Donor Profile: Germany

Last updated: January 10, 2023

Summary



ODA Spending


ODA in Context

Germany was the second-largest donor country among members of the OECD DAC in 2021.


Germany is the fourth-largest donor in proportion to the size of its economy. The country spent 0.74% of its GNI on ODA in 2021, or .68% excluding in-country refugee costs. Germany is one of the few European countries that does not offset the costs associated with hosting refugees with cutbacks in funding for global development.




2021 was the second year since 2016 that Germany has reached the 0.7% ODA/GNI target. The German government has committed to reaching the target, but fell short in 2018 and 2019.


Total ODA increased by 5.1% between 2020 and 2021 (in real terms), due to an increase in Germany’s bilateral and multilateral ODA spending to fight the COVID-19 pandemic and provide vaccine donations. The OECD DAC estimates total COVID-19-related ODA from Germany at US$3 billion in 2021.


The budget of the BMZ, which comprised 45% of total ODA in 2019, increased significantly over from 2017-2022. The budget grew by 57% between 2017 and 2022 and stands at €12.4 billion (US$14.1 billion) in 2022. Increases in recent years mostly resulted from additional spending related to the COVID-19 pandemic and the Russian invasion of Ukraine. However, for 2023, the BMZ’s budget is set to decrease by €11 million (US$13 million or 2%) to €12.2 billion (US$13.9 billion).


After Germany’s ODA level reached record-high levels in 2020 and 2021, driven by Germany’s response to the COVID-19 pandemic, ODA was expected to decrease in 2022 to US$26.2 billion and US$25.5 billion in 2023, in line with a decreasing budget for the BMZ. However, the unexpected influx of refugees from Ukraine will likely inflate ODA levels, as costs for receiving refugees in Germany are partially counted as ODA and financed from additional budgets.



ODA Breakdown


The German government has a strong preference for bilateral funding. In 2020, bilateral funding accounted for 80% of total ODA, well above the OECD DAC average of 58%. This includes earmarked funding through multilaterals. Germany’s preference for bilateral funding is driven by its two large government-owned implementing agencies, the GIZ and the KfW . Germany channels only small 7% of its bilateral ODA through NGOs ( DAC average: 19%).


Germany channels the largest share of its bilateral ODA as grants (75% in 2020, DAC average: 89%) with the remaining 25% disbursed as loans and equity investments (down from a peak of 34% in 2015). The responsibility for administering loans is assigned by the BMZ to the KfW Most loans are provided in the energy sector to LMICs and UMICs.



Bilateral Spending


In response to the influx of asylum seekers to Germany since 2015, spending on humanitarian assistance and migration has increased significantly from pre-2015 levels. Even after a 16% decrease in volume from 2019, the cost of hosting refugees in Germany still accounted for the second-largest share of Germany’s bilateral funding in 2020.


Due to the influx of refugees from Ukraine to Germany in 2022, Germany’s in-country refugee costs will likely increase significantly in 2022. While education received the largest share of Germany’s bilateral ODA, more than half of this (US$1.8 billion, or 56%) represents costs for students from partner countries studying in Germany. A significant proportion of Germany’s bilateral ODA (about 17%) is therefore spent within Germany and does not support partner countries directly.


Agriculture has been a priority for German development cooperation for several years, and funding to the agriculture sector has increased by 56% since 2016. However, the sector receives a relatively small share of bilateral ODA (5% in 2020). Additional ODA for agriculture comes from Germany’s contributions to multilateral organizations.


The portion of bilateral ODA going to LICs is relatively low compared to other DAC donors.Current spending also falls short of Germany’s ambition to spend between 0.20% of ODA/GNI on LICs, which was affirmed in the ‘2021-2025 Coalition Agreement’. In 2020, only 0.15% of GNI was spent on ODA to LICs.


Germany channels nearly 75% of its bilateral ODA to MICs, with India, Indonesia, and the Syrian Arab Republic comprising the largest individual country recipients. However, most funding to India (70%) and to Indonesia (89%) is provided in the form of loans or equity investments.


