5.1 billion. This increase is the result of two dynamics: a significant rise in costs of hosting refugees in Italy, some of which is reportable as ODA, and the growing political will to use development cooperation as a tool to strengthen Italy’s international standing.

Due to its geographic position, Italy has been at the frontline of the refugee crisis in Europe, with high numbers of asylum seekers reaching the continent by crossing the Mediterranean Sea. ODA-reportable costs of hosting refugees in Italy rose significantly in the last years: While in 2012 they were only US$221 million, in 2015 they reached US$992 million. In 2016 they increased even further, reaching US$1.7 billion and accounting for 33% of Italy’s ODA. When excluding these costs, net ODA stood at US$3.4 billion, or 0.18% of Italy’s GNI (down from US$5.1 billion or 0.28%). However, unlike several other donor countries, Italy so far does not use its development budget to cover those costs. The funds are instead additional to planned development funding, thus ‘inflating’ Italy’s ODA levels.

In parallel, funding for development programs abroad, primarily through multilateral channels, is also increasing: When excluding costs of hosting refugees within Italy, net ODA went up by 12% between 2015 and 2016.

Italy held general elections in March 2018. Given that no coalition or single party won a majority, government formation is likely to be delayed. Until a new Prime Minister is named, Italy will remain under the leadership of caretaker Prime Minister Paolo Gentiloni. In 2018, Italy holds the presidency of the Organization for Security and Co-operation in Europe (OSCE). It also aims to ensure follow-up to results obtained during its G7 presidency in 2017, including the accountability report on education, the financial report on nutrition and food security, and the road map on gender.

Further readings

Government sources

• Ministry of Economy and Finance (MEF); Economic and Financial Document 2017 (DEF); 2017 (in Italian)

 Other official sources

• Organisation for Economic Co-operation and Development (OECD); Development cooperation peer review, Italy; 2014

Focus on tackling root causes of migration, particularly in Africa

Strategic priorities of Italy’s development cooperation are spelled out in the three-year Programming Guidelines and Directions for Italian Development Cooperation (‘linee guida programmazione triennale’), developed by the Ministry of Foreign Affairs and International Cooperation (MAECI). The 2017-2019 Guidelines cover 10 priority sectors, including humanitarian aid, migration, agriculture and food security, environment, energy, health, education, global citizenship education, culture and creative industry, and juvenile justice.

Italy’s development priorities:

• Migration: Tackling root causes of displacement, particularly from Africa, was a key priority of Italy’s G7 presidency in 2017 and remains high on the agenda. At EU-level, Italy pushes for a ‘Migration Compact’ for greater cooperation with transit countries.
• Agriculture, food security and nutrition: Italy has shown international leadership, e.g., through its G7 presidency in 2017. It maintains close relationships with the Rome-based Food and Agriculture Organization (FAO), World Food Programme (WFP), and International Fund for Agricultural Development (IFAD).

Italy has recently overhauled its development cooperation system (see question three: ‘Who are the main actors in Italy’s development cooperation?’). In 2014, the parliament approved the first major reform of its development cooperation since 1987. As part of this reform, Italy established its first-ever development agency, the Italian Agency for Development Cooperation (AICS). The agency started operating in January 2016. AICS disbursed US$376 million (€340 million) in 2016, US$555 million (€502 million) in 2017, and has a planned budget of US$569 million (€514 million) in 2018. AICS outlines five thematic areas on which it will focus its bilateral cooperation: 1) economic development and opportunities; 2) human development (including health and education); 3) environment and use of natural resources; 4) rural development and food security; 5) emergency and fragile states.

