This paper gives an overview of all development finance sources available to countries of the Organisation of Eastern-Caribbean States (OECS) for enhancing their economic and climate resilience, and progress towards their Sustainable Development Goals (SDGs). After reviewing political and macroeconomic contexts, it examines some of the specific challenges and opportunities they meet in financing their development, including the mobilisation of private finance and domestic resources; public debt sustainability; and the alignment of official development finance (ODF) with their evolving needs. It stresses the risks of inadequately preparing for the end of eligibility to official development assistance (ODA), when countries reach high-income status while remaining highly vulnerable. Finally, it presents recommendations for the OECD Development Assistance Committee (DAC) members to better support and accompany OECS countries as they transition to higher-income status.

Building on the evidence collected through seven country pilots, this Transition Finance Compendium concludes that more could be done to build the resilience of ODA. The analyses carried out suggests that official development assistance (ODA) trends should not be observed in isolation of other sources of financing for sustainable development since transition finance is about the progressive substitution of external financing by domestic public resources and private investment mobilised. It finds that further planning and co-ordination of DAC members’ exit and phasing-out strategies or decisions could generate ODA efficiency gains and resilience; that the increasing complexity of the financing for sustainable development (FSD) landscape creates not only opportunities for access to additional sources of financing, but also risks; and concludes on emerging recommendations for the DAC to better prepare transition, e.g. good practices/relevant standards and tools for transition finance. It ends suggesting how the DAC can move from transition finance diagnostics to implementation.

This paper explores the health financing challenges that countries face when they transition from low-income towards middle-income level and beyond. While domestic actors bear an increasing share of the national health expenditure in this process, the transition is not automatic nor necessarily smooth. The challenges that emerge in the process are recently exacerbated by the COVID-19 crisis, which risks diverting resources away from basic health services. The role of development actors during this stage can be critical in setting up sustainable systems of health financing in those countries. The paper starts with a review of the progress on the global health agenda by taking stock of past achievements and remaining challenges. Then, it explores how the health financing landscape transitions with the income level of a country, tracing how this can give rise to transition setbacks. Finally, the paper zooms in on the role of development finance and how it can be reshaped to better facilitate the transition process of countries.

Through the ABC framework developed under the OECD’s transition finance work stream, the present country pilot strives to shed light on Chile’s official development assistance graduation experience. Its main objective is to understand the challenges related to this graduation, analyse the measures (positive or otherwise) taken prior to this transition stage, and learn from the Chilean experience to identify and react to the transition challenges faced by recent and future ODA graduates. The policy recommendations and conclusions proposed in this report aim to help development partners better approach graduation under similar conditions, i.e. in countries approaching graduation from ODA.

This study investigates transition finance in Lebanon, an upper middle-income country in the MENA region transitioning from a significant adverse shock. Lebanon’s development path has been historically non-linear and, most recently, the Syrian conflict adversely affected the country’s development path. The Syrian conflict compounded pre-existing deficits and challenges in Lebanon, calling for increased international assistance.DAC donors increased official development assistance (ODA) to Lebanon to preserve stability and promote refugee protection. Donors also created special financing instruments such as the Global Concessional Financing Facility (GCFF) to foster the provision of multilateral concessional financing to Lebanon. Official development finance in Lebanon is high in comparison to its peers, particularly on a per capita basis and for humanitarian assistance. The country also attracts high amounts of FDI and remittances. Overall, domestic credit dominates the financing landscape and public debt is high.DAC members and other donors can strengthen the humanitarian-development-peace nexus, address long-standing country needs to promote self-sufficiency, and re-design partnerships driven by mutual accountability and appropriate incentive structures.

This working paper aims to better understand the process of graduation from least developed country (LDC) states in a Pacific small island developing state (SIDS), and provides the Development Assistance Committee (DAC) and other development partners with evidence-based analysis and recommendations on how to better manage transition in such context.Solomon Islands is engaged in a multifaceted transition stage with financial, technical, geopolitical and environmental dimensions. Solomon Islands is scheduled to graduate from the category of LDC by 2024, and the global alliance for vaccines and immunisations (GAVI) financial support by 2022.The transition finance approach used in this study shows that Development Assistance Committee (DAC) members have a crucial role to play to support the country’s transition and should utilise their official development assistance (ODA) in a way that maximises its impact. This would entail: helping the country move towards a sustainable economic model (both in terms of environmental and financial/debt sustainability), supporting the progressive substitution of ODA by other financing sources (in particular domestic resources and private investment), and adapting their role and strategy to the country’s evolving circumstances and needs (for example by establishing new economic partnerships in support of the country’s strategy of economic diversification and promotion of higher value-added trade and private investment).

Based on the “ABC” approach targeted to assess all available sources of financing (official development finance, private investment, domestic resources, and remittances), the Viet Nam country pilot study explores the challenges of transition finance in a middle-income country in the Asia-Pacific region. After launching a series of successful reforms beginning in the late 1980s, Viet Nam has undergone an impressive transformation, which turned the country from a centrally planned to a market-oriented economy and from a low-income to a lower middle-income country. At the same time, Viet Nam is moving from a relatively high reliance on ODA and other external sources towards non-concessional sources and domestic sources. Through evolving partnerships, development partners can align their support with newly arising needs, actively supporting Viet Nam overcome the middle-income trap and move towards a trajectory for more sustainable development.

The Zambia country pilot study was conducted by the OECD Development Assistance Committee (DAC) to explore the challenges of transition finance for a commodity-based Least Developed Country (LDC). In particular, debt sustainability concerns are viewed within the context of the shifting financing for sustainable development landscape of Zambia following its re-classification to Lower Middle Income Category (LMIC).In line with the Addis Ababa Action Agenda (AAAA), the pilot study proposes a new “ABC” approach targeted to assess all available sources of financing (official development finance, private investment, domestic resources, and remittances), identify emerging SDG financing gaps and promote better alignment of resources with national financing for sustainable development strategies.

A transition finance country pilot was initiated by the OECD Development Assistance Committee (DAC) in partnership with the government of Cabo Verde. The study aims to capture the challenges facing Cabo Verde following graduation from Least Developed Country (LDC) to Lower Middle Income Category (LMIC), including the shifting financing for sustainable development landscape, the mounting risk of debt distress and the economic and environmental vulnerabilities as a Small Island Developing States (SIDS). In line with the Addis Ababa Action Agenda (AAAA), the pilot study proposes a new “ABC” approach targeted to assess all available sources of financing (ODA, OOF, private investment, domestic resources, and remittances), identify emerging SDG financing gaps and promote better alignment of resources with national financing for sustainable development strategies.