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The 0.7% Pledge is the commitment of the world's developed countries to donate 0.7% of their gross national product (GNP) to the economic development of poor countries.
GNP - The total number of goods and services produced by a country's factors of production and sold on the market in a given time period. Production from citizens working outside of the country does count toward to GNP. Production from non-citizens living inside the country does not.
The timeline below follows the 0.7% pledge from its inception to its place in the world today:
“In recognition of the special importance of the role which can be fulfilled only by official development assistance, a major part of financial resource transfers to the developing countries should be provided in the form of official development assistance. Each economically advanced country will progressively increase its official development assistance to the developing countries and will exert its best efforts to reach a minimum net amount of 0.7 per cent of its gross national product at market prices by the middle of the Decade."
- International Development Strategy for the Second United Nations Development Decade, UN General Assembly Resolution 2626 (XXV), October 24, 1970, para. 43
What is Official Development Assistance (ODA)?
According to the OECD:
“Flows of official financing administered with the promotion of the economic development and welfare of developing countries as the main objective, and which are concessional in character with a grant element of at least 25 percent (using a fixed 10 percent rate of discount). By convention, ODA flows comprise contributions of donor government agencies, at all levels, to developing countries ('bilateral ODA') and to multilateral institutions. ODA receipts comprise disbursements by bilateral donors and multilateral institutions."
In real words:
Aid given for the main objective of promoting economic development in developing countries, of with at least 25% must be a grant. Aid can be country-to-country (bilateral aid) or to multilateral institutions (like the World Bank), which then distribute the money to developing countries.
In the original UN Resolution, ODA was defined as untied aid for the specific purpose of promoting economic and social development, as seen in the following:
"Financial aid will, in principle, be untied. While it may not be possible to untie assistance in all cases, developed countries will rapidly and progressively take what measures they can to reduce the extent of tying of assistance and to mitigate any harmful effects [and make loans tied to particular sources] available for utilization by the recipient countries for the purpose of buying goods and services from other developing countries."
"Financial and technical assistance should be aimed exclusively at promoting the economic and social progress of developing countries and should not in any way be used by the developed countries to the detriment of the national sovereignty of recipient countries."
"Developed countries will provide, to the greatest extent possible, an increased flow of aid on a long-term and continuing basis."
International Development Strategy for the Second United Nations Development Decade, UN General Assembly Resolution 2626 (XXV), October 24, 1970, para. 45-47
However, the definition of ODA has expanded in the subsequent years to include a number of other causes. Some new categories for ODA include:
This re-distribution of funds results in less money being invested directly for the economic development of poor countries. Thus, even though it may appear as though a particular country's ODA budget has increased, less of that money may be reaching those who need it most.