Italy donor profile

The government has committed to gradually increase ODA to 0.4% of GNI by 2021, but the 2019 budget indicates decreases in coming years

In 2018, Italy spent US$5.0 billion on total ODA (current prices), making it the eigth-largest donor country among members of the Organisation for Economic Co-operation and Development’s (OECD) Development Assistance Committee (DAC). This corresponds to 0.24% of Italy’s GNI, making Italy the 18^th-largest donor in relative terms.

These numbers are based on the new methodology for measuring ODA loans which the OECD DAC will apply to ODA reporting for 2018 onward. Preliminary ODA figures for 2018 using this new methodology were first released in April 2019. This methodology, called ‘grant-equivalent’ methodology, provides a more accurate way to count donor efforts in concessional ODA loans because only the ‘grant’ portion of loans, expressed as a monetary value, is counted as ODA. The impact of this methodology reform on Italy’s ODA is currently small. According to the previous methodology, known as the ‘cash basis’ methodology, net ODA was 2% below ODA figures using the new methodology.

To allow for comparison overtime, the OECD still publishes net ODA disbursements according to the cash basis methodology. Following sharp decreases between 2008 and 2012 due to the economic crisis, Italy’s ODA doubled between 2012 and 2017, reaching a peak of US$5.9 billion (constant prices). Between 2017 and 2018, ODA decreased by 21%. These fluctuations were largely driven by changes in the costs of hosting refugees in Italy, but also stemmed from the establishment of an Italian development agency in 2016.

Between 2012 and 2017, Italy’s spending for development more than doubled a main factor since 2014 has been the increase in costs of hosting refugees.

Due to its geographic position, Italy has been at the frontline of refugees reaching Europe by sea. ODA-reportable costs of hosting refugees in Italy rose significantly in the last years: while in 2012 they were only US$226 million (or 9% of net ODA), in 2017 they reached US$1.8 billion, accounting for 31% of Italy’s net ODA. In 2018, refugee costs decreased for the first time since 2012, to US$1.1 billion. When excluding these costs, net ODA between 2017 and 2018 still decreased by 12% (from US$4.1 billion to US$3.6 billion in 2018). Despite declines in arrivals, the Italian Ministry of Interior has budgeted US$1.9 billion for 2019 for hosting refugees as well as to “assistance to countries in the field of migration and asylum”.

Despite reaffirmation in September 2018 from the current government to gradually increase the ODA/GNI share to 0.4% by 2021, the budget after 2019 further undermines this commitment. The new budget law approved in December 2018 after long discussions with the EU over Italy’s public deficit indicates a gradual decrease of ODA from €5.1 billion (US$5.7 billion, 0.29% of GNI) in 2019 to €4.6 billion (US$5.2 billion or 0.26% of GNI) in 2021, given a projected growth rate of 1%. ODA levels as a share of GNI are expected to drastically decrease over the next years, which has prompted concerns from civil society.

The government has pledged to gradually increase ODA to 0.4% of GNI by 2021; however, budget documents indicate a decline to 0.26% of GNI by 2021.

Focus is on tackling root causes of migration, particularly in Africa

Strategic priorities of Italy’s development cooperation are spelled out in the three-year Programming and Policy Document and Directions for Italian Development Cooperation (‘Documento Triennale di Programmazione e di Indirizzo'), developed by the Ministry of Foreign Affairs and International Cooperation (MAECI). The 2017-2019 Guidelines cover ten 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. The Ministry of Foreign Affairs committed to increase development assistance and increase economic investments in Africa at the Italy- Africa conference in October 2018.
• 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 overhauled its development cooperation system in 2014, the first major reform since 1987 (see Question 4: ‘Who are the main actors in Italy’s development cooperation?’). As part of this reform, Italy established its first-ever development agency, the Italian Agency for Development Cooperation (AICS), and created a new mandate for the Italian Bank of Deposits and Loans (Cassa Depositi e Prestiti, CDP) to function as an international financial institution (IFI) for development. AICS started operating in January 2016. In 2017 it operated with a budget of €545 million (US$614 million, just over 10% of Italy’s total net ODA. For 2018 AICS’ planned budget has increased to €592million (US$667 million).

