French development aid reform to generate ‘substantial’ new funds

The AFD supports the export of Palestinian olive oil. [Heather Cowper/Flickr]

France hopes to boost funding for development and climate action by linking the French Development Agency with the country’s public financing body. EURACTIV France reports

The French President, François Hollande, announced plans to make the French Development Agency (AFD) and the public financing group Caisse des Dépôts (CDC) work more closely together on Monday 24 August.

“I want to take this opportunity to say that our development policy has to change, has to be reformed. The tools serving this policy must be further strengthened. So I have decided to enact a major reform: to bring the AFD and the CDC group closer together,” the President said at an Ambassadors’ Week meeting in Paris.

Financing agency

“This will give us a real financing agency, as other countries like Germany and Italy have already established, that will be better funded, better equipped, and linked to local communities and businesses, like the Public Investment Bank,” he added.

In Germany, the public bank KFW has already broadened its activities into development aid. The AFD described this as “a strategic opportunity that provides a long term solution to the question of raising equity, with the solid financial backing of the CDC group”.

The financial capacity of the AFD, the agency responsible for executing French development policy, has risen considerably over the last 10 years, and is expected to reach €8.5 billion in 2016.

“But with the Sustainable Development Objectives (SDGs) due for adoption in New York this September and the Paris climate agreement in December, we need a change of scale, and possibly a change of approach,” said Annick Girardin, the French Secretary of State for Development and Francophonie.

>> Read: UN development negotiations hampered by excessive targets

President Hollande said, “The Development Agency will be given a new mission, with new funding, to support development, the energy transition and the climate.”

The operation’s stated objective is to “change the scale” by allowing the AFD to borrow on the markets at lower rates. “We have to free up substantial new funds,” said a source close to the plans. “The international community is preparing to finance the development agenda, and France also has to play its part.”

>> Read: French development aid declines

This preparation is all the more necessary, as French development assistance has fallen substantially in recent years, and even dropped below the European average in 2014. According to the OECD, French development aid fell from 0.5% of gross national product (GNP) in 2010 to 0.36% in 2014.

French government sources told EURACTIV that “this move will strengthen the AFD’s loan capacity, which does not change the fact that we still have to act on the purely budgetary aspect of official development assistance, which will be put to parliament in September under the economic bill”.

>> Read: French development aid falls below EU average

For France, the upcoming UN climate conference has been an important call to action. The member states of the United Nations will meet in Paris in December to try and reach an agreement that will keep global warming to below +2°C above pre-industrial times, and find ways to fund climate adaptation in the poorest countries.

But progress on the agreement so far has been too slow for François Hollande. “$100 billion for 2020, this should be an obligation. Without the $100 billion, there will be no agreement in Paris. This money is vital to the climate adaptation effort,” the French president stressed.

>> Read: Aid cuts undermine French COP 21 position

In view of the forthcoming international climate and development conferences, the new links between the AFD and the Caisse des Dépôts will be cemented as quickly as possible. A French government source said, “It would be good to have the structure in place for the bicentenary of the Caisse des Dépôts in April 2016.” 

The Sustainable Development Goals (SDGs) provide a framework for the international community's efforts to make the planet fairer and more sustainable by 2030. The General Assembly of the United Nations will adopt the future SGDs in September 2015. These goals will replace the Millennium Development Goals, (MDGs), which expire at the end of this year. 

  • 25 to 27 September 2015: New York summit on sustainable development
  • December 2015: COP 21 in Paris

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