Policy Updates

On September 19, 2023, UK Foreign Minister James Cleverly called for a more inclusive international financial system and announced a series of new UK financial guarantees to unlock further funding from MDBs at the 78^th UN General Assembly.

The guarantees included:

• US$300 million to IFCAP: The UK estimates that this will unlock a further US$1.2 to US$1.8 billion in climate financing over the next 5 years. IFCAP is a multi-donor financing partnership facility set up by the ADB, with the goal of scaling up finance for action against climate change in Asia and the Pacific; and
• GBP180 million (US$215 million) in support to the IFFE: GBP95 million (US$113 million) will be provided as grants and paid-in capital, as well as GBP85 million (US$101 million) in contingent guarantees. The UK hopes this will unlock up to US$1 billion in affordable education finance.

The UK also announced GBP17 million (US$20 million) to improve tax systems in developing countries to help ensure countries have more sustainable public finances and to close tax loopholes. The UK estimated that this could raise an additional US$260 billion in financing.

Finally, the UK also announced that it will join and provide additional disaster risk financing support for the Caribbean, a region particularly vulnerable to natural disasters. The Foreign Secretary is slated to announce that the UK will join CCRIF SPC to establish an affordable insurance scheme to increase the resilience of vital WASH services and provide additional support for the Caribbean.

On September 14, 2023, the UK government released its final statistics on UK ODA spending for 2022.

The figures showed that the UK spent GBP13 million (US$15 million), or 0.51% of its GNI, on ODA. In 2022, the data showed an increase in current prices of GBP1 million (US$2 million) from 2021 levels.

The UK spent GBP4 million (US$4million), or 28.8%, on in-donor refugee costs. BOND criticized the UK for spending such a large share of its ODA budget in-donor refugee costs and noted that this increase came at the expense of funding for vulnerable partner countries.

Other key statistics included:

• UK bilateral and multilateral spending: UK bilateral ODA spending increased in 2022 and stood at GBP10 million (US$12 million), or 75.3% of total UK ODA. Much of the 33% increase in bilateral funding was allocated to in-donor refugee costs. Core multilateral funding accounted for GBP3 million (US$4 million), or 24.7% of total UK ODA. This is the lowest share of multilateral ODA in recent years. The UK met its commitment made in its 2022 International Development Strategy to deliver 75% of its ODA bilaterally;
• Distribution of ODA across government departments: The FCDO was accountable for just 59.7% of ODA in 2022, down from 71.6%, and was driven primarily by in-donor refugee costs. The FCDO spent GBP7.6 million (US$9.1 million) on ODA in 2022, compared with GBP8.2 million (US$9.8 million) in 2021. In contrast, the UK Home Office, spent GBP2 million (US$3 million) of ODA in 2022, a 130.2% increase compared to 2021;
• Regional spending: Africa remained the largest recipient of UK region-specific bilateral ODA in 2022, accounting for 42.2% of ODA. However, bilateral ODA to Africa decreased by 28.2%, from GBP1.7 million (US$2 million) in 2021 to GBP1.2 million (US$1.5 million) in 2022. This is the lowest level of ODA to Africa in recent years;
• Top three recipients of UK bilateral ODA: The top three recipients of UK bilateral country-specific ODA were Afghanistan (GBP352 million (US$421 million)), Ukraine (GBP342 million (US$409 million)) and Nigeria (GBP110 million (US$131 million));
• Top five bilateral ODA sectors: The largest amount of bilateral ODA was focused on the sectors ‘Refugees in Donor Countries’ (GBP4 million (US$4 million)), ‘Humanitarian (GBP1 million (US$1 million)) and ‘Health’ (GBP976 million (US$1.2 billion));
• Top five recipient of UK multilateral ODA: The EU remained the largest recipient from the UK, though the volume of funding decreased. The second-largest recipient of UK multilateral ODA was the Global Fund, followed by the World Bank’s IDA, the ADF and the GCF; and
• Pandemic funding: In 2022, approximately GBP270 million (US$323 million) of UK bilateral ODA was spent on activities which specifically addressed the COVID-19 pandemic. FCDO accounted for 96% of pandemic ODA. This included the UK’s donation of excess vaccine doses, both directly and through COVAX, estimated at GBP228 million (US$273 million).