AICS outlines five thematic areas on which it will focus its bilateral cooperation:

• economic development and opportunities;
• human development (including health and education);
• environment and use of natural resources;
• rural development and food security;
• conflict-affected and fragile states.

Due to Italy’s position on the frontline of the refugee crisis, the government places strong focus on tackling the root causes of migration, particularly in Africa. In 2017 Italy hosted hosted the Summit of the G7 Heads of State and of Government in the city of Taormina, Siciliy. The resulting 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 Italian government also reinforced its commitment to increase development finance to Africa at the Italy-Africa Conference in October 2018.

Italy continues to place its focus on tackling the root causes of migration, particularly in Africa.

Italian Prime Minister Giuseppe Conte has called for greater European cooperation and investment to address the ‘mass migration crisis’ and deaths in the Mediterranean Sea. In this context, he has emphasized Italy’s support for the EU’s Trust Fund for Africa, which was established to address root causes of irregular migration. Nonetheless, Italy has so far not adopted the Global Compact on Migration, an intergovernmentally negotiated agreement that lays out objectives to facilitate legal migration prepared by the UN. Italian officials did not attend the conference in December 2018, instead opting for  a discussion in the Italian Parliament first, as migration has become a highly controversial topic.  

The country has shown international leadership on agriculture and the related areas of nutrition and food security, as emphasized during its G7 presidency in 2017 and will host the G20 Summit in 2021 where the focus is expected to shift to energy.

The country has shown international leadership on agriculture and the related areas of nutrition and food security. During the Italian G7 presidency, leaders highlighted agriculture, food security, and nutrition as crucial issues to address and committed to increase ODA to these sectors, particularly in sub-Saharan Africa, as well as to strengthen humanitarian assistance to famine-stricken areas. Multilateral contributions in the area of agriculture and rural development are high, given Italy’s close ties to the UN Rome-based agencies, the Food and Agriculture Organization (FAO), World Food Programme (WFP), and the International Fund for Agricultural Development (IFAD). Italy is starting to prepare for hosting the G20 Summit in 2021 where the focus is expected to shift to energy.

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: On average Italy spent 61% of its ODA multilaterally between 2010 and 2017. But since 2015, the share of bilateral contributions has increased due to the costs of hosting refugee, bringing bilateral and multilateral contributions more in line. Still, at 47% in 2017 Italy spent more ODA multilaterally compared to member countries of the OECD’s Development Assistance Committee (DAC; 40%).

The share of ODA disbursed multilaterally is much higher than that of other donors, making up almost half of Italy’s total ODA in 2017.

Half of bilateral ODA covers costs of hosting refugees; humanitarian assistance is largest sector of spending abroad

In recent years, Italy’s bilateral funding has increased rapidly, tripling between 2013 and 2016 and reaching a total of US$3.2 billion in 2017. The increase in bilateral ODA is largely driven by two factors: the launch of the Italian development agency (AICS) in 2016 and the costs of hosting refugees in Italy.

Despite the drop in incoming migrants (120,000 in 2017 compared to 181,000 in 2016), costs of hosting refugees made up 56% of Italy’s bilateral ODA in 2017, or US$1.8 billion. Excluding these refugee-related costs, bilateral spending for development programs abroad has still significantly increased: by 66% between 2016 and 2017, from US$845 million in 2016 to US$1.4 billion in 2017.

Other sectors have benefited from this expansion of bilateral cooperation. Humanitarian assistance is the largest sector of spending abroad, receiving US$266 million in 2017, an additional 51% from 2016 levels. Investments to strengthen government and civil society almost tripled, from US$53 million in 2016 to US$155 million in 2017. The most significant increase of bilateral ODA between 2016 and 2017 was in the energy sector, which increased from more than ten-fold, from US$11 million to US$143 million. Agriculture remained relatively stable, receiving US$102 million bilaterally in 2017. However, the key priorities outlined in the AICS guidelines for 2017-2019 – health, education, and agriculture – represent only 10% of Italy’s bilateral spending.

