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Aid funding – investing in a better future

The European Union contributes actively to help developing countries stand on their own two feet. By tackling poverty, boosting local economies and strengthening governance, the EU support millions of people in partner countries across the globe. The EU provides development assistance in a way that secures the long-term future of developing countries which face the rigours of operating in an ever more complex and fast-paced global economy.

The Commission finances most of its development programmes for African, Caribbean and Pacific (ACP) partner countries through the European Development Fund (EDF). Money from this pot is also spent on supporting the EU’s Overseas Countries and Territories (OCTs). The Commission also funds some programmes from the EU’s general budget. Member States contribute to both the EDF and the general budget.

Commission funding for overseas aid is significant: between 2003 and 2007, the ninth EDF provided €15.2 billion to ACP countries. The tenth EDF runs from 2008 to 2013, and is scheduled to give out payments of €22.7 billion.

Funding is flexible and goes where it is needed. For example, in 2005 the Commission concentrated on providing money for health and education, as well as for infrastructure projects and budget support.

Commitments and payments to ACP and OCT countries in 2005 pdf - 52 KB [52 KB] , 2006 (from EDF pdf - 61 KB [61 KB] and from the general budget pdf - 27 KB [27 KB] ) and 2007 pdf - 13 KB [13 KB] .

Money well spent

Development aid must be delivered in an efficient and effective way if it is to benefit those who are most in need.

The Commission funds most ACP aid programmes in four stages. Indicative programmes identify overall priorities before money is allocated via global commitments to specific projects. Then, contracts with third parties to deliver projects are agreed through individual commitments. Payments are then made to the contractors for the delivery of projects.

Europe is also a world leader in providing budget support payments, which are direct contributions to the government budgets of recipient countries. This type of funding encourages ACP countries to take more responsibility for their own development by encouraging governments to reform their economies, improve the way they manage public finances, cut debt and make it easier for businesses to invest locally.

The Commission faces unique challenges as an aid donor to ACP countries. Firstly, it must find a way to act quickly while complying with the EU’s collective decision-making processes.

Secondly, while most other donors support a limited number of better performing states, the Commission has to deliver its aid throughout the developing world. This includes the world’s very poorest countries, many of which have weak government structures and shaky economic policies.

Thirdly, the Commission must make best use of European taxpayers’ money by ensuring that anti-poverty programmes are tailor made to meet local need and that they deliver concrete, lasting results.

More aid, better aid

Since 1990, Commission funding for ACP countries has risen steadily each year in real terms – and now it is spending more than ever before on aid for trade. Since 2001, more than €850 million of Commission funds have been used to help ACP regions to boost trade and integrate into the world economy.

The Commission does this by:

  • Using innovative financing techniques – for example, it has devoted more than €1 billion to initiatives to support projects for water and sanitation, energy and peacekeeping
  • Simplifying its procedures
  • Devolving responsibility for most of its programmes to its in-country delegations
  • Working more closely with other donors

What’s more, since 2000, the Commission has radically changed the way it works. Quality reviews are now integral to its programme design process. More independent monitoring and evaluation has allowed the Commission to learn from experience and correct mistakes more quickly.

The Commission now requires ACP governments to make a commitment to support new programmes once EU funding ends. Commission staff operating in ACP countries work with partners – including governments, NGOs, and representatives from civil society – to devise programmes “on the ground”. This allows the Commission to tailor programmes to local needs and circumstances. As a result, EU Member States – which must give the go ahead to new programmes – have approved every Commission proposal made over the past few years.

Developing efficiency

The Commission is working hard to commit and spend money more quickly than it has in the past. Since 2001, it has cut the average time taken to implement development projects from five to four years. The Commission has now developed a faster, leaner way to make decisions about new development programmes, which it has presented to EU Member States. And the tenth European Development Fund will be the first to start with all resources from past EDFs already committed to specific programmes.

For further information

See also: Annual reports on the European Union’s development policy and external assistance programmes.

Last update: 13/02/2013 | Top