Where next for aid?

If we crunch the numbers, about 40% of all Official Development Assistance was eliminated from the development system in the first months of 2025^[1]. We’ve faced cuts before, but these are different. They represent a systemic shock, and their effects will ripple for years in both predictable and unpredictable ways. In the short term, gutting aid is already killing people in large numbers. Health systems are collapsing, and we can’t respond properly to humanitarian crises, to name just two effects. 

The gutting of ODA left many developing countries at a critical juncture, because significant portions of their budgets disappeared overnight. There are no small tweaks that can cover a 50% loss of your health budget. No line item reshuffles give you fiscal space to vaccinate all your country’s children overnight. The loss is structural.

We can make educated guesses at longer term effects of gutting the aid system, like increases in HIV and TB, more epidemics, lower education rates, and the knock