Development A ssistance 13 during downturns. One option is to create a reserve fund, sometimes called ‘rainy day fund,’ into which the additional revenues during good times are placed. These funds can then be used to maintain spending, and prevent retrogression, during bad times. Of course, in severe downturns, such as recessions, it is appropriate to introduce stimulus programs. The design of such programs, including the balance between tax cuts and extra spending should take into account human rights principles and obligations. Measures which put more purchasing power into the hands of the poor and middle class—through a cut in VAT, for example, or extra spending on infrastructure and public services which creates jobs—are more equitable from a human rights perspective than reducing income taxes for the richest groups. IV. Development Assistance Official development assistance (ODA) is another source that may augment the resources available to a government of a middle or low-income country. It is provided both bilaterally, government to government; and by multilateral institutions such as the World Bank, the regional development banks, and the EU. However, it important to realize that ODA takes the form of loans, as well as grants. Interest has to be paid on loans and the loan has to eventually be repaid. These payments, debt service and the amortization of loans mean that not all of the ODA that flows into a country any one year is a net addition to the resources available to the government. It is important to distinguish between gross inflows of ODA and net inflows of ODA. Even the net inflows can overstate the amount of new resources being made available, since debt relief is counted as part of the net ODA. However, debt forgiveness simply writes off debt, it does not make any new resources available. ODA may finance specific projects, such as the building of a hospital or a bridge, but increasing amounts of ODA are not tied to a specific project. They are provided to augment the budget of specific ministries (‘sector support’) or to the Ministry of Finance to support the budget as a whole (‘budget support’). ODA which is not tied to a project generally has policy conditions attached to it, such as trade liberalization, an increasing role for the private sector in service provision, or ceilings on public sector pay. Not all ODA provides extra resources for the government; some ODA bypasses the government and goes directly to NGOs. KEY QUESTIONS: ■■ How far do governments of better-off countries recognize their extraterritorial obligations to provide international assistance? ■■ How far does ODA augment the resources available? ■■ Are there limits on how much ODA a country can absorb? ■■ How effectively do countries use ODA to support ESCR?