Spain donor profile

Net ODA surged in 2016 due to exceptionally high debt relief to Cuba

Spain’s official development assistance (ODA) stood at US$4.3 billion in 2016 (in 2016 prices), making it the 10^th-largest donor country. Due to its economic crisis, Spain’s ODA drastically declined in the past years: ODA was cut by nearly three-quarters between 2008 and 2015 (US$5.4 billion to US$1.4 billion). However, net ODA surged by 205% in 2016 compared to 2015. This was largely due to exceptional debt relief (US$2.1 billion) for Cuba, but also to increased core contributions to multilaterals. Spain’s contributions to EU institutions went up by 26%, from US$910 million to US$1.1 billion. This significant increase came to fund the EU’s response to unprecedented arrivals of asylum seekers starting in 2015, which triggered higher spending from the EU, including for humanitarian assistance (among other sectors). Spain also dramatically increased contributions to the World Bank’s International Development Association (IDA), from US$11 million in 2015 to US$293 million in 2016, returning to its 2011 levels after four years of very low contributions in the wake budgetary austerity.

These increases brought Spain’s net ODA to 0.35% of its GNI. This share is expected to decrease to 0.21% in 2017 but may be slightly higher as a result of additional non-budgeted operations, such as debt relief announced in 2017 for several African countries and Peru.  In tune with the current economic recovery (Spain’s gross domestic product grew 3.1% in 2017 and is expected to grow at 2.7% in 2018), ODA may keep rising in the coming years, as its drastic decline coincided with budgetary constraints induced by the economic crisis.

The new political environment resulting from recent general elections is likely to benefit development policy. After the June 2016 elections, five months of political stalemate resulted in the formation of a minority government in November 2016. The 2016 general election followed on the heels of another indecisive election in 2015. Spain’s Prime Minister (PM), Mariano Rajoy of the People’s Party (PP) now leads a minority conservative government. Under a minority government, Parliament is in a strategic position to influence the budget, including for ODA. The new parliament is more supportive of development issues than the previous one: since November 2016, for example, the Congress’ Development Committee has been unanimously calling for ODA increases in order to reach 0.40% of the country’s GNI by 2020.

However, the recent secessionist crisis in the northeast region of Catalonia is challenging PM Rajoy’s government’s capacity to advance decision-making and approve new laws and initiatives in the parliament. With the 2018 budget delayed, key decisions on development policy, such as an eventual pledge to the Global Fund to Fight Aids, Tuberculosis and Malaria, have been postponed. Without parliamentary support of the largest opposition party, the Spanish Socialist Workers' Party (PSOE), the government will struggle to approve a new budget for 2018.

Further readings

Government sources

• Spanish government; Master Plan for Spanish Cooperation 2018-2021; 2018 Spanish
• Spanish government; Referencia del Consejo de Ministros ; 2018 Spanish
• Spanish government; Los Presupuestos del Estado para 2018 benefician a los trabajadores y pensionistas que cobran menos, y mejoran los servicios fundamentales; 2018 Spanish

Spain focuses on the SDGs, aid effectiveness, and new cooperation models

The Spanish government outlines its strategic orientations for development in the ‘Master Plan for Spanish Cooperation 2018-2021’ (Master Plan), which underlines Spain’s firm commitment to advance the implementation of the 2030 Agenda for Sustainable Development and increase ODA to 0.7% of GNI. It outlines four cross-cutting development principles (human rights, gender equality, cultural diversity, and environment), and seven strategic goals/orientations in line with the SDGs: 1) zero hunger; 2) good health and well-being; 3) quality education; 4) gender equality; 5) clean water and sanitation; 6) decent work and economic growth; and 7) peace, justice and strong institutions. According to the Master Plan, these sectors account for 87% of Spain’s bilateral funding.

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.
• Gender, governance, and climate change: these sectors are prioritized as cross-cutting areas of intervention.
• 2030 Agenda implementation: The seven SDGs prioritized by Spain account for 87% of bilateral funding.
• Zero Hunger: Zero hunger is the first sector mentioned in the Master Plan, with a focus on food security and smallholder farming. Spain’s ODA to agriculture and rural development stood at US$145 million in 2015.