Italy currently provides almost all of its bilateral ODA in the form of grants: in 2017, just 9% of bilateral ODA was in the form of loans and equity investments, equal to the OECD-DAC average. However, when excluding refugee costs, Italy provided 21% of total bilateral ODA as loans. The share of ODA provided as loans and equity investments is expected to increase, as Italy’s new development bank is increasingly engaging in innovative financing mechanisms. The majority of Italy’s bilateral ODA is disbursed through the public sector (75% in 2017). Only 7% of bilateral ODA was channeled through non-governmental organizations (NGOs) in 2017, a significant decrease as a share of bilateral ODA in recent years but an increase in absolute terms.

Italy’s ODA recipients are primarily in sub-Saharan Africa and MENA

Sub-Saharan Africa and the Middle East and North Africa (MENA) region are priority areas of Italy’s bilateral development cooperation. With the exception of Afghanistan and Turkey, all top ten recipients are in these regions (2015-2017 average). These regions will remain in focus in the coming years, particularly as Italy continues its emphasis on tackling root causes of migration from Africa. The three-year Programming and Policy Guidelines for Italian Development Cooperation 2017-2019 also highlight these as geographic priorities.

Sub-Saharan Africa and the MENA region are geographic priorities of Italy’s bilateral cooperation.

Italy provides a considerably small proportion of its bilateral ODA to low-income countries (LICs): 11% in 2017, compared to the DAC average of 24%. However, this partly reflects the large portion of Italian ODA that is not allocated by income-level: excluding this, LICs received 41% of bilateral ODA on average between 2015 and 2017.

Who are the ODA recipients?

Multilateral contributions primarily go to EU institutions

Core contributions to multilateral organizations made up almost half of Italy’s ODA in 2017 (47%): This represents a 5% increase over 2016, from US$2.7 billion to US$2.9 billion. A large proportion is channeled to EU institutions, which went from US$1.4 billion in 2015 to US$1.8 billion in 2017, amounting to two thirds (61%) of Italy’s total contributions to the multilateral system. This increase was primarily to fund EU policies to respond to unprecedented arrivals of asylum seekers. The 5% increase to overall multilateral funding from 2016 to 2017 can largely be explained by contributions to the International Fund for Agricultural Development (IFAD), the African Development Fund (ADF) and other UN organizations, which increased significantly.

Other major recipients of Italy’s multilateral ODA in 2017 were the regional development banks (US$ 290 million or 10% of multilateral ODA), the World Bank (US$278 million or 10%), and UN agencies (US$271 million or 9%). The multilateral share is particularly high in the area of agriculture and rural development: In 2016 the sector received US$233 million in the form of multilateral funding, or 71% of total agricultural ODA.

The MAECI leads on strategy; Italy’s new development agency, AICS, implements bilateral programs; embassies play a key role on the ground

The new government of Italy is based on a coalition of the anti-establishment 5-Star Movement and the right-wing League. In 2019, there is a risk of early election if the coalition decides to dissolve due to disagreement on essential matters. The Italian prime minister, currently Giuseppe Conte (Movement 5 stars), engages in development when it comes to high-level commitments or international conferences. Conte appointed Pietro Benassi, former Italian ambassador to Germany, as his diplomatic advisor.

ITALY'S DEVELOPMENT COOPERATION SYSTEM

In 2014, Italy’s development cooperation system was profoundly restructured. The reform aimed to better align development policy with foreign affairs. Amongst other new initiatives, the Italian Agency for Development Cooperation (AICS) and a new development bank were established.

