Aid is not the only source of development finance or, for many countries, the most important. Remittances and private voluntary transfers meet some of their need. But the extremely poor countries of Africa and Asia require substantial increases in aid to reach their development goals. 

     Rapidly growing economies need and attract large flows of private direct and portfolio investment. East Asian exporters have also recorded large trade surpluses. Latin America and the Caribbean receives high levels of remittances from people living and working abroad.

     Many countries in the Middle East and North Africa generate substantial trade surpluses, which provide a source of public and private finance. Although countries in all regions borrow from multilateral institutions like the World Bank, some are repaying more than they borrow. 

Source: OECD Development Assistance Committee.

     Official development assistance (ODA) is the aid provided by the richest countries to the poorest. Through much of the 1990s ODA levels fell while ODA as a proportion of donors’ GNI fell even faster. Many donors pledged to provide at least 0.7 percent of GNI, but the average remains below .25 percent. As much as a third of aid goes to middle-income countries, not to the neediest. Since 2002 donors have pledged to increase aid by $20 billion a year in 2006 and to provide more than $100 billion a year by 2010.

Source: International Trade Centre, World Trade Organization, and United Nations Conference on Trade and Development.

     Creating opportunities for developing countries to sell their products in wealthier markets is an important complement to aid. Tariffs have been falling. Many high-income countries have offered special concessions, allowing selected exports of poor countries to enter duty-free. The recent dropping of quotas on textiles has created new opportunities for efficient producers. But tariffs charged by high-income countries on goods important to developing countries, such as textiles and agricultural products, remain high. Subsidies of $350 billion a year to agricultural producers in OECD countries are another barrier to developing country exports. Global trade is not yet a level playing field.

a. Includes a one-time balloon payment on an Indian bond in 2003.
Source: World Bank staff estimates.

     Low-income countries paid $28 billion in debt service on public debt in 2003. Middle-income countries paid $177 billion. Developing country export earnings, needed to acquire the currencies to pay their creditors, have been rising while debt service has grown more slowly, reducing debt burdens for many countries. But for extremely poor countries debt service represents a crucial loss of potential development resources. Since 1998 the HIPC initiative has provided $54 billion in debt relief for heavily indebted poor countries.

Source: World Bank staff estimates and data from the International Telecommunication Union.

      New technologies bring new opportunities to developing countries. Mobile phones have helped to eliminate the bottlenecks of fixed, mainline phone service. Personal computers are more widely available, and the Internet, unknown 15 years ago, is expanding rapidly. These are examples of integrating technologies, which reduce barriers of time, space, and culture. 

     Developing countries also need access to new medicines to reduce the terrible burden of disease. Bringing these and other life-saving technologies to poor people will require willing cooperation between the public and private sectors.