Spain donor profile

Net ODA reached record-high level in 2016 due to exceptionally high debt relief to Cuba

Spain’s official development assistance (ODA) stood at US$4.1 billion in 2016 (in current prices; US$4.8 billion in 2014 prices), making it the 10^th-largest donor country. Due to its economic crisis, Spain’s ODA drastically declined in past years: ODA was cut in half between 2011 and 2015 (US$4.3 billion to US$2.1 billion). Net ODA increased again by 192% compared to 2015, largely due to exceptional debt relief for Cuba. This brings Spain’s net ODA to 0.33% of its GNI in 2016, a share expected to decrease to 0.21% in 2017.

The new political environment resulting from recent general elections is likely to benefit development policy. After a 10-month political stalemate and two general elections, a government was formed in November 2016. Spain’s Prime Minister, Rajoy (conservative People’s Party, PP) now leads a minority conservative government. Under a minority government, Parliament is now in a key, strategic position to influence the budget, including for ODA. The new parliament is more supportive of development issues than the previous one. In November 2016, the Congress’ Development Committee approved a non-binding resolution to increase ODA levels to reach 0.40% of the country’s GNI by 2020.

Spain increases its aid effectiveness: it focuses its ODA on a small group of countries

The Spanish government outlines its strategic orientations for development in the ‘Master Plan of the Spanish Cooperation for 2013 to 2016’ (Master Plan). A new Master Plan for 2017 to 2020 is currently being drafted and expected to be published in 2017, after a consultation process with civil society organizations (CSOs) and members of Parliament, yet it is currently unclear when exactly this will be. Until then, the 2013-2016 Master Plan applies. It outlines eight main strategic orientations: 1) consolidate processes of democracy and the rule of law; 2) reduce inequalities and vulnerability to extreme poverty and crisis; 3) promote economic opportunities for the poorest; 4) promote social cohesion systems, emphasizing basic social services; 5) promote women’s rights and gender equality; 6) improve the provision of global and regional goods; 7) respond to humanitarian crises; and 8) build global citizenship.

Spain’s key development priorities:

• Strong focus on MICs: Spain seeks to develop new models of cooperation with its middle-income partner countries. It focuses on triangular cooperation and knowledge transfers.
• Health: Although funding levels for global health have been low in recent years, it remains a top priority for Spain. Funding levels are expected to increase as Spain regains budget flexibility.
• Agriculture and food security: Spain’s ODA to agriculture and rural development stood at US$172 million in 2015. Focus is on food security and supporting small-holder farming.

Within its development policy, Spain emphasizes cooperation with middle-income countries (MICs). Its traditional top recipients are countries in Latin America, such as Peru and Colombia that are transitioning to upper-middle income status. The Ministry of Foreign Affairs and Cooperation (MAEC) seeks to progressively substitute traditional ODA with these countries with new models for development cooperation. This includes triangular programs (carried out jointly by an industrialized country, an emerging economy and a recipient country), blended finance (financial instruments involving a mix of public funding and private investments for development), knowledge transfer programs, and an increasing use of equity investments. The current MAEC leadership is aiming for Spain to lead global efforts – specifically for MICs – to influence the global debate around managing the middle-income transition and to attract emerging markets in Latin America to the global development community.

Spain’s international obligations shape ODA allocation

Currently, the largest share of Spain’s bilateral ODA is used for debt relief: in 2015, they accounted for 16% or US$145 million of total bilateral development assistance (DAC average 1%). Spain used the entire amount for a debt relief agreement between Spain’s Ministry of Economy and Cuba. The second largest sector is administrative costs: In 2015, they accounted for 14% of total bilateral ODA (US$123 million). This is due to the cuts in development financing induced by budget constraints in the context of the economic crisis: Spain is fulfilling its institutional obligations while cutting non-obligatory contributions. The third-largest sector is ‘unspecified’ (12%): this mainly includes bilateral funding coming from Spanish regional and local governments, for which data on sectoral allocation is not reported to the OECD. The fourth-largest sector within Spanish bilateral cooperation is the government and civil-society sector (11%, US$97 million in 2015). In this area, Spain focuses strongly on gender equality, on democratic participation; thereby reflecting Spain’s strategic priority areas set out in the Master Plan.

The fifth-largest sector to benefit from Spanish bilateral ODA is agriculture: Spain’s contribution to this sector amounted to US$65 million in 2015. However, the country’s total contributions to the sector are higher, as Spain channels 62% of its total ODA to this sector through multilateral organizations (US$107 million in 2015). This brings Spain’s total contribution to US$172 million. Food security is a priority of Spanish development policy: Spain shows international leadership in the sector: it hosts the humanitarian logistics hubs of the World Food Program (WFP), International Committee of the Red Cross and of the United States Agency for International Development on the Canary Islands.