Within government, two main 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 Enzo Moavero Milanesi (no party affiliation). Within the MAECI, the Deputy Minister of Foreign Affairs (Emanuela del Re) manages development policy. She supervises the MAECI’s Directorate General for Development Cooperation (DGCS), which is in charge of defining the strategic direction of development programs. Its Director-General is Giorgio Marrapodi since January 2018. Del Re also supervises the work of AICS and the development bank.
• The Ministry of Economy and Finance (MEF), led by Giovanni Tria (no party affiliation), is also a key player: the MEF prepares revenue and financial analysis for the MAECI, oversees and assesses the economic and financial effects of laws and policies, and jointly with the MAECI controls the ODA budget, as well as relations with and contributions to multilaterals.
•  MAECI and MEF are also members of the Interministerial Committee for Development Cooperation (CICS), established in 2014 as part of the reform. The CICS represents the institutional setting for interaction among different ministries involved in development cooperation and aims to ensure coherence of policies and approaches. 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 of foreign affairs, 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$2.3 million). It is chaired by the MAECI and composed of the heads of MAECI’s DGCS and AICS.

The 2014 development cooperation reform strongly aligns development policy with foreign affairs.

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$2.3 million). AICS’ staff was initially limited to 200, prompting concerns from Italian civil society organizations (CSOs) about limited capacity that could negatively impact program implementation. In 2018, the ceiling was increased to 240. The position of director has been vacant since government elections in 2018; Leonardo Carmenati is leading AICS as deputy director general.

Italy’s fairly new development finance institution is increasingly engaged in development financing.

The ‘Cassa Depositi e Prestiti’ (CDP) operates as The Italian development bank and has a new mandate as an international financial institution (IFI) for development cooperation since 2014. Since 2016 the CDP also manages the Revolving Fund for Development Cooperation (FRCS). In total it manages resources of €5.4 billion (US$6.1 billion) and since 2017 is authorized to use its own resources up to 1€ billion (US$1.1 billion) per year. CDP’s focus in development cooperation is the management of the FRCS on behalf of the Italian government; direct lending to sovereign and multilateral entities, working with the private sector and other partners in co-financing with multilateral development banks; and technical financial advisory to the Ministry of Foreign Affairs, AICS, and other Italian public institutions.

Embassies play a key role in programming bilateral funds on the ground. Allocations 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. These guidelines define annual priority countries and key bilateral programs. 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.

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 guidelines 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 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.

Foreign Ministry manages the main ODA budget line; Ministry of Interior holds high share of total ODA as it manages costs for hosting refugees

The budget law indicates that Italy will spend €5.1 billion (US$5.7 billion) on ODA in 2019. This would be a slight decrease from US$5.9 billion in 2017. In 2017, 31% of ODA went toward the cost of hosting refugees in Italy, funding for which is provided by the Ministry of Interior. These costs continuously and significantly increased between 2012 and 2017, going from US$226 million in 2012 to US$1.8 billion in 2017. In 2019, the Ministry of Interior’s budget for hosting refugees and migration-related assistance in third countries is set at US$1.9 billion. Despite declines of incoming migrants, Italy still receives very high numbers of asylum seekers every year, who reach Europe via 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.

Almost a third of ODA (33%) 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 (40%, US$2.3 billion in 2019). The MEF mainly contributes to Italy’s development funding through contributions to the EU's general budget, which includes the Development Cooperation Instrument (DCI). The estimated share of the European Union budget destined for development assistance is US$1.5 billion in 2019.

The Ministry of Foreign Affairs and International Cooperation (MAECI) manages the last part of the ODA budget (26%, or US$1.5 billion in 2019). The main ODA-related budget envelope within the MAECI’s budget is the program 4.2 ‘Development Cooperation’ (US$1.3 billion). It comprises ‘chapters’ of funding to Italy’s development agency, AICS, and contributions to the European Development Fund. It also includes several ‘chapters’ of contributions to the UN and other multilaterals.

Parliamentary budget discussions run from October to December; Overall ODA levels are set in spring

• 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. The draft budget is presented to Parliament in mid-October. 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, engaging MPs and MAECI staff 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 levels, 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.

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.