Donor Profile: Italy
Last updated: December 23, 2022
In 2021, Italy spent a total of US$6 billion (current prices; US$5.7 billion in constant 2020 prices) on ODA, making it the seventh-largest donor country among members of the OECD DAC.
Italy’s ODA only represented 0.28% of the country’s GNI in 2021, putting it below the UN target of 0.7% and the DAC average of 0.32%.
In 2018, ODA growth in Italy was reversed for the first time since 2012. Following steady decreases between 2017 and 2020, resulting from a reduction in in-country refugee costs, Italy’s ODA jumped sharply in 2021 due to the COVID-19 pandemic and Italy’s global health response. Italy’s ODA in 2021 equated to US$5.7 billion, bringing development assistance nearly back to 2017 levels.
In its ‘2018 Update to the Economic and Financial Document,’ Italy committed to gradually increasing its ODA to GNI ratio to 0.36% in 2020, to 0.4% in 2021, and 0.7% by 2030 - targets Italy has not met. Since 2019, the ‘Economic and Financial Documents’ no longer mention such targets.
In 2022, Italy's Parliament voted to approve a budget for 2022-2026, which includes an increase in the international cooperation budget by €99 million (US$113 million) for 2022, €199 million (US$227 million) for 2023, €249 million (US$284 million) for 2024, €299 million (US$341 million) for 2025, and €349 million (US$398 million) per year starting from 2026.
NGOs are optimistic about the increased international cooperation budget for the next five years. 'Campaign 070' presented a bill to parliament in 2022 to integrate the ambitious goal of reaching a 0.5% ODA/GNI target in 2027 and a 0.7% ODA/GNI target in 2030, though these may not come to fruition as a result of elections in September 2022.
Italy traditionally disburses most of its ODA multilaterally. On average, Italy directed 61% of its ODA to multilateral institutions between 2011 and 2020; however, between 2012 and 2017, Italy’s share of bilateral contributions increased due to the high costs associated with hosting refugees. While this brought Italy’s bilateral and multilateral contributions more in line with the DAC average, Italy has tended to revert to greater multilateral spending in recent years.
In 2020, Italy channeled 69% of its ODA multilaterally, well above the 42% average of all members of the OECD DAC.
Italy’s bilateral contributions decreased significantly after 2017 and have remained on the decline.
These substantial changes were primarily driven by the changing costs of hosting refugees. In-country refugee costs fell by 88% between 2017 and 2020. Despite this significant decrease, the costs associated with the hosting of refugees still made up the largest share of Italy’s bilateral ODA in 2020 (16%).
The recent cuts in bilateral ODA affected various sectors:
- Bilateral contributions to humanitarian assistance, Italy’s second-most highly funded sector, declined by 38% from 2017 to 2020.
- Health, education, and agriculture — the key priority areas defined in the AICS guidelines for the 2021-2023 period — together represented 28% of Italy’s bilateral spending in 2020.
- Despite the overall decrease in bilateral ODA, funding for education increased by 31% from 2017 to 2020, and by 9% from 2019 levels.
The majority of Italy’s bilateral ODA is disbursed through the public sector, followed by multilateral organizations as earmarked funding. Bilateral funding through multilateral organizations increased in absolute terms from 2019 to 2020, most likely due to increased COVID-19 support.
Italy currently provides the majority of bilateral ODA in the form of grants (74%), much lower than the DAC average of 89%. 2020 is the first year in which Italy did not provide more than 90% of bilateral ODA as grants. The share of ODA provided as loans and equity investments is expected to rise as Italy’s development bank is increasingly engaging in innovative financing mechanisms.
The MENA region and SSA (receiving US$293 million and US$261 million in 2020, respectively) are priority regions for Italy’s bilateral development cooperation. A large share of Italy’s bilateral funding is unallocated by country and region (US$407 million). Italy provided 21% of its bilateral ODA to the MENA region and 19% to the SSA region in 2020. These regions are expected to remain Italy’s primary focus in the coming years, according to the current ‘Programming and Policy Document.’
Italy is a strong supporter of multilateralism, in particular health multilaterals. In recent years, Italy has increased its contributions to health multilaterals such as Gavi and the Global Fund.
Core contributions to multilateral organizations made up 69% of Italy’s ODA in 2020 (:abbrDAC average: 42%). A large proportion is channeled to EU Institutions, which received US$2 billion of Italy’s ODA in 2020, amounting to 65% of the country’s total contributions to the multilateral system.
Other recipients of Italy’s multilateral ODA in 2020 included the World Bank Group (US$432 million, or 14% of multilateral ODA ), UN agencies (US$209 million, or 7%), and regional development banks (US$152 million, or 5%).
Recent commitments to multilateral organizations are summarized below.
Italy is a representative democracy with a parliamentary system. Elections take place every five years or in the event of a dissolution.