Within its development policy, Spain adopts a two-speed, differentiated strategy depending on the status of its partner countries.  When co-operating 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 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. Democratic governance, infrastructure, and climate change are among Spain’s preferred interventions in MICs. For example, Spain contributed to the creation of a water sanitation program in Bolivia, a project that was jointly carried out with Brazil. 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.

In addition, the new Master Plan expects a growing ODA focus on least-developed countries (LDCs) from sub-Saharan Africa. In these countries Spain prioritizes traditional ODA disbursements (mostly grants) to support the provision of basic social services and institutional strengthening.

Spain’s international obligations shape ODA allocation

In 2016 the largest share of Spain’s bilateral ODA was used for debt relief: it accounted for 75% of total bilateral development assistance, or US$2.2 billion, far beyond the 3% average among countries in the OECD’s Development Assistance Committee (DAC). Spain used almost the entire amount for a debt relief agreement between Spain’s Ministry of Economy and Cuba that totaled US$2.1 billion. The second-largest sector is administrative costs: In 2016, they accounted for 4% of total bilateral ODA (US$109 million). This is due to the cuts in development financing induced by budget constraints in the context of the economic crisis: Spain kept fulfilling its ODA-related institutional obligations with the EU and development banks while cutting development programs abroad (i.e. bilateral projects, voluntary contributions to multilateral instruments, and humanitarian interventions). Costs of hosting refugees in Spain made up the third-largest sector of bilateral ODA: they amounted to US$89 million in 2016. The fourth-largest sector within Spanish bilateral cooperation is the government and civil-society sector (3%, US$86 million in 2016). In this area, Spain focuses strongly on gender equality and democratic participation, reflecting Spain’s strategic priority areas set out in the Master Plan. Multisector ODA follows, with US$79 million, or 3%, US$49 million of which was allocated to the EU facility for refugees in Turkey.

The sixth-largest sector to benefit from Spanish bilateral ODA is agriculture: Spain’s contribution to this sector amounted to US$60 million in 2016. However, the country’s total contributions to the sector are higher. In 2015, the latest year for which complete sectoral data is available, Spain channeled 62% of its total ODA to this sector through multilateral organizations (US$91 million). This brings Spain’s total contribution to US$145 million. Therefore, food security is one of the top priorities 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 (ICRC) and of the United States Agency for International Development (USAID) on the Canary Islands.

The vast majority of Spain’s bilateral ODA in 2016 consisted of grants (97%); however, the small share of loans and equity investments is likely to increase, since they limit 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 need to be distributed as loans and equity investments. This negatively affects Spain’s multilateral voluntary contributions, which have dropped to disproportionately low levels since the beginning of the economic crisis, bringing international funding in the form of mandatory EU contributions up to 87% of total multilateral ODA in 2015. While it is outlined as a priority area, the humanitarian aid sector remains below previous levels. It recovered slightly between 2015 and 2016, from US$52 million to US$57 million.

Further readings

Government sources

• Spanish government; Master Plan for Spanish Cooperation 2018-2021; 2018 Spanish

MAEC steers strategy, AECID leads implementation

Prime Minister (PM) Mariano Rajoy of the conservative People’s Party (PP) has led a minority government since November 2016. His office (La Moncloa) covers development at high-level forums like the UN General Assembly or the G20. Under his leadership, the Ministry of Foreign Affairs and Cooperation (MAEC) sets the strategic orientation of Spanish development policy.  

Since November 2016, the MAEC is has been headed by Alfonso Dastis, an independent. 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 Directorate for Sustainable Development Policies (DGPOLDES, led by Cristina Pérez), 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; see below).  

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

In October 2017, the Spanish government created the High-Level Group for the 2030 Agenda, a new administrative body led by Foreign Minister Dastis, in collaboration with the Minister of Agriculture, Fisheries and Environment and the Minister of Public Works. The new working group aims at coordinating all ministries’ actions on the 2030 Agenda and fostering its implementation in Spain. It is directed by the Special Ambassador for the 2030 Agenda, Juan Francisco Montalbán.