Due to its position on the frontline of the refugee crisis, Italy places an increasing focus on tackling the root causes of migration, particularly in Africa. To this end, Italy put food security and nutrition, health, and women’s empowerment, as key drivers of migration, at the forefront of its G7 agenda in 2017. The G7 Taormina Leaders’ Communiqué agreed to strengthen dialogue and establish partnerships with African countries to improve socio-economic conditions and to reduce drivers of migration. The G7 leaders highlighted agriculture, food security, and nutrition as crucial goals and committed to increase ODA targeting in these sectors, particularly in sub-Saharan Africa, as well as to strengthen humanitarian assistance to famine-stricken areas. At the European level, Italy pushes for a ‘Migration Compact’, a plan that aims to strengthen cooperation with countries of transit and of origin to tackle root causes of displacement.

Italy shows leadership in agriculture and food security; large amounts of bilateral funding dedicated to hosting refugees in Italy

Italy channels more than half of its ODA through multilateral contributions (52% in 2016; see more details in question six: ‘How is Italy’s ODA spent?’). The multilateral share is particularly high in the area of agriculture and rural development: In 2015 (latest year for which complete sector data is available) the sector received US$208 million in the form of multilateral funding, or 67% of total agricultural ODA. The country has shown international leadership on agriculture and the related areas of nutrition and food security, most recently during its G7 presidency in 2017, during which it hosted a G7 ministerial meeting on agriculture as well as the Global Nutrition Summit, a high-level event on nutrition. The G7 Taormina Leaders’ Communiqué highlighted agriculture, food security, and nutrition as crucial G7 goals.

The country has shown international leadership on agriculture and the related areas of nutrition and food security, most recently during its G7 presidency in 2017

Italy’s bilateral ODA doubled in the past two years, increasing from US$1.2 billion in 2014 to US$2.5 billion in 2016. However, much of this increase is driven by rising costs of hosting refugees in Italy: In 2016, 67% of bilateral ODA was spent on hosting refugees in Italy. When excluding these costs, bilateral ODA decreased by almost 10% between 2015 and 2016 (from US$907 million in 2015 to US$826 million in 2016); this is a reversal of the trend from previous years, which saw a continuous increase in bilateral spending for development programs abroad. Government, civil society, education, agriculture, and health saw the most significant cuts between 2015 and 2016, whereas humanitarian aid, food aid, and conflict, peace and security continued to increase.

Further readings

Government sources

• Italian Agency for Development Cooperation (AICS); Webpage; accessed in January 2018 
• Italian Government, Presidency of the Council of Ministers; Migration Compact: Contribution to an EU strategy for external action on migration; 2016 
• Ministry of Economy and Finance (MEF); Additional note to the budget law 2018 of the Ministry of Foreign Affairs and Cooperation; 2018 (in Italian)
• Ministry of Foreign Affairs and International Cooperation (MAECI); Programming Guidelines and Directions for Italian Development Cooperation 2016-2018; 2017 (in Italian)

 Other official sources

• G7 Italy; G7 Taormina Leaders' Communiqué; 2017 

The MAECI leads on strategy; Italy’s new development agency, AICS, implements

The Italian Prime Minister engages in development when it comes to high-level commitments or international conferences. Since December 2016, Paolo Gentiloni (Democratic Party, PD) is Prime Minister of Italy. Following general elections in March 2018, Gentiloni will remain caretaker Prime Minister until a new government is formed. A new government may lead to changes in political leadership and strategic priorities in development policy.  

ITALY'S DEVELOPMENT COOPERATION SYSTEM

The 2014 law on cooperation profoundly restructured Italy’s development cooperation system by strongly aligning development policy with foreign affairs. Within government, two ministries are involved in development cooperation:

• The Ministry of Foreign Affairs and International Cooperation (MAECI) is responsible for defining the strategic direction of development policy. It is currently headed by Angelino Alfano (founder of the New Centre-Right party). Within the MAECI, the Deputy Minister of Foreign Affairs (Mario Giro) manages development policy. He supervises the MAECI’s Directorate General for Development Cooperation (DGCS) and the work of the Italian Agency for Development Cooperation (AICS), as well as Italy’s new development bank. The DGCS is in charge of defining the strategic direction of development programs. Its Director-General is Giorgio Marrapodi since January 2018.
• The Ministry of Economy and Finance (MEF), led by Pier Carlo Padoan (no party affiliation), is also a key player: It has control (jointly with the MAECI) over relations with and contributions to development banks and funds, and collaborates with the MAECI on the ODA budget.