The top recipients of German grant funding are the Syrian Arab Republic, Ethiopia, Iraq, and Yemen. All funding to these countries comes in the form of grants. This is in line with the BMZ’s prioritization of partnerships within the MENA and SSA regions.



Multilateral Spending and Commitments


Until 2013, the German Parliament had capped multilateral spending at one-third of total German ODA. Although this cap has since been lifted, core funding to multilaterals remains significantly lower than the DAC average of 42%. Like many EU member states, the largest recipients of Germany’s multilateral funding in 2020 were EU Institutions. Germany is also among the largest donors to Gavi, the Global Fund, and UN agencies.


Germany’s earmarked funding to multilaterals, which is channeled through multilateral development organizations for use in a specific sector or country has increased significantly in recent years. The growth has largely been driven by Germany’s funding to multilaterals active in humanitarian assistance and crisis response.

Recent commitments to multilateral organizations are summarized below.



Politics & Priorities


Political Context


Germany is a parliamentary democratic republic. Political power is divided among the legislature, which includes the Bundestag (parliament) and the Bundesrat (representative body for Germany’s regional states); the executive branch, including the Head of Government, the Head of State, and the Cabinet; and the judiciary, which is independent of the other branches. There are elections for the Bundestag every four years. The dominant political parties are the CDU, with its sister party, the CSU, and the SPD.


Olaf Scholz ( SPD ) is the current chancellor and has been in office since December 2021. The SPD party won a plurality of seats in the Bundestag during the 2021 elections and formed a coalition with Alliance 90/The Greens and the FDP. The governing coalition is committed to an ODA quota of at least 0.7% of Germany’s GNI and plans to channel 0.2% of the country’s GNI to LDCs.


Under the overall guidance of the Chancellery, which is responsible for determining policy guidelines, the BMZ sets development priorities. Development Minister Svenja Schulze ( SPD ) has led the BMZ since December 2021.


The BMZ is organized across six Directorates-General. These regional subdivisions allocate Germany’s bilateral development assistance according to the BMZ’s strategy and priorities. Sectoral subdivisions formulate Germany’s sector strategies, interface with multilateral development institutions, and advise on bilateral programs.


Germany’s two major state-owned development agencies, the GIZ and KfW operate under the political supervision of the BMZ. Both play key roles in policy development, priority setting, and implementation.

  • GIZ plans and executes Germany’s technical cooperation with partner countries. GIZ also provides consulting services to the BMZ’s sectoral divisions through its ‘sector initiatives’ (‘Sektorvorhaben’).
  • KfW leads on Germany’s bilateral financial cooperation with partner countries. It receives funding from the BMZ and raises its own funds on capital markets.

The BMF, led by Minister Christian Lindner ( FDP ) develops caps for the federal budget and individual ministerial budgets. This makes it an important stakeholder when it comes to ODA levels, the BMZ’s budget, and long-term ODA contributions.


Main Actors


Click for more details on each actor.


Development Priorities


The government’s ‘2021-2025 Coalition Agreement’ lists the following development priorities:

  • Global Health, especially One Health and the fight against poverty-related and neglected tropical diseases;
  • Global health R&D;
  • Gender equality & SRHR;
  • Agriculture, Climate, and Social Protection; and
  • Multilateralism, Security, and strengthening relations with the African continent.

Development Minister Svenja Schulze ( SPD ) highlighted pandemic prevention and response, combating poverty and hunger, a just energy transition, and feminist development policy as priority thematic areas for the BMZ going forward. The MENA region will remain the regional development focus for the BMZ.


Since 2014, part of the BMZ’s budget has been channeled through ‘special initiatives’, programs spearheaded by the development minister:

  • Transformation of agricultural and food systems;
  • Refugees and host countries;
  • Stability and development in the MENA region; and
  • Good employment for socially just change.