The report noted that these figures have not been subject to international verification by the OECD.

On September 7, 2023, the CDG published a report examining the UK’s non- ODA development finance, which found that the UK is on track to meet its pledge to mobilize GBP8 million (US$9.6 billion) in private finance three years ahead of its 2025 target.

The study reviewed seven main finance tools, including the UK’s use of export finance and capital increases to the BII. It found that the UK has increased the amount of mobilized private finance from approximately GBP3 billion (US$4.3 billion) in 2018 to GBP5 billion (US$6 billion) in 2021. Private financing is projected to reach GBP10 billion (US$12 billion) in 2022, exceeding the target set by former Foreign Minister Liz Truss of mobilizing GBP8 billion (US$9.6 billion) by 2025.

The report highlighted the UK’s use of guarantees to increase lending by MDBs, noting it as an innovative approach that mobilized GBP5 billion (US$6 billion) for climate objectives, support to Ukraine, and other initiatives. This approach utilizes MDBs' preferred creditor status and ability to raise money from private investors at a rate much more favorable than other UK instruments.

The report noted the need for transparency around the UK’s use of guarantees, and urged the UK to follow Sweden’s model of delivering an annual guarantee report.

On September 6, 2023, the UK’s aid watchdog ICAI released an update on the implications of the UK’s new Illegal Immigration Act, finding that the act would impact the UK’s ability to report its spending on irregular asylum-seekers as ODA.

The act was introduced to Parliament on March 7, 2023, and received Royal Assent, though it has not come into force. The act denied individuals arriving in the UK through irregular or illegal routes the ability to apply for asylum. It gave the UK the right to return individuals to their home country or a third country where their asylum claim could be assessed.

ICAI found that denying access to an asylum application entails that these individuals are not considered refugees under UK law, therefore, funds expended on them cannot be classified as in-donor refugee costs.

In 2022, the UK spent GBP3.7 billion (US$4.4 billion) of its ODA budget on in-donor refugee costs. The Home Office was responsible for GBP2.9 billion (US$3.5 billion) of these funds.

ICAI created three scenarios for 2024 to evaluate at the impact of ODA spending on in-donor refugee costs.

• Scenario 1 assumes the act is fully implemented, and the government does not create any new safe and legal routes. In-donor refugee costs would fall to just GBP222 million (US$266 million) in 2024;
• Scenario 2 assumes the act is fully implemented, and the government sets up new safe and legal routes by expanding the UK Resettlement Scheme to take an additional 20,000 refugees per year. In-donor refugee costs would fall sharply to GBP394 million (US$472 million) in 2024; and
• Scenario 3 assumes that the act is only partially implemented, applied only to some people arriving via illegal routes. In-donor refugee costs would remain high, standing at GBP1.8 billion (US$2.2 billion) in 2024, though this would still be below 2022 levels.

ICAI noted that the act would not affect people seeking protection through safe and legal routes via UK schemes such as its nationality-based schemes for Hong Kong and Ukraine and the more limited schemes for Afghanistan and Syria. Around 60% of the 500,000 people who have received some form of protection in the UK since 2015 arrived through safe and legal routes from Ukraine and Hong Kong. ICAI also noted, however, that the number of individuals coming from these two countries to the UK has significantly decreased in the 1^st and 2^nd quarters of 2023 and is likely to continue to decrease in the future.

An explanatory note accompanying the act mentioned the Prime Minister’s promise to create more safe and legal routes for people seeking asylum in the UK. ICAI noted that the Prime Minister also stated that more safe and legal routes will only be implemented once the government has achieved sufficient control of UK borders.

ICAI has not sought legal advice or input on the act. The report was intended to inform MPs about the potential ramifications of the act on ODA spending lines. The Home Office is undertaking its own review, which is slated to be released later in 2023.

On September 2, 2023, the UK government published a report highlighting the UK’s progress in implementation of the UK’s Strategy for International Development, originally published in May 2022.