MAECI and MEF are also members of the Interministerial Committee for Development Cooperation (CICS), established in 2014 as part of the reform. The CICS usually meets twice a year to approve the three-year Programming Guidelines for Italian Development Cooperation and the overall ODA budget. The CICS is chaired by the Prime Minister and composed of the Minister of Foreign Affairs, the Deputy Minister, and representatives from other ministries, including Finance and Environment. The Joint Development Cooperation Committee (Comitato Congiunto) decides on operational issues, including on funding for projects over €2 million (US$2.2 million). It is chaired by the MAECI and composed of the heads of MAECI’s DGCS and the development agency AICS.

The 2014 law on cooperation strongly aligns development policy with foreign affairs

The Italian Agency for Development Cooperation (AICS) was set up in January 2016. It is in charge of developing, supervising, and directly implementing programs. The agency may only autonomously approve project funds of up to €2 million (US$2.2 million). Its staff number is limited by law to 200. Italian civil society organizations (CSOs) are concerned that the human resource constraint could limit the agency’s capacity to implement the planned increase in development programs.

In addition, the 2014 reform introduced the first Italian development finance institution as part of the Bank of Deposits and Loans (CDP), a joint-stock company under public control that manages the entire Italian postal savings and provides loans to the Italian state or local governments. It finances development projects through private and public financing (primarily blending MAECI and MEF resources with EU funding), risk-sharing, and capital-risk instruments, and is meant to improve “access, control, and coordination of the financial activities of banks and multilateral funds”. The CDP is supervised by the MAECI.

Civil society is involved in the policy-making process mainly through the National Council for Development Cooperation (CNCS). It is a consultative body – introduced by the 2014 reform – which brings together 50 members of different backgrounds: private-sector organizations, CSOs, and public authorities. It expresses its views on the three-year programming guideline and other development issues. The CNCS currently divides its work into three groups (‘Agenda 2030’, ‘private sector’, and ‘migration and development’) that each meet every two months.

The parliament plays an important role in the budget process. The Italian parliament has two chambers: the Chamber of Deputies and the Senate. They examine, amend, and vote on the draft budget bill developed by the government. The Foreign Affairs committees of both chambers give recommendations on ODA budget amendments, while the Budget committees of both chambers make the final decision.

Further readings

Government sources

• Italian Agency for Development Cooperation (AICS); Webpage, structure; accessed in January 2018 (in Italian)
• Ministry of Foreign Affairs and International Cooperation (MAECI); Webpage, political staff; accessed in January 2018 (in Italian)

 Other official sources

• Organisation for Economic Co-operation and Development (OECD); Development cooperation peer review, Italy; 2014 

Ministry of Foreign Affairs (MAECI) manages the main ODA budget line; Ministry of Interior covers the costs of hosting refugees in Italy

In 2018, Italy’s ODA is expected to stand at more than US$4.8 billion (€4.4 billion). This is a decrease from US$5.3 billion in 2017, largely driven by expected decreasing costs of hosting refugees in the country. Almost a third of ODA (32% in 2018) covers the costs of hosting refugees in Italy; these funds are provided by the Ministry of Interior. These costs continuously and significantly increased between 2012 and 2017, going from US$221 million in 2012 to US$1.9 billion in the proposed 2017 budget. In 2018, the government’s budget proposal sees a decline for the first time, planning US$1.6 billion for the year. Unlike other countries in Europe, Italy still receives high numbers of asylum seekers, who reach Europe through the Mediterranean Sea. Due to its geographic position, the costs of hosting refugees in Italy are likely to remain at very high levels in the coming years, despite seeing slight declines.