By issue


In August 2022, the BMZ has set out four focus areas for its bilateral and multilateral development cooperation:

1. Fighting the COVID-19 pandemic and its effects, preparing for future pandemics by supporting:

  • Resilient health architecture;
  • Access to vaccines and medical supplies;
  • One health;
  • Primary health care; and
  • SRHR.

2. Eradicating poverty and hunger by:

  • Fighting the acute hunger crisis;
  • Fostering sustainable nutrition systems;
  • Limiting inequalities concerning the distribution of wealth, resources, and rights;
  • Building social security systemsl and
  • Supporting vocational training and good jobs.

3. Supporting a just energy transition vis-a-vis:

  • Expansion of clean and safe energy;
  • Climate-just employment;
  • Social-ecological transformation of the economy;
  • Adaptation to climate change; and
  • Climate-friendly cities.

4. Establishing a feminist development policy that foregrounds:

  • Women’s, girls’, and LGBTIQ+ people’s rights;
  • Political, social, and economic participation;
  • Equiteable access to resources;
  • Children’s rights and protection of children; and
  • Reducing GBV.

Global Health


Global health is an important issue for Germany’s development policy, which has been highlighted in past G7 and G20 presidencies, in 2015 and 2017 respectively. In line with Germany’s strong international response to the COVID-19 pandemic, pandemic response and preparedness have been a focus since 2020. To this end, the BMZ established a new sub-division entitled ‘Special initiative pandemic and global health, pandemic prevention, One Health’. Under Germany’s 2022 G7 presidency, a ‘G7-Pact for Pandemic Readiness’ was initiated to strengthen and align efforts to bolster worldwide pandemic readiness.


Read more about Germany’s ODA to Global Health


Climate


Climate protection has been emphasized by the BMZ as a ‘cornerstone’ of German development policy and increased in focus in recent years. Within this sector, the BMZ focuses on supporting LMICs in climate change mitigation, especially through enhancing the energy transition in these countries. Germany entered into so-called ‘Just Energy Transition Partnerships’ with South Africa in 2021 and Indonesia in 2022.


Read more about Germany’s ODA to Climate


Gender equality


The German development minister Svenja Schulze ( SPD ) set a feminist development policy as one of her main priorities when she took office in December 2021. Schulze prioritizes development projects that involve women on an equal footing wherever possible. In September 2022, the BMZ announced the implementation of a target quota for projects that contribute to gender equality. The target aims for 93% of all BMZ projects from 2022 through 2025 to contribute to gender equality.


Read more about Germany’s ODA to Gender Equality


Agriculture


Agriculture was one of the strategic priorities of former Development Minister Müller, who in 2014 launched ‘ONE WORLD - No Hunger’, a ‘Special Initiative’ on food and nutrition security as well as rural development. The ‘Special Initiative’ – now called ‘ Transformation of agricultural and food systems’ is carried forward in the current legislative period (2021 - 2025) under the current development minister Svenja Schulze.


Read more about Germany’s ODA related to Agriculture


Education


In line with Germany’s ‘special initiative’ on vocational training and jobs, higher education and vocational training are the main priorities for Germany within the education sector and are mainly approached through bilateral development cooperation.


Read more about Germany’s ODA related to Education


By region


According to the BMZ’s partnership model, introduced by the ‘BMZ 2030 Reform’, bilateral partner countries are categorized by different partnership models. As of July 2022, the BMZ cooperates bilaterally with 65 countries. With its bilateral partners, the BMZ is pursuing a joint long-term development goal. Part of these countries are so-called ‘reform partners’ – countries with a focus on reforms. Bilateral partner countries in the EU neighborhood focused on political and economic transformation are considered ‘transformation partners’. ‘Global partners’ are largely middle-income countries, where cooperation focuses on cross-border issues, such as climate change. With ‘nexus and peace partners’, the BMZ aims to work on the causes of conflicts and flight and promote stability and peace.