The last election was in September 2022. The center-right coalition led by Giorgia Meloni won the Italian political elections with 44% of the votes. Brothers of Italy led with more than 26%, up from just 4% in the last national election in 2018, supplanting Matteo Salving’s League for Salvini Premier party as the driving force on the right. LSP took less than the 9% of the vote, down from more than 17% four years ago. The other major conservative party, Silvio Berlusconi's Forza Italia, garnered around 8% of the vote.
The voting turnout in Italy was historically low with just 64% against 73% in the previous election The right took full advantage of Italy's electoral law, which benefits parties that forge pre-ballot alliances. Centre-left and centrist parties failed to align, and even though they collectively won more votes, they ended up with far fewer seats. The center-left Democratic Party received 19% of the vote, while the left-leaning, unaligned Five Star Movement received around 15%, a exceeding pre-election expectations. The centrist coalition, Azione, led by former Prime Minister Matteo Renzi and Carlo Calenda, won almost 8%. Enrico Letta the head of the main opposition, PD said he will not contest the leadership in the next party congress.
Giorgia Meloni is Italy’s first female Prime Minister, forming Italy’s most right-wing government since World War II. She leads a party rooted in the post-war fascist movement that gained traction due to dictator Benito Mussolini. Earlier this year she publicly positioned herself strongly against migrants, the LGBTQ+ community, and the EU. She is attempting to soften her image by emphasizing support for Ukraine and diluting anti- EU rhetoric.
Italy is facing a looming recession due to its gas dependence. In October 2022, the IMF raised its Italian growth forecast to 3.2% for 2022, 0.2% higher than its previous forecast in July and 0.9% above an April forecast. This follows GDP growth of 6.6% in 2021. But for 2023, the IMF slashed its Italian growth forecast by 0.9% in July and 1.9% in April 2022 to -0.2%. The IMF also noted that Italian unemployment would fall to 8.8% in 2022 before rising to 9.3% in 2023. Italy's budget deficit will fall to 5.4% in 2022 from 7.2% in 2021, then fall further to 3.9% in 2023, and public debt will drop from 150.9% in 2021 to 147.2% in 2022, to 147.1% in 2023. Furthermore, inflation is very high: consumer prices grew by 8.7% in 2022.
More clarity on ODA levels will come once the budget is delivered in late December 2022.
Development cooperation is defined as an ‘integral and qualifying part’ of Italian foreign policy and builds on the following architecture:
- Parliament is composed of the 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 final decisions.
- MAECI is responsible for defining the strategic direction of Italy’s development policy. Within MAECI, the Vice-Minister of Foreign Affairs and International Cooperation plays a key role in overseeing the development of the ODA budget as well as the development of the tri-annual programming guidelines, which define the country’s overarching development objectives and priorities.
- MEF has joint control over the cooperation with and contributions to development banks and funds together with MAECI. MEF collaborates with MAECI on the ODA budget. The Directorate III on International Financial Relations is an important part of MEF, which consists of 10 specific offices that participate in informal government groups (including the G7 and the G20) and deal with development-related initiatives.
- CICS usually meets twice a year to approve the three-year programming Guidelines and ODA budget. CICS is chaired by the Prime Minister and is composed of the Minister and Deputy Minister of Foreign Affairs, as well as representatives from other ministries, including finance and the environment.
- The Joint Development Cooperation Committee decides on operational issues, including all projects worth over €2 million (US$2 million). It is chaired by MAECI and composed of the heads of MAECI’s DGCS and AICS.
- AICS develops, supervises, and implements Italy’s development programs.
- The development finance institution, CDP, is a joint-stock company under public control, which provides technical and financial support to MAECI and AICS. It acts as the administrative manager of development financing, by signing agreements with the governments of partner countries or by managing Italian, European, international, and private sector funds. CDP itself can also finance development projects, using its own resources or private/public blending instruments.
- 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, in consultation with local technical units and embassies. At the country level, regional departments at DGCS’ headquarters develop and approve projects after consultation with the embassies.
- Civil society is involved in the policy-making process mainly through the CNCS. It is a consultative body bringing together 50 members of different backgrounds, including private-sector organizations, CSOs, and public authorities, to provide feedback on the government’s development policies. The CNCS divides its work between three groups (‘Agenda 2030,’ ‘private sector,’ and ‘migration and development’). Each is supposed to meet every two months, but there has been public criticism that the Council remains largely inactive.
Italy’s strategic priorities for development cooperation are spelled out in the three-year ‘ Programming and Policy Document and Directions for Italian Development Cooperation’, developed by MAECI. The most recent document for 2021-2023 confirms Italy’s focus on the African continent and on mitigating the root causes of migration and displacement as well as health, education, agriculture, food security, nutrition, and environmental protection. The priority intervention areas center around five strategic pillars:
- ‘People — human development and dignity,’ which includes food security; sustainable agriculture; health; education; cultural and natural heritage; promoting sustainable tourism; social, economic, and political inclusion; and migration;
- ‘Planet — protection of the environment, management of natural resources and the fight against climate change,’ which also includes ensuring access to reliable and sustainable energy;
- ‘Prosperity — inclusive and sustainable economic growth and decent work;’
- ‘Peace — peaceful and inclusive societies, democracy, effective and responsible institutions, rule of law and human rights for all;’ and
- ‘Partnerships for sustainable development,’ supporting the mobilization of domestic resources; debt relief and restructuring; promoting triangular cooperation and public-private partnerships; engaging civil society actors; and strengthening statistical skills.
