AbstractThe EC supports development activities through the EU budget lines for external relations and the European Development Fund (EDF). Poverty reduction is the primary aim of the EC’s new Development Policy and the challenge for the EC is to align its development assistance instruments with this perspective. The EC’s official development assistance (ODA) has been increasing steadily during the 1990s. The EC has a twofold role. First, it is similar to a bilateral donor providing support directly to countries. Second, it has an important role in relation to Member States, co-ordinating their efforts. Further work will be needed to strengthen the impact of EC ODA on poverty reduction, through action to speed up commitments and disbursements, by linking ODA with other political and trade activities, and more effective country and sector allocations. Improvements in the allocation process will have to meet several strategic requirements.