North Africa and SSA: The German government's new development approach across the African continent focuses on fostering private investment, good governance, and advocating for a concerted EU-Africa Policy at the EU level.


In 2017, former development minister Gerd Müller presented a ‘Marshall Plan with Africa’ laying out initiatives to improve economic and social development. The plan suggested that countries willing to implement reforms would benefit from increased ODA and German support for private investment. To date, Germany has so-called ‘reform partnerships’ based on this principle with seven countries in Africa: Ethiopia, Ghana, the Ivory Coast, Morocco, Senegal, Togo, and Tunisia. These partnerships serve as Germany’s bilateral contribution to ‘Compacts with Africa’, a G20 initiative that was developed by the BMF and launched during Germany’s G20 presidency in 2017. Currently, the BMZ’s new strategy for development cooperation on the African continent is under development. The strategy was expected to be published by the end of 2022 but has not been published so far.


Asia: Even though the SSA and MENA regions are priorities for the BMZ, Germany allocates the largest shares of its bilateral ODA to Asia (27%). In Asia, the BMZ works mostly with regionally influential MICs including China, India, Indonesia, and Vietnam. The BMZ’s work in these countries seeks to address global issues such as climate change by leveraging their large populations, economic strength, and wealth of resources such as tropical forests, biodiversity, and commodities.


Political Outlook


In December 2021, Svenja Schulze ( SPD ) took office as the new German Development Minister. Schulze, who served as the Minister for the Environment under the last government from 2018 to 2021, set her own priorities for German development cooperation, which were largely influenced by her predecessor Gerd Müller over the eight years prior. Schulze focuses on implementing a feminist development policy. However, her priorities in 2022 have largely been influenced by the war in Ukraine and its global effects, especially on food security.


Contemporary political discourse is dominated by the Russian war of aggression in Ukraine and its domestic and international consequences. Three days into the Russian invasion of Ukraine, Chancellor Scholz announced the Zeitenwende (“turning-point,” or “watershed”), including far-reaching policy shifts for Germany such as the creation of a €100 billion (US$114 billion) special fund for the military to invest more than two percent of GDP on defense. Historically Germany has spent as little as 1.4% of its GDP on defense. Overall, the German government advocates for a holistic approach to human security and supports multilateral solutions. The government’s security policy focuses on a triad of foreign, defense and development policies.


In 2022, Germany took over the G7 Presidency. Its program, titled ‘Progress toward an equitable world’, has also been largely influenced by the Russian war of aggression in Ukraine. The Development Ministers that met in May 2022 focused their discussions predominantly on the war’s impact on global food security. The meeting marked the launch of the GAFS, which was proposed by German Development Minister Svenja Schulze during the World Bank’s Spring Meeting in April 2022. The alliance aims to increase funding for and coordinate international efforts for food security.


Two other initiatives have been launched under the German G7 Presidency:

  1. The ‘G7-Pact for Pandemic Readiness’, a global network of health experts, aims to strengthen and align efforts for worldwide pandemic readiness; and
  2. The ‘Global Shield Against Climate Risk,’ which aims to scale up climate risk financing, improve climate resilience and preparedness, and promote the development of rapid solutions in the case of climate-related damages. The initiative is supported by the V20was launched at COP27 in November 2022.

Budget


Budget breakdown


Germany’s ODA is sourced from the budgets of different ministries. The largest share of ODA comes from the BMZ: 47% in 2020, the latest year for which total ODA data is available from the BMZ. The AA, which manages most of the funding for humanitarian assistance and UN peace missions, accounts for 14% of ODA overall. Another 6% is raised the KfW on capital markets.


The overall federal budget for 2023 was finalized in November 2022 and projects spending worth €476.3 billion (US$542.8 billion). This is a decrease of 3.9% (€19.5 billion or US$22.2 billion) compared to the federal budget in 2022. The decrease is driven by the government’s return to the constitutionally enshrined debt brake in 2023, which has been suspended for the past three years due to extraordinary spending related to the COVID-19 pandemic and the Russian war in Ukraine.