SPAIN'S DEVELOPMENT COOPERATION SYSTEM

The MAEC oversees Spain’s development agency (AECID), which is directed by Luís Tejada since September 2016. AECID is responsible for implementing bilateral programs, humanitarian assistance, and funding to 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 €228 million in 2017.

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. In 2015, for example, the FONPRODE only disbursed €18 million (8%) out of the €235 million budgeted for that year. The Spanish government is working to overcome this obstacle by improving capacity at AECID’s Directorate for Multilateral and Financial Cooperation, which oversees FONPRODE.

The Spanish parliament is composed of two chambers (Congress of Deputies and Senate): each of them has a development committee. Members of Parliament (MPs) debate and vote on commitments related to development and can request information on all development matters, as well as a parliamentary hearing of 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, ODA budget cuts have led to tense debates and amendment proposals by the opposition, blocked in the past by the absolute majority of the People’s Party (PP). After the June 2016 elections, five months of political stalemate resulted in the formation of a minority government in November 2016. This situation has resulted in a greater influence of the parliament over development policy and the ODA budget, as well as a growing consensus among all political parties, including the governing PP, on the need to increase development financing.

Spanish 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. Spain’s main civil society umbrella organization for development cooperation, Coordinadora de ONGD España (CONGDE), coordinates NGO activities and regularly interacts with government actors. It has 76 member organizations and 17 regional NGO platforms, counting 400 organizations in total. NGOs have traditionally implemented large shares of bilateral ODA (an average of 34% between 2013 and 2015). Debt relief for Cuba, which was channeled through the public sector, diluted the share of ODA for NGOs in 2016 to 11%, well below recent norms. Funding channeled through CSOs is usually well above the OECD Development Assistance Committee (DAC) member average of 17%. CSOs have been strongly affected by ODA reductions in recent years: 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 €178 million in ODA in 2015. However, their share of ODA in Spanish development cooperation has decreased, from 14% in 2011 to 11% in 2015.

Further readings

Government sources

• Spanish government; Boletín Oficial del Estado Núm. 259; 2018 Spanish
• Spanish government; Propuesta de Presupuestos Generales del Estado para 2017. Ayuda Oficial al Desarrollo de la Administración General del Estado; 2017 Spanish
• Spanish government; Financiadores - Cooperación Española para el Desarrollo Internacional (Comunidades Autónoma);  Spanish

The Finance Ministry provides the largest share of ODA

Because of the political fallout from the Catalan secession crisis, the government delayed the approval of the 2018 budget draft until March 2018. While it is still uncertain if the new budget for 2018 will be approved by the parliament (parliamentary discussions will take place from April to June), the 2017 budget continues to apply. Spain’s 2017 draft ODA budget sets ODA at €2.5 billion (US$2.7 billion) or 0.21% of GNI. Several ministries provide ODA. The Ministry of Foreign Affairs and Cooperation (MAEC) used to be Spain’s prime ODA provider, but its share has decreased to 26% in 2017, as cuts mainly affected MAEC’s ODA budget.

The Ministry of Finance and Public Function (MINHAFP) now manages the largest share of Spain’s ODA (45% in 2017): it channels the country’s mandatory contributions to the European Union (EU). The Ministry of Economy, Industry and Competitiveness (MINECO) (17% of ODA in 2017) manages contributions to international financial institutions, including the World Bank, and channeled debt relief. Its budget increased from €59 million in 2015 to €486 million in 2016, but decreased to €372 million in 2017.

MAEC’s draft budget for 2017 stands at €559 million (US$620 million). This budget envelope provides little information on funding channels, recipients and spending for specific sectors. MAEC’s budget includes funding for the Spanish Agency for International Development Cooperation (AECID). AECID’s budget focuses on funding for bilateral programs, civil society organizations (CSOs) and humanitarian assistance. About 36% of MAEC’s budget (€199 million or US$221 million) is channeled through FONPRODE. Since 2012, all FONPRODE funds must be disbursed as loans or equity investments through bilateral programs, or as earmarked loans managed by multilateral organizations. While FONPRODE’s mandate is to also channel voluntary contributions or grants to multilateral instruments in addition to loans and equities, this “loans-only” policy is aimed at reducing the impact of Spain’s ODA to the public deficit.

