Latest OECD report: “When and why do countries stop being eligible to receive Official Development Assistance?”

Since 2005, the sole criterion for inclusion of countries on the DAC list of ODA eligible countries is their status as “low- and middle-income” countries in accordance with GNI per capita as defined in the World Bank’s income classification. The threshold for graduation – i.e. exiting the list – is therefore classification by the World Bank (WB) as a high-income country for three consecutive years.

Important: making sure that a country’s graduation from the list is well-prepared and based on the notion of ‘smooth transition strategies’.  Recently, the DAC decided that in the future countries anticipated to transition to the higher income category will be informed by the OECD Secretariat about the ODA criterion and timeframes in the first year they reach the high-income threshold, rather than only a year in advance as previously practiced. Countries will thus be alerted earlier, giving them more time to prepare for ODA resources being phased out as a form of external financing.


The DAC members further confirmed their commitment to contribute to smooth transitions. This message was reaffirmed in the recent Communique from the DAC high level meeting on 14-15 November 2023, which stated: “We will anticipate countries’ transition to other sources of domestic, and where applicable, external finance, and explore options together with partner countries to continue co-operation through other avenues”.

The challenge of preparing countries whose GNI per capita trajectory indicates their upcoming graduation from the ODA list is one that DAC members will need to  address before the next triennial review of this list in 2026. At present, Guyana and Panama are on a trajectory to graduate following this review. Net ODA to these two countries was USD 139 million and USD 91 million in 2021, respectively.

In this context it is clearly a constraint that most donors do not have funding streams beyond ODA. A recent report from a Norwegian expert group has offered some ideas in this direction, suggesting that countries could make available non-ODA funds for this purpose – at the same time stressing that such funding streams should not be at the expense of ODA within the 0.7% target, but additional to it.

Another issue of concern to the DAC has been managing situations where a country graduates from the list, but afterwards falls below the threshold, in some cases due to sudden onset crises (e.g., Covid-19, natural disasters).

That risk prompted the DAC in 2020 to simplify and expedite the process of reinstatement, so that if in July of a given year, WB income data for the previous year reveal that a graduated country has fallen below the high-income threshold, that country can be re-instated immediately, retroactively effective to the first of January of that same calendar year. This happened recently for Palau which graduated in 2021 but was reinstated on the list in 2022.

Read the full report here.