AICS, which manages Italy’s bilateral development cooperation, focuses development cooperation in five thematic areas:
- Economic development and opportunities;
- Human development (including health, education, gender equality, and disabilities);
- Environment and use of natural resources;
- Rural development and food security; and,
- Conflict-affected and fragile states.
Global health is a key issue for Italy, and will likely continue to top the agenda going forward. Food security is another priority for Italy in light of the COVID-19 crisis. Italy is also now promoting the ‘One Health’ approach, which puts forth that human and animal health are interdependent and linked to the health of entire ecosystems.
Agriculture is a key issue for Italy, especially with major UN food and agriculture organizations based in Rome.
Climate and gender equality: Climate change and gender equality are prioritized in Italy’s development priorities; however funding levels remain moderate. These issues could likely see increased interest, and potentially funding, in the coming years.
Education is not a major priority for Italy; however, the issue is largely related to Italy’s work in gender equality.
Due to Italy’s geographic location as the first port of call for many refugees entering Europe, the country’s development priorities include a strong emphasis on tackling the root causes of migration, particularly on the African continent. Although, Italy has not yet adopted the Global Compact on Migration, an intergovernmental agreement that lays out objectives to facilitate legal migration prepared by the UN.
AOI and CINI, two Italian NGO development umbrella networks, noted that the 2022 budget will allow Italian ODA to count towards hosting refugees and asylum seekers in their first 12 months in Italy. The unspent part of these funds, intended for the reception of refugees and asylum seekers, will be redirected from the Ministry of Interior to MAECI.
As a result of migration, ODA -reportable costs of hosting refugees in Italy rose significantly within the last decade: In 2012, Italy spent only US$237 million (9% of total ODA) on in-country refugees. In 2017, that number reached US$1.9 billion (31% of total ODA). Starting in 2018, refugee costs began to decrease for the first time since 2012, falling to US$1.1 billion (22%) in 2018, US$458 million (10%) in 2019, and US$229 million (5%) in 2020. This decrease was the primary driver of Italy’s overall ODA decline between 2017-2020; however, even excluding refugee costs, Italy’s ODA decreased by 6% (from US$4.2 billion to US$4.0 billion) between 2017 and 2019. Net ODA, excluding refugee costs, rose to US$4.2 billion in 2020. Refugee costs could increase again as a consequence of Russia’s full-scale invasion of Ukraine and resulting increased refugee numbers.
Italy is in the early stages of developing an evaluation system following ‘Law 125,’ which calls for results-based management of Italian development cooperation. Italy has therefore established an ‘Evaluation Advisory Committee.’ Despite these recent efforts, the ‘ OECD Development Co-operation Italy Peer Review’ in 2020 recommended that Italy should strengthen evaluation to inform future program design, strategic direction, and oversight of its development initiatives.
Italy’s budget documents indicate that the country will spend €5.6 billion (US$6.3 billion) on ODA in 2022.
The MEF manages the largest part of Italy’s ODA budget (46%) in 2022: €2.5 billion (US$2.9 billion). The MEF mainly contributes to Italy’s development funding through contributions to the EU's general budget, which includes the DCI.
The Ministry of Interior controls the portion of the ODA budget allocated for spending on refugees and migration-related issues.
MAECI manages 24% of the ODA budget in 2022. The main ODA -related budget envelope within MAECI’s budget is program 4.2 ‘Development Cooperation’. It comprises ‘chapters’ of funding to Italy’s development agency, AICS (€617 million, or US$703 million in 2022), and contributions to the EDF. It also includes several ‘chapters’ of contributions to the UN and other multilaterals.
Parliamentary budget discussions run from October to December and overall ODA levels are set in March and April.
- The MEF develops three-year budgetary guidelines: From February to April each year, the government develops the DEF, which sets a three-year framework for economic and budgetary planning. Key decision-makers in this process are the Prime Minister, the Minister of Finance, the Minister of Foreign Affairs and International Cooperation, and the Vice-Minister of Foreign Affairs. The DEF is presented to the parliament by April 10 each year for approval from 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 Vice-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 before the presentation of the draft budget, Members of Parliament and MAECI staff are frequently consulted by interest groups who hope to advocate for certain priorities within the budget during this period.
- Parliament examines, amends, and votes on the 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 key stakeholders in the budget allocation. The full parliament votes on the budget by the end of December.
In addition to the regular budget process, the government usually issues a decree known as the 'one thousand extension decree’ 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 usually provides an additional opportunity for interest groups to influence the ODA budget.
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