Spain’s regional governments and local administrations provide ODA mainly through CSOs and their own bilateral programs, although they can provide funding to multilateral institutions as well.

 Source: Ayuda Oficial al Desarrollo de la Administración General del Estado. Propuesta Presupuestos Generales del Estado para 2017
 

Further readings

Government sources

• Spanish government; Propuesta de Presupuestos Generales del Estado para 2017. Ayuda Oficial al Desarrollo de la Administración General del Estado; 2017 Spanish

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 accordance with overall spending levels set in the government’s guidelines to each ministry. 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’ draft budgets. 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 individual members regarding 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, the 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 2010 onwards due to a constrained budgetary environment

A large debt-relief package for Cuba in 2016 obscures what is otherwise a clear trend: Recent years of economic turmoil have resulted in Spain’s channeling a large part of its remaining ODA through core, obligatory contributions to multilateral organizations. Discounting the US$2.1 billion in bilateral debt relief to Cuba, core contributions to multilaterals accounted for 66% of Spain’s total ODA in 2016. This well exceeds the OECD Development Assistance Committee (DAC) member average of 38%. From 2013 to 2015, core contributions to multilaterals accounted for 60% of total Spanish ODA on average.

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 50% of total gross ODA in 2015. In 2016, when discounting the Cuban debt relief, it made up 45% of total ODA. Spain has sharply reduced its voluntary contributions to multilateral organizations over the past years. The Master Plan for Spanish Cooperation 2018-2021, finalized in March 2018, said a new strategy for Spanish engagement with multilaterals will be developed in the coming months. The former multilateral review from 2015 said funding was 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. In 2015, FONPRODE only disbursed €18 million (8%) out of the €235 million budgeted for that year. This was because of administrative limitations and major bottlenecks in the issuing of loans. To deal with this issue, the Spanish government is working to improve capacity at AECID’s Directorate for Multilateral and Financial Cooperation, which oversees FONPRODE.

Over the past three years, and even after discounting the Cuban debt relief, Spain’s bilateral ODA spending has steadily increased, from US$595 million in 2013 to US$743 million in 2016. This was largely driven by increases in bilateral grants. However, bilateral ODA remains 19% under its pre-crisis 2010 levels (76% when discounting 2016’s Cuban debt relief), when ODA stood at US$3.7 billion. These low-levels are partly due to a constrained budget environment, and to the phasing out of many bilateral programs (reflecting the government’s target to close or redesign 29 country offices by the end of 2016).

Nearly all of Spain’s bilateral ODA consists of grants (97%). 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 (MENA) region. Six out of the 10 largest ODA recipients from 2014 to 2016 are in Latin America, and three are part of 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 73% of bilateral funding between 2014 and 2016. Only 7% was allocated to low-income countries (LICs), well below the OECD DAC average of 25%.

The government plans to concentrate its ODA on fewer countries going forward, reducing the number of priority countries from 50 in 2013 to 21 as outlined in the ‘Master Plan for Spanish Cooperation 2018-2021’. From these priority countries, 7 are LICs and 14 are MICs.

Spain’s 21 priority countries:

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

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 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.

In tune with its differentiated approach for bilateral funding, in addition to the MAPs Spain plans to develop New Generation Partnerships (ANG) with some of its traditional ODA recipients that have progressed to developed or upper-middle-income countries, including Argentina, Brazil, Chile, Costa Rica, Mexico, Panama, Uruguay, Cape Verde, Egypt, Equatorial Guinea, Tunisia, and Jordan.

Further readings

Government sources

• Spanish government; Master Plan for Spanish Cooperation 2018-2021; 2018 Spanish
• Spanish government; Propuesta de Presupuestos Generales del Estado para 2017. Ayuda Oficial al Desarrollo de la Administración General del Estado; 2017 Spanish
• Spanish government; Informe Sobre el 'Informe de Actividad FONPRODE 2015'; 2018 Spanish