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EU Financing / Budgetary Affairs, International Relations, PUBLICATIONS

European Development Fund – Joint development cooperation and the EU budget: out or in?

Written by Alessandro D’Alfonso

As a major international actor in development cooperation, the EU has in the European Development Fund (EDF) its largest geographic instrument in this policy area, with €30.5 billion allocated to the 11th EDF for 2014-20. In recent years, around 30% of total EU spending on external assistance, including spending on both development and other categories, has been channelled through the EDF. The Fund focuses on countries and territories which have special historical ties with some Member States: the African, Caribbean and Pacific Group of States (ACP), which receive the bulk of funding, and the overseas countries and territories (OCTs) of the EU.

European Development Fund - Joint development cooperation and the EU budget: out or in?

© Jean-Paul Heerschap / European Union.

From a budgetary perspective, the EDF presents a significant peculiarity, since it is intergovernmental in nature and remains outside the EU budget, despite the fact that most of its resources are managed by the European Commission. In turn, this implies that the rules governing the financing, spending and monitoring of the EDF are different from those applicable to the EU budget, although efforts have been undertaken to align them as much as possible. One difference is that the European Parliament has a more limited role in the functioning of the EDF than in the development cooperation instruments financed by the EU budget. As regards the proposal for the Financial Regulation applicable to the 11th EDF, the European Court of Auditors welcomed a number of improvements, but maintained a general observation on transparency, considering that the complexity of the document entails a significant risk of legal uncertainty and errors.

The EDF finances a broad range of actions in beneficiary countries, with disbursements for social (e.g. education, health and water) and economic (e.g. transport, communication and energy) infrastructure and related services together accounting for more than half of total EDF payments for 2010-12. Least Developed Countries received 56% of the funding over the same period. The share of interventions through budget support, an approach to aid delivery that involves direct financial transfers to the national budget of the beneficiary country, is generally higher than for development programmes under the EU budget.

While stakeholders and analysts note both achievements and weaknesses of the EDF, a long-standing idea concerns the possible inclusion of the Fund in the EU budget (i.e. its so-called ‘budgetisation’). Supporters of the idea, which include both the Commission and the European Parliament, consider that budgetisation would bring advantages such as stronger democratic legitimacy of the EDF as well as an increase in the efficiency and in the effectiveness of EU development aid through a simplification of the relevant framework.

Over the last four decades, the European Commission has put forward several proposals for budgetisation. However, EU countries have never reached the required unanimity, with individual positions possibly influenced among other things by considerations of potential increases or decreases of respective financial contributions to the Fund. From their side, ACP countries may fear a weakening of the financial commitment of the EU to the group, which the Commission contests.

The new target date for budgetisation is 2021, after the expiry of the Cotonou Agreement, a comprehensive international agreement setting out the wider framework of ACP-EU relations. Since the EDF is the financial envelope of this international agreement, its future is tightly linked to the evolution of ACP-EU relations. In 2015, the Commission is expected to launch a wide consultation on the post-Cotonou framework.

Read the whole In-Depth Analysis here

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