The progress report highlighted the UK's efforts in:

• Helping to support sustainable growth by: allocating GBP2.3 billion (US$2.8 billion) of new guarantees with key MDBs to support sustainability in partner countries, signing Just Energy Transition Partnerships with South Africa, Indonesia, Vietnam, and Senegal to support clean energy, and providing GBP588 million (US$704 million) in private and public finance for clean energy innovation through the Ayrton Fund;
• Supporting vulnerable communities facing humanitarian crises by: providing a provisional total of GBP1.06 billion (US$1.3 billion) in humanitarian aid in 2022 to countries including Syria, Sudan, Turkey, Afghanistan, and Ukraine;
• Strengthening global health by: hosting the Global Pandemic Preparedness Summit in 2022 alongside CEPI to raise more than GBP1.1 billion (US$1.3 billion) for PPR, helping secure multilateral agreement for a legally binding global PPR instrument, pledging GBP25 million (US$30 million) to a new pandemic preparedness fund, and funding UK research on a new insecticide for malaria bed nets, which is currently protecting 63 million people;
• Promoting open science for global resilience by: investing GBP300 million (US$359 million) in R&D to strengthen local resilience in partner countries, which includes new research with the Bill & Melinda Gates Foundation to increase agricultural yields by up to 20% for certain crops while protecting biodiversity. Additionally, providing funding for the Global Innovation Fund;
• Supporting girls’ education and women’s rights by: helping build a Global Coalition for Foundational Learning alongside USAID, the World Bank, UNESCO, UNICEF, and the Gates Foundation that calls on governments around the world to prioritize FLN for marginalized children and girls. Additionally, signing a flagship GBP38 million (US$45.5 million) program in March 2023 designed to strengthen grassroots women's rights organizations and hosting the ‘Preventing Sexual Violence in Conflict Initiative’ International Conference in 2022, which led to 40 countries committing to tackle conflict-related sexual violence.
• Supporting reform of the international financial system by: allocating GBP4 billion (US$5 billion) in SDR through the IMF to deliver affordable long-term financing in low and lower-middle income countries, and working to mainstream CRDCs in loan agreements to vulnerable countries; and
• Strengthening UK ODA by: creating a new position for Minister for Development and Africa, creating a Ministerial ODA Board to improve ODA spending oversight, and the establishment of a Second Permanent Secretary at the FCDO to oversee development priorities.

On August, 31, 2023 UK Minister for Development and Africa Andrew Mitchell announced UK funding for two new education projects in Rwanda.

The first program is the UK’s new Girls in Rwanda Learn program, a seven-year partnership with UNICEF that aims to retain at-risk girls in school and support schoolchildren with disabilities. The second program is the launch of a Digital Library. Access to the Library will be free for a year and plans to span over 800,000 literary resources. The project is a British Council initiative.

On July 27, 2023, the FCDO published a new policy paper outlining the government’s support for girls’ education worldwide and highlighted the policy goals of the UK government in this area, guided by the Global Objectives on access and learning in low- and lower-middle income countries by 2026.

The objectives were agreed upon by the G7 during the UK’s 2021 Presidency. They focused on increasing access to school for 40 million more girls and improving literacy outcomes for 20 million more girls ages 10 and under.

The paper noted that the work to ensure quality education for all children is guided by FCDO’s 2021 International Women and Girls Strategy. It highlighted that the UK is motivated to improve girls' education as it is both a human right and an economic booster for partner countries.

The paper reported that the UK’s program helped to support 16 million children, including 8 million girls, to gain an education between 2015 and 2020. It also noted that FCDO’s Education, Gender and Inclusion Research Team has invested in research in more than 40 countries to improve access to learning as well as utilize educational technology.

UK multilateral and bilateral ODA supports education in 100 countries around the globe, according to the paper. Support offered by the UK includes providing training and support to teachers in partner countries, protecting girls' education throughout crises, ending violence against children, and ensuring that everyone, including disabled children, has access to education.

On July 19, 2023, the FCDO released its equality impact assessment report for ODA allocations in FY2023-24 and predicted consequences of future funding cuts.

The assessment noted that cuts to UK ODA in FY2023-24 for key regions and thematic areas are projected to have a negative impact on thousands of vulnerable people.

