ABSTRACT

Official development assistance (ODA) is at the heart of foreign aid. The Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) defines ODA as resources transferred on concessional terms, with the promotion of the economic development and welfare of the developing countries as the main objective. In addition, the early 1990s witnessed a growth in ‘official aid’ to ‘Part II’ countries, which shared ODA’s essential features but was targeted on 12 ‘transition’ countries in the former communist world, primarily Russia, and advanced developing countries like Israel. Concessionality (‘softness’) refers to grants or loans on especially favourable terms. Over time, grants have become the dominant mode of bilateral aid to the least developed countries, many of which have experienced difficulties in servicing their foreign debt, including loans formerly acquired on concessional terms.