Almost a third of ODA (32%) includes costs of hosting refugees in Italy; the funds are provided by the Ministry of Interior

The Ministry of Economy and Finance (MEF) manages the largest part of the ODA budget (39%, US$1.9 billion in 2018). The MEF mainly contributes to Italy’s development funding through contributions to the EU's general budget (which includes the Development Cooperation Instrument, DCI, receiving in total US$1.2 billion in 2018), as well as other multilateral development banks and funds. It also manages debt-relief programs.

The Ministry of Foreign Affairs and International Cooperation (MAECI) manages the last third of the ODA budget (27%, or US$1.3 billion in 2018). The main ODA-related budget envelope within the MAECI’s budget is the program 4.2 Development Cooperation’ (US$1.2 billion). It comprises ‘chapters’ for funding to Italy’s development agency, AICS, and contributions to the European Development Fund. It also includes several ‘chapters’ for contributions to the UN and other multilaterals.

Further readings

Government sources

• Ministry of Economy and Finance (MEF); Additional note to the budget law 2018 of the Ministry of Foreign Affairs and Cooperation; 2018 (in Italian)
• Senate; State budget for the financial year 2018 and the multi-year budget for the three-year period 2018-2020; 2018 (in Italian)

Overall ODA levels are set in spring; allocations to countries are made following budget approval

• Ministry of Economy and Finance (MEF) develops the three-year budgetary guidelines: From February to April each year, the government develops the Economic and Financial Document (DEF), which sets a three-year framework for economic and budgetary planning; over the past years, the document has also outlined estimates of the share of GNI dedicated to ODA for the next three years. Key decision-makers in this process are the Prime Minister, the Minister of Finance, the Minister of Foreign Affairs and International Cooperation, and the Deputy Minister of Foreign Affairs. The DEF is presented to the Parliament by April 10 each year for the approval of both houses.
• Government develops the budget draft: From July to September, the Cabinet develops the budget draft, in which suggested ODA increases need to be protected. Key stakeholders include the Deputy Minister of Foreign Affairs, the Minister of Foreign Affairs, the Minister of Finance, and the Prime Minister. As budget negotiations between the government and parliament start prior to the presentation of the draft budget in mid-October, engaging MPs over this period of time may prove effective for advocacy purposes.
• Parliament examines, amends, and votes on budget draft: Parliamentary budget discussions run from October to December. The Budget committees of the Chamber of Deputies and the Senate set the final budget bill, and the Foreign Affairs committees of both houses give recommendations on amendments to the bill. Members of these committees are thus key stakeholders to engage when it comes to budget allocations. The full parliament votes on the budget by the end of December.

The budget cycle in 2018 will diverge from the above timeline, given the general elections in March 2018.

From July to September, the Cabinet develops the budget draft, in which suggested ODA increases need to be protected

In addition to the regular budget process, the government usually issues a decree known as the ‘one thousand extension decree’ (‘milleproroghe’) at the end of December. It uses this decree to finance additional measures in the next budget year, relating to any budgetary issue. Parliament examines and may amend the decree from January to February. This may provide additional opportunities to influence the ODA budget.

Further readings

Government sources

• Ministry of Economy and Finance; Public Finance Documents; 2018

Italy traditionally disburses much of its ODA multilaterally

Italy traditionally provides ODA mainly through multilateral channels. The share of ODA disbursed multilaterally is much higher than that of other donors: it reached more than half of Italy’s total ODA in 2016 (52%), while member countries of the OECD’s Development Assistance Committee (DAC) provide on average 38% of their ODA multilaterally. Core contributions to multilateral organizations went up by 22% between 2015 and 2016. This is mostly driven by a strong increase in contributions to EU institutions, which went from US$1.4 billion to US$1.8 billion, reaching two thirds of total contributions to the multilateral system. This significant increase was primarily to fund EU policies to respond to unprecedented arrivals of asylum seekers starting in 2015, and, among other initiatives, its increased funding for humanitarian assistance. In addition, Italy contributes to the Asian Infrastructure Investment Bank, which started operating in 2016. Its contributions reached US$175 million in 2016. The World Bank’s IDA remained the second-largest recipient of multilateral core contributions from Italy, with US$205 million in 2016.

