The tied aid disciplines were agreed to in 1991 by the Participants with the aim of limiting the use of concessional financing for projects that might be supported through commercial financing. The objective was to redirect tied aid away from richer countries that are able to attract commercial credits, and towards developing counties that are less well off.
The tied aid disciplines consist of three pillars: country eligibility, minimum concessionnality level, and project eligibility (Chapter III of the Arrangement).
Country eligibility
Tied aid cannot be provided to countries whose per capita Gross National Income according to the World Bank is above the upper limit for lower middle-income countries for two consecutive years (unless the concessionnality reaches at least 80%).
Minimum concessionality level
Tied aid must have a concessionality level of at least:
- 80% if the beneficiary country is not eligible for tied aid
- 50% if the beneficiary country is a Least developed Country (LDC)
- 35% if the beneficiary country is a tied aid eligible country and not an LDC
The discount rates to be used when calculating the concessionality level are the Differentiated Discount Rates (DDRs)
Project eligibility requirements
Tied aid shall not be extended to public or private projects that should be commercially viable. Please refer to the Ex ante Guidance for Tied Aid and Chapter III of the Arrangement for assistance in determining if a project might be deemed as commercially non-viable.
