The Overseas Development Assistance Programme next year is to get a 25 per cent increase on this year's allocation.
An extra £52 million (€66 million) is to be provided, bringing the total to £260 million or 0.35 per cent of gross national product (GNP).
This year's provision was equal to 0.31 per cent of GNP. The Government target is to reach the UN recommended 0.7 per cent of GNP by 2007.
The Minister of State for Foreign Affairs, Ms Liz O'Donnell, described the announced increase as "truly historic".
She said the Government's aspiration of allocating 0.45 per cent of GNP towards overseas aid by 2002 will be met.
Reaching the UN target of 0.7 per cent of GNP by 2007 "will mean quadrupling our aid over the next seven years from £208 million to £800 million", she said. The money will be well spent, she said.
The Estimate announcement was welcomed by the development agency Concern as an interim step towards reaching the 0.7 per cent target by 2007.
A spokesman said it was important now to look critically at how the extra money would be spent and suggested it should go to the UN agencies which have a proven track record in getting results, and away from the EU's development programmes which were proving very inefficient, he said.
Trocaire's director, Mr Justin Kilcullen, said he was assuming the Government was putting in place a sustainable, manageable and strategic plan for coping with the 2007 target, which would involve a huge increase in the amounts being channelled by the Department of Foreign Affairs towards overseas aid.
