African countries, both in dollar amounts and as a share of gross domestic product (GDP). In 2006, ODA to Sub-Saharan countries other than South Africa was $37.5 billion or 8.2 percent of GDP, compared with 1 percent for all developing countries. Medium- and long-term private capital flows were only a fraction (about 40 percent) of official flows in Sub-Saharan African countries other than South Africa, while they were almost 10 times the size of official aid flows in other developing regions (figure 1).

Aid flows to Sub-Saharan Africa declined until the late 1990s, but have increased again in recent years. Official aid to Sub-Saharan African countries other than South Africa declined between 1995 and 2000, from $17.4 billion to $11.7 billion. ODA has increased again in recent years with a substantial scaling up of aid. However, debt relief under the HIPC Initiative and the MDRI and exceptional debt relief provided by Paris Club creditors to Nigeria in 2005-06 have contributed a large share of this increase in official flows (IBRD 2007; World Bank 2007a). According to IBRD (2007), debt relief represented close to 70 percent of the increase in bilateral official development assistance (ODA) to Sub-Saharan Africa between 2001 and 2005.<sup>10</sup> Net official debt flows have declined dramatically in recent years (from 1.5 percent of GDP in the early 1990s to 0.3 percent of GDP in 2000-05 for Sub-Saharan African countries for which data were available in 2005) as debt relief under the HIPC Initiative and MDRI has reduced debt stocks and the stream of future repayments for many Sub-Saharan African countries.<sup>11</sup> Although developed countries have pledged to substantially increase aid flows to SubSaharan Africa substantially over the next decade, recent pledges for scaling up aid have not yet materialized for many donor countries. Excluding the exceptional debt relief to Nigeria, real ODA flows to Sub-Saharan Africa fell in 2005 and stagnated in 2006 (IBRD 2007).<sup>12</sup> The promised doubling of aid to Africa by 2010 seems unlikely at the current rates of growth. The lack of predictability of future aid is a cause for concern in addition to the duplication of activities among donors and misalignment of the donor community priorities’ with the country’s development objectives.

10 Paris Club creditors provided $19.2 billion exceptional debt relief to Iraq and Nigeria in 2005 and a further $14 billion in 2006 (IBRD 2007; World Bank 2007a). The HIPC Initiative launched in 1996 has committed $62 billion ($42 billion in end-2005 net present value terms) in debt relief for 30 highly indebted low-income countries, 25 of which are in Sub-Saharan Africa. The MDRI, launched in 2006, deepens this debt relief by providing 100 percent debt cancellation by the International Monetary Fund, International Development Association and the African Development Fund. This debt relief amounts to $38 billion for a smaller group of 22 countries (18 of which are in Sub-Saharan Africa) that have reached, or will eventually reach, completion under the HIPC Initiative (IBRD 2006, 2007; World Bank 2007b). These two initiatives together have reduced debt-service to exports from 17 percent in 1998-99 to 4 percent in 2006 (IBRD 2007).

> 11 The present value of debt stocks would eventually decline by 90 percent for the group of 30 HIPC countries. Lower debt stock ratios, however, may increase “free rider” risks.(IBRD 2007).

> 12 Nigeria has benefited from both debt relief and the commodity price boom. Under an agreement with the Paris Club group of official creditors, Nigeria received $18 billion in debt relief and used its oil revenues to prepay its remaining obligations of $12.4 billion to the Paris Club creditors (and another $1.5 billion to London Club creditors) during 2005-06. This has resulted in a reduction of Nigeria’s external debt stock by more than $30 billion (World Bank 2007a).

7