Tied vs untied financing

Tied vs untied financing contrasts official support whose proceeds must, in law or in fact, be used to procure from the donor or supporting country (and a restricted set of others) with financing whose proceeds are freely available for procurement from a wide set of countries. The OECD Arrangement defines tied aid as aid which is in effect tied to procurement of goods and/or services from the donor country and/or a restricted number of countries, including loans, grants or associated financing packages with a concessionality level greater than zero per cent. Untied aid is aid whose proceeds are fully and freely available to finance procurement from any country; both definitions sit in Annex XIII of the January 2026 text.

Tied vs untied financing on bank export finance desks

On EF desks the distinction appears in two related but separate conversations. First, Arrangement export credits are official support for exports and are therefore procurement-linked by design: an export credit agency covers or finances goods and services from its constituency subject to national eligibility, including national content requirements. Second, tied aid and trade-related untied aid are concessional packages subject to the Arrangement's Chapter III and Chapter IV disciplines. UKEF notes that the Arrangement includes rules on providing concessional funding in combination with export credits (tied aid).

Where the tying status of a financing practice is uncertain, the Arrangement places the burden on the donor country: it must furnish evidence that the aid is in fact untied under the Annex XIII definition.

Arrangement mechanics for tied aid

Participants keep complementary policies for export credits and tied aid. Export credit policies should be based on open competition and market forces. Tied aid policies should provide resources to countries, sectors or projects with little or no access to market financing, ensure best value for money, minimise trade distortion and support developmentally effective use.

Core tied-aid disciplines include:

• country eligibility keyed to World Bank per capita GNI data, with no tied aid to countries above the upper limit for lower-middle-income countries
• a minimum concessionality level of 35%, or 50% if the beneficiary country is a Least Developed Country, with stated exceptions
• restrictions on extending tied aid to projects that should normally be commercially viable
• transparency and notification among Participants

Concessionality for loans is the difference between nominal value and the discounted present value of future debt service, expressed as a percentage of nominal value; grants have 100% concessionality.

Untied loan products versus tied export credits

Several ECAs offer untied loan guarantees: national products in which official support is not conditioned on a matching export contract from the supporting country in the classic Arrangement export-credit sense. That product label is separate from the Annex XIII tied and untied aid definitions, which turn on the procurement freedom of aid proceeds, not on whether a commercial export credit exists. Reading a term sheet therefore means checking both dimensions: whether disbursement is linked to the source of goods or services, and whether any concessional element brings the package under the tied-aid disciplines.