The assessment predicted that the 2023-24 ODA cuts will result in:

• A 60% cut in funding to the UK’s Women’s Integrated Sexual Health Program in Africa, which was projected to reduce the number of averted unsafe abortions from approximately 300,000 to 115,000, and the number of averted maternal deaths from 2,531 to approximately 1,000;
• 500,000 women and children in Yemen losing access to healthcare;
• 27,000 children left untreated for severe acute malnutrition in Yemen;
• 42,000 teachers and school leaders in Ethiopia not being trained; and
• An 87% cut in funding to the Education Cannot Wait program, projected to result in a lack of support for 115,000 girls across various partner countries.

Civil society celebrated the public release of the report as a step towards governmental transparency, despite the troubling contents.

On July 17, 2023, the UK's FCDO released its annual report for FY2022-23 and revealed an anticipated 20% increase in FCDO ODA, from GBP6.9 billion (US$8.3 billion) in FY2022-23 to GBP8.3 billion (US$9.9 billion) in FY2024-25.

Most of the increase was planned for FY2024-25, with a marginal increase expected in FY2023-24. Civil society groups welcomed the planned increase. However, experts noted that many budget lines cut in FYs 2021-22 and 2022-23 are first planned for additional cuts in FY2023-24 before eventually increasing in FY2024-25.

The cuts in FY2023-24 targeted UK bilateral ODA programs. They resulted from anticipated continued spending on in-donor refugees and a sharp increase in multilateral core contributions for FY2023-24.

The outline of the funding plans for key regional and thematic funding areas depicted that:

• Bilateral ODA to Africa was GBP942 million (US$1.1 billion) in FY2021-22 and fell by 18% in FY2022-23 to GBP762 million (US$913 million). The report projected the regional funding would fall by 15% in FY2023-24 to GBP645 million (US$772 million) and then to rise by 111% to GBP1.3 billion (US$1.6 billion) in FY2024-25;
• Education, gender and equality stood at GBP179 million (US$214 million) in FY2021-22 and fell by 17% in FY2022-23 to GBP147 million (US$176 million). The report indicated the thematic funding would fall again in FY2023-24 to GBP139 million (US$166 million) (5%) and then to rise by 153% to GBP354 million (US$424 million) in FY2024-25;
• Global health stood at GBP1.1 billion (US$1.3 billion) in FY2021-22 and fell by 15% in FY2022-23 to GBP1 billion (US$1.2 billion). Projections showed funding is scheduled to fall again in FY2023-24 to GBP809 million (US$969 million) (21% from FY2022-23) and then to rise by 32% to GBP1 billion (USD1.2 billion) in FY2024-25; and
• International Finance Institutions Department, which leads financing for MDBs, stood at GBP848 million (US$1 billion) in FY2022-23, but was projected to rise GBP1.8 billion (US$2.2 billion) in FY2023-24 (53%) before falling by 241% to GBP527 million (US$631 million) in FY2024-25.

The climate, energy, and environment thematic area showed new funding lines that were not present in FY2021-22. Funding stood at GBP201 million (US$241 million) in FY2021-22 and increased by 148% in FY2022-23 to GBP481 million (US$576 million). It is scheduled to increase again in FY2023-24 to GBP576 million (US$690 million) (20%) and again rise by 35% to GBP653 million (US$782 million) in FY2024-25.

Another new category was British Investment Partnerships, which focuses largely on funding for the UK’s development finance institution, British International Investments. The report showed that funding is set to increase from GBP342 million (US$409 million) in FY2022-23 to GBP891 million (US$1 billion) in FY2024-25.

At the Paris Summit for a New Global Financing Pact, the EU announced several pledges and partnerships to support partner countries in adapting to climate change.

In partnership with France, Germany, the UK, and Canada, the EU launched a new Just Energy Transition Partnership with Senegal. With the help of international development banks and other partners, the group aimed to mobilize EUR2.5 billion (US$2.7 billion) to diversify Senegal's power supply and increase domestic access to renewable energy.

The EU, via the Team Europe initative also provided an additional EUR300 million (US$328 million) to Rwanda's Resilience and Sustainability Facility. Building on existing commitments of US$319 million made through the IMF, the funding included commitments from the EIB, AFD, IDC, and other partners. The funding was allocated to projects to bolster the capacity to author and enact policy changes to respond to climate change.

Additionally, the EIB announced an EUR10 million (US$11 million) loan to Barbados for healthcare resilience. The pledge also included a commitment to improve partnership on WASH, renewable energy, and climate change.