The share of ODA disbursed multilaterally is much higher than that of other donors: it reached more than half of Italy’s total ODA in 2016

In recent years, bilateral funding has been increasing, tripling between 2013 and 2016, reaching a total of US$2.5 billion in 2016. This trend rebalanced multilateral and bilateral ODA, at around 50% of total ODA each. This is primarily due to increases in costs of hosting refugees in Italy, which are reported as bilateral ODA, as well as by increased humanitarian aid. When costs of hosting refugees are excluded, the increase in bilateral ODA has been more moderate, growing from US$465 million in 2013 to US$826 million in 2016 (a 78% increase), which is largely driven by the bilateral cooperation programs of Italy’s development agency, AICS, established in January 2016. Between 2015 and 2016, bilateral ODA excluding refugee costs even declined by 9% (US$81 million).

Italy currently provides almost all of its bilateral ODA in the form of grants: in 2016, just 9% of bilateral ODA excluding refugee costs was in the form of loans and equity investments. But the share of ODA provided as loans and equity investments is expected to increase, as Italy’s new development bank is expected to engage in innovative financing mechanisms (the bank is not yet fully operational). The majority of Italy’s bilateral ODA is disbursed through the public sector (81% in 2016). Only 8% of bilateral ODA was channeled through non-governmental organizations (NGOs) in 2016. This is a significant decrease from the share in recent years in relative terms: In 2013, still 16% was channeled through NGOs. However, in absolute amount, ODA funding through NGOs went from US$136 million in 2013 to US$193 million in 2016.

Who are the ODA recipients?

Focus is on sub-Saharan Africa and MENA

Sub-Saharan Africa and the Middle East and North Africa (MENA) region are the priority areas for Italy’s cooperation. With the exception of Afghanistan and Albania, all top ten recipients are in the region (2014-2016 average, see chart below). These regions will remain in focus in the coming years, particularly as Italy places increasing emphasis on tackling root causes of migration from Africa. The three-year Programming Guidelines for Italian Development Cooperation 2017-2019 highlights these as geographic priorities.

Sub-Saharan Africa and the MENA region are the priority areas for Italy’s cooperation

As a result of Italy’s engagement in sub-Saharan Africa, Italian development cooperation strongly benefits low-income countries (LICs). When excluding ODA that is not allocated to specific countries (69%, 2014-2016 average), Italy allocated 47% of its bilateral ODA to LICs. When considering total bilateral ODA, this corresponds to 14%.

How is bilateral funding programmed?

MAECI is responsible for strategy and programming, but embassies also play a key role on the ground

The programming and implementation of bilateral ODA have been significantly restructured by the 2014 reform. As the new agency AICS started operating in January 2016, it is still unclear what processes AICS and the Foreign Ministry’s Directorate General for Development Cooperation (DGCS) will use to program bilateral funding.

Up until the 2014 reform measures come into effect, allocations of bilateral funding to partner countries are based on multi-year country programs developed by DGCS. To do so, the DGCS consults Local Technical Units and embassies in the field. Priority sectors and allocations are outlined in these documents. Based on the country programs, the DGCS annually reviews and updates its guidelines for development cooperation. They define annual priority countries and key bilateral programs within these. At a country level, regional departments at DGCS’ headquarters then develop and approve projects after consultation with embassies. Due to their close relations with partner-country stakeholders, embassies often have an influential role.

Further readings

Government sources

• European Commission; Press Release, EU Official Development Assistance reaches highest level ever; 2017
• Italian Agency for Development Cooperation (AICS); Webpage; 2018
• Ministry of Economy and Finance (MEF); Additional note to the budget law 2018 of the Ministry of Foreign Affairs and Cooperation; 2018 (in Italian)

 Other official sources

• Organisation for Economic Co-operation and Development (OECD); Development cooperation peer review, Italy; 2014