Earmarking of funding has become an increasingly defining element in the field of international development. The UN Secretary-General estimated in a recent report on the repositioning of the UN Development System that only about 20 per cent of the system is being funded by core contributions of UN Member States (sometimes being referred to as unrestricted aid). Approximately 90 per cent of all non-core financial flows to UN agencies are being directed towards single-donor projects.

The trend from shifting unrestricted aid towards highly earmarked grants has had major impact on UN agencies with regard to their programming and working methods. Critics of earmarking complain that these instruments erode the spirit of multilateralism and prevent UN agencies from being mandate-driven institutions, which are guided by strategic plans adopted by their member states, national priorities and needs assessments conducted under UN leadership. Proponents of earmarking, on the other hand, claim that it leads to a higher level of transparency and accountability and that it would better align aid with donor countries’ national development agendas.

Against this background, the Federal Ministry of Economic Cooperation and Development of Germany commission a study to the German Development Institute to shed light on the different funding instruments and the effects of earmarking on the multilateral development system, including evidence and analysis to inform smart decision-making .

Dr. Baumann introduced parts of the draft report to the expert community in New York soliciting feedback for the final version that will be published soon. The document revealed how systemic and self-perpetuating earmarking has become over time having a major impact on how UN agencies are being structured and how they operate. Dr. Baumann concluded that earmarking comes in different levels (“shades of grey”) and that there remain large knowledge gaps on the overall funding situation despite transparency efforts by the development community.