The return to the debt brake and the decrease in the total budget also impacted spending for the BMZ. The BMZ’s 2023 budget stands at €12.2 billion (US$13.9 billion), which is €11 million (US$13 million) less than was allocated to the BMZ in 2022. The parliamentary budget process did not result in increases to the BMZ’s 2022 budget, but secured an increase compared to the government’s draft budget. The draft budget set BMZ spending at €11.1 billion (US$12.6 billion) in 2023, which was €1.3 billion (US$ 1.5 billion) less than in 2022. The amendments made by the parliament resulted in an additional allocation of €1.1 billion (US$1.3 billion) for the BMZ in 2023.


Most of the €1.1 billion (US$1.3 billion) increase is sourced from an additional budget envelope sitting outside the ministries’ core budgets. The ‘Budget Plan 60’ includes an envelope on ‘global crisis response’. This funding can be accessed to address acute global challenges, such as the COVID-19 pandemic or the Russian invasion of Ukraine. In total, the 2023 budget has allocated €5 billion (US$5.7 billion) for global crisis response from this plan. Of this, the AA also received an allocation of €1 billion (US$1.1 billion). This leaves still some funding available for further crisis relief in 2023.


Multilateral spending saw large cuts in the Cabinet’s draft budget for 2023. Despite the increases negotiated in parliament, the multilateral budget envelope decreased by 19% from €3 billion (US$3.4 billion) in 2022 to €2.4 billion (US$2.7 billion) in 2023. This extraordinary drop is partly due to the expiration of ACT-A financing, which was previously financed partly through this budget line. Funding for bilateral cooperation stands at €5.8 billion (US$6.6 billion) in 2023, marking a 7% increase from 2022 levels.


Additionally, the downward trend of the BMZ’s budget is anticipated to continue in the upcoming years from €10.7 billion (US$12.2 billion) in 2024 down to €10.4 billion (US$11.9 billion) in 2026, as foreseen in the mid-term financial planning published in June 2022 by the BMF.


The BMZ’s budget (see table) is composed of different budget envelopes, including:

  • The ‘Bilateral development cooperation’ envelope includes budget lines for major regions and is broken down by annual allocations to specific country programs;
  • The ‘European development cooperation, UN, and other international organizations’ envelope includes budget lines for multilateral organizations related to climate change and biodiversity, global health multilaterals, and various UN programs; and
  • The ‘Multilateral development banks’ envelope includes contributions to the World Bank Group, as well as the AfDB and ADB.


Budget Process


The German government’s fiscal year runs from January to December. The chart depicts the regular budget decision-making process:

  • February/March: Cabinet agrees on caps for federal and ministerial budgets. In March, the BMF publishes caps for the federal budget and individual ministerial budgets. At this point, major decisions on increases in ODA and the overall funding allocation are made by key stakeholders including the Finance Minister, with input from the BMZ.
  • April-June: Negotiations within ministries. Ministries develop their budgets in April and submit them to the BMF. Allocations to individual international organizations are determined during this period. In parallel, between April and August, the BMZ plans its bilateral spending and multilateral funding envelopes.
  • June: Draft budget and medium-term financial planning. The Cabinet negotiates the budget and publishes the final government’s budget draft in June before parliament’s summer break. Key players in this period are the Chancellery, the BMF, and the BMZ.
  • September/Beginning of October: Parliamentary debates and proposed amendments. The first reading in Parliament takes place in early September. Parliament debates the budget until early November.
  • September/October: Amendments reviewed and recommendations to committees. The Development Committee makes recommendations on budget amendments in September. In October, the BMZ’s budget is debated by the Development and Budget Committees.
  • November: Amendments, decisions on each ministerial budget, and voting. Key stakeholders during this phase include the Budget Committee, which takes final decisions in November.
  • December: The final budget draft is voted on in plenary and signed by the President.

Issue Deep-Dives

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Kristin Laub

klaub@seekdevelopment.org

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