The vast majority of Spain’s bilateral ODA in 2015 consisted of grants (96%); however the small share of loans and equity investments is likely to increase, as this limits the budgetary impact of ODA. Around 50% of the Ministry of Foreign Affairs (MAEC) draft total ODA budget in 2016 was channeled through the Development Promotion Fund (FONPRODE), the main financial instrument for voluntary multilateral funding, loans, and equity investments. However, since 2012, all FONPRODE funds needed to be distributed as loans and equity investments. This negatively affected Spain’s multilateral voluntary contributions, which dropped disproportionately low since the beginning of the crisis; bringing international funding in the form of mandatory EU contributions up to 87% of total multilateral ODA in 2015. Furthermore, although outlined as a priority area, Spain has cut bilateral contributions to the humanitarian aid sector, which has decreased continuously from US$237 million in 2011 to US$61 million in 2015.

MAEC steers strategy, AECID leads implementation

Under the overall leadership of the Prime Minister, currently Mariano Rajoy (People’s Party, PP), the Ministry of Foreign Affairs and Cooperation (MAEC) sets the strategic orientation of Spanish development policy. The Prime Minister’s Office (La Moncloa) covers development at high-level forums like the UN General Assembly or the G20. Since November 2016, the MAEC is headed by Alfonso Dastis (an independent diplomat). Within the MAEC, the Secretary of State for International Cooperation and for Ibero-America, Fernando García-Casas, a diplomat appointed in early December 2016, covers development-related issues. García-Casas supervises the work of the General Secretariat for International Development Co-operation (SGCID), an administrative body based at MAEC that steers development policy and defines ODA funding priorities, as well as the work of the Spanish Agency for International Development Cooperation (AECID). While other SGCID leadership staff still needs to be appointed, the AECID is directed by Luís Tejada since September 2016.

At the ministerial level, other key players include the Ministry of Treasury and Public Function (Ministry of Finance), which drafts the development budget bill, channels ODA funding to the EU institutions, and the Ministry of Economy, Industry and Competitiveness (MINECO). MINECO is engaged in debt relief operations, in the management of Spain’s Development Promotion Fund (FONPRODE) jointly with MAEC, in disbursements to regional development banks and finance institutions.

The MAEC oversees Spain’s development agency (AECID), which is responsible for implementing bilateral programs, humanitarian aid, and funding to civil society organizations (CSOs). It also advises the MAEC on allocation questions. However, AECID’s financial volume of activities has drastically decreased due to the overall budget cuts: from €870 million in 2011 to €229 million in 2016.

SPAIN'S DEVELOPMENT COOPERATION SYSTEM

FONPRODE is the main financial instrument for voluntary multilateral funding, loans, and equity investments. While the AECID manages day-to-day FONPRODE operations, the MAEC (together with the MINECO and other ministries) defines its funding priorities. FONPRODE was created in 2010, initially to separate ODA from Spanish commercial interests and ensure that no loans were allocated to heavily indebted countries. FONPRODE’s mission originally included the disbursements of voluntary multilateral funding, but grants have been excluded from this instrument due to budgetary constraints since 2012. In addition, administrative burdens have prevented FONPRODE from disbursing the entire budget that had been approved by the Parliament. This is a major factor behind Spain’s underspending of its ODA budget: in 2014, 20% of funds budgeted for ODA were not disbursed. A similar share of underspending was expected in 2015 (figures unavailable at time of publication).

The Spanish parliament is composed of two chambers (Congress of Deputies and Senate): each of them has a development committee. Members of Parliament debate and vote on commitments related to development, and can request information on all development matters, as well as a parliamentary hearing of the development actors (including the Minister of Foreign Affairs and heads of Secretary of State for International Cooperation, Secretariat for International Development Co-operation and AECID. While there used to be a high level of consensus across the political spectrum regarding development issues, current budget cuts have led to tense debates and amendment proposals by the opposition, blocked in the past by the Partido Popular’s absolute majority. After the June 2016 elections, five months of political stalemate resulted in the formation of a minority government in November 2016. This situation results in a greater influence of the Parliament over development policy and the ODA budget.

Spain’s civil society, including secular and Catholic non-governmental organizations (NGOs) and think tanks, serves a key role in development cooperation. Although NGOs have lost influence in recent years due to political shifts, the level of NGOs’ inclusion in policy dialogue remains high, both through bilateral platforms and the MAEC’s consultation Council for Development Cooperation. Coordinadora de ONGD España (CONGDE, Spain’s main civil society umbrella organization for development cooperation), coordinates NGO activities and regularly interacts with government actors. It has 76 member organizations and 17 regional NGO platforms (with 400 organizations in total). While NGOs have traditionally implemented large shares of bilateral ODA (29% in 2015, which is well above the OECD Development Assistance Committee (DAC) member average of 17%), they are strongly affected by current ODA reductions: many of them rely on public funding, both from AECID and sub-national governments.

Spain is a highly decentralized country: sub-national state actors (autonomous regions, local administrations and universities) also provide ODA and conduct decentralized cooperation activities. According to government estimates, they contributed €206 million in ODA in 2015. However, their share of ODA in Spanish development cooperation has decreased from 14% in 2011 to 11% in 2015.

The Finance Ministry provides the largest share of ODA

Given that a caretaker government ruled Spain from January to October 2016, no budget bill for 2017 had been presented to Parliament as of November 2016. The 2016 budget will be automatically implemented in 2017 until the new cabinet of Prime Minister Rajoy presents its budget bill for 2017 and the Parliament approves it – likely no later than June 2017. For the moment, ODA allocations will thus remain at their 2016 level, i.e., €2.4 billion (US$3.2 billion).

Several ministries provide funding for ODA. The Ministry of Foreign Affairs and Cooperation (MAEC) used to provide the largest share of ODA funding. This changed during the financial crisis: its share of ODA stood only at 31% in 2016, and has thereby been the most affected by budget cuts. The Ministry of Finance and Public Function (MINHAFP) managed the largest share of Spain’s ODA: it channels the country’s mandatory contributions to the European Union (EU). They represented 40% of Spain’s total ODA in 2016. The Ministry of Economy, Industry and Competitiveness (MINECO) distributed one-fifth of this financing: it managed contributions to international financial institutions and channeled debt relief. Its budget increased from €59 million in 2015 to €486 million in 2016. These funds were, however, mostly budgeted for compulsory contributions to the World Bank that were owed from previous years.

For 2016, the MAEC’s draft budget amounted to approximately €753 million (US$999 million). Around half of this was channeled through the Development Promotion Fund (FONPRODE) as loans and equity investments, although it is unknown how much was disbursed by FONPRODE in 2016. FONPRODE funds needed to be distributed as loans and equity investments. This affected Spain’s multilateral voluntary contribution, which dropped disproportionately since the beginning of the crisis (in comparison with other funding channels).The MAEC’s budget also included funding for the Spanish Agency for International Development Cooperation (AECID). The AECID budget focused on funding for bilateral programs, civil society organizations (CSOs) and humanitarian assistance. Spain’s regional governments and local administrations also provide ODA, mainly through CSOs and their own bilateral programs, although they can provide funding to multilateral institutions as well.

 *AECID may also provide some multilateral funds. However, these are not specified in AECID’s budget.

ODA levels and main funding lines are decided upon between March and July

• Government suggests overall ODA volume: In March, the government sets guidelines for overall spending per ministry, including overall ODA volume, as well as funding lines for Spain’s Development Promotion Fund (FONPRODE) and the Spanish Agency for International Development Cooperation (AECID). Key stakeholders in this period include the Prime Minister’s Office, as well as the Ministry of Foreign Affairs and Cooperation (MAEC) and the Ministry of Finance and Public Function (MINHAFP).
• Ministries develop their budget requests: Between May and June, each ministry, including MAEC and MINHAFP, develop their budget requests in light of the guidelines. Around June or July, ministries present their requests to MINHAFP.
• Government decides on ministerial spending caps: Once budget requests are sent to the MINHAFP, negotiations start between the ministries. In July, the government decides on caps for ministerial budgets and the government’s overall spending ceiling is presented, including the ODA volume. Key decision-makers regarding ODA levels are the Prime Minister, the Finance Minister and the Foreign Minister.
• Negotiations take place among ministries: From August to September, the MAEC continues to negotiate with the Ministry of Finance for specific funding items, e.g., the share of loans or grants in the FONPRODE budget. Both ministries are key stakeholders during this period.
• Parliament discusses, amends and votes on budget bill: From October to November, Parliament discusses and amends the ministries’ budget draft. The Development Committee provides recommendations on budget amendments and the Budget Committee makes the final decision: members of Parliament may present amendments to the overall budget and to specific ODA budget lines in this period. The lack of a clear majority in Parliament since 2016 reinforces the influence of its members with regard to budget allocations, including for ODA.

Further allocations are decided upon during the implementation phase of the annual budget: The MAEC decides on spending to partner countries and other multilateral organizations during the course of the entire year. Allocations from the FONPRODE are made by the ‘FONPRODE Executive Board’. The Board, which includes representatives from MAEC, Ministry of Economy, Industry and Competitiveness, MINHAFP, and other ministries, usually meets three to four times per year. Its funding proposals need to be approved by the Prime Minister’s cabinet weekly meeting (Consejo de Ministros).

ODA funding sharply decreased from 2012 onwards due to a constrained budget environment

Spain channels a large part of its ODA through core contributions to multilateral organizations: they accounted for 58% of its total ODA in 2015. This well exceeds the OECD Development Assistance Committee (DAC) member average of 39%. Following the economic crisis, budget cuts significantly affected bilateral funding, whereas binding multilateral contributions to the European Union (EU) needed to be maintained. As a result, Spain’s contributions to the EU accounted for 87% of total multilateral ODA in 2015. Spain has sharply reduced its voluntary contributions to multilateral organizations over the past years. In 2015, Spain published a strategic document that formulates the priorities for multilateral cooperation. According to this strategy, funding is expected to increase for UN agencies, including for UNHCR, UNICEF, the International Fund for Agricultural Development (IFAD) and the World Food Program (WFP).

Over the past few years, Spain has not been able to disburse the entire ODA budget as approved by Parliament. In 2014, underspending amounted to 20%. This is mainly due to major issues in the disbursement of the Spanish Development Promotion Fund’s (FONPRODE) budget since 2012. Out of the €375 million budgeted to be disbursed as loans and equity in 2014, only 10% (€36 million) was finally disbursed. This was because of administrative limitations and major bottlenecks in the issuing of loans. A similar level of underspending was expected for 2015 (no final figures are available yet). Additionally, Spain’s bilateral ODA declined by 40% from US$1.2 billion in 2013 to US$706 million in 2014. This was partly due to a constrained budget environment, and to the phasing out of a large number of bilateral programs (reflecting the government’s target to close or redesign 29 country offices by the end of 2016). Spain ODA spending slightly recovered to US$899 million in 2015, due to an increase in bilateral grants.

Nearly all of Spain’s bilateral ODA consists of grants (96%); the small share of loans and equity investments is likely to increase, as it is a way for Spain to limit the budgetary impact of its ODA.

Who are Spain’s ODA recipients?

Spain focuses on Latin America, sub-Saharan Africa, and the MENA region

Spain focuses its funding on Latin America, sub-Saharan Africa, and the Middle East and Northern Africa region (MENA). Eight out of ten ODA recipients from 2013 to 2015 are in Latin America or in the MENA region. Due to Spain’s focus on those two regions, the largest proportion of bilateral ODA is allocated to middle-income countries (MICs). They received 52% of bilateral funding between 2013 and 2015. Only 15% was allocated to low-income countries (LICs), well below the OECD DAC average of 28%.

The government plans to concentrate its ODA on fewer countries going forward, reducing the number of priority countries from 50 in 2013 to 23 by the end of 2016.

Spain’s 23 priority countries:

Bolivia, Colombia, Cuba, Dominican Republic, Ecuador, El Salvador, Ethiopia, Equatoria, Guinea, Guatemala, Haiti, Honduras, Mali, Mauritania, Morocco,  Mozambique, Nicaragua, Niger, Paraguay, Peru, the Philippines, Senegal, West Bank and Gaza, and Western Sahara.

How is bilateral funding programmed?

MAEC and AECID regional divisions set strategy; country offices and embassies shape programs

Spain programs its bilateral funding based on the strategic, regional, and thematic priorities established in the four-year Master Plan. The Master Plan outlines different approaches to bilateral cooperation that depend on the income group of a country. Low-income countries receive funding according to their development needs, cooperation with middle-income countries focuses on fostering triangular partnerships, global health research and development, and global public goods. The governing council of the Spanish Agency of International Cooperation for Development (AECID), which includes representatives from the Ministry of Foreign Affairs and Cooperation (MAEC), decides on allocations by region and country.

To increase ODA predictability, Spain introduced multi-annual country partnership frameworks (MAPs) for its 23 priority countries in 2010. The MAPs specify sector priorities and provide estimated annual budget allocations. They are developed jointly by the AECID, the partner countries, and local civil society organizations. Over the course of 2017, MAPs are expected to be updated for 13 countries.

As of 2016, the AECID is implementing a new results-based programming model and creating so-called ‘country programs’. Country programs are expected to operationalize the MAPs by outlining planned bilateral programs and projects. These country programs will be developed by AECID’s country offices and embassies jointly with AECID’s regional and sector departments.