With a population of 61 million, Italy was the world’s ninth largest economy in 2012 in terms of nominal gross domestic product (GDP). It is a member of many international bodies including the G8 and G20 and a member of the European Union (EU).

Italy supports a number of development solutions on the global stage and monitors them through dedicated multilateral mechanisms. It should continue voicing its concern about, and support for, common solutions at international level, and address a limited number of risks in the dialogue with its partner countries, prioritising interventions that can yield the best results.

Despite efforts in recent years, Italy has not yet set out the overall strategic goals of its development co-operation programme. To achieve this, it could build on its practice of approving triennial guidelines setting priorities for the development co-operation programme, as well as the participatory processes that were established to develop a common vision of its development co-operation. The Millennium Development Goals (MDGs) are at the centre of this vision and Italy’s priorities. In partner countries Italy is struggling to concentrate on fewer sectors, where it can make a difference. Providing guidance on how to focus the aid programme where development co-operation is needed most and where it coincides with Italy’s comparative advantages would, therefore, be useful.

Italy remains committed to reach the UN target of 0.7% ODA/GNI eventually. However, Italian ODA experienced a steady decline between 2008 and 2012, dropping from USD 4.86 billion to USD 2.74 billion. Italian ODA represented 0.14% of its gross national income (GNI) in 2012, down from 0.22% in 2008. The government has reversed this negative trend: it increased the ODA level in 2013 and 2014 and committed to steadily raise the ODA/GNI ratio to 0.28/0.31% in 2017 – a positive signal. It is also encouraging that Italy has taken steps to provide forward-looking information on ODA.

Italy benefits from driving forces within the political sphere as well as the profit and non-profit sectors that are favourable for improving the delivery of its policy priorities, in line with commitments made in Busan. However, Italy’s legislative constraints and strict administrative procedures are significant obstacles to effective programming, and major institutional changes are still needed. There are a number of alternatives for the Ministry of Foreign Affairs to consider when improving the efficiency and effectiveness of the Italian system. When selecting the most suitable option, Italy is invited to address concerns related to transaction costs, institutional fragmentation and the relationship between headquarters and co-operation offices, and to consider experiences from other DAC members.

Italy has made substantial efforts to meet some of the 2009 peer review recommendations: it has approved new guidelines on budget support, country systems and programme approaches, and increased aid untying. It has a new risk management approach and a marker on aid effectiveness, which could contribute to improving the delivery of the programme if closely monitored. In spite of this, Italy lagged behind with respect to implementing the aid effectiveness principles in the period leading to the OECD 2011 monitoring survey. A large share of Italian development aid continues to be delivered as project-type interventions using Italy’s procedures, and Italian aid is still unpredictable and inflexible with respect to the allocation of programme funds across sectors.

Italy has taken recent initiatives to adopt results-based management approaches. However, the understanding of results-based management remains weak throughout the Italian aid system. Expected results are not built into programming and budgeting processes at headquarters. In partner countries, while monitoring systems seem to be robust at the project level, the link with the overall country framework is unclear. Managing for results is also weak in fragile contexts, where the same approach is used as in other partner countries. In particular, it is unclear how Italianfunded projects take into account conflict sensitivity or “do no harm” approaches.

Italy has finalised a new humanitarian policy, formally recognising the good humanitarian donorship (GHD) principles and other major developments in the humanitarian landscape. Recovery is supported through relatively flexible funding to multilateral agencies, and to Italian-designed rehabilitation projects, often implemented by Italian NGOs. Italy shares its expertise in disaster management with partner countries, an effective way to reduce disaster risks. The commitment to increase ODA should benefit the humanitarian budget, which currently suffers from limited resources. However, the new humanitarian policy does not provide strategic guidance on how to allocate funds or add value to Italy’s funding decisions; it is also silent concerning Italy’s position on major policy issues such as migration and food security.

A team of examiners and the OECD Secretariat visited Albania in October 2013 as part of the peer review of Italy. The team met Italian development co-operation professionals, partner country civil servants, other bilateral and multilateral partners, and representatives of Italian and partner country civil society organisations, the private sector, and local and regional authorities as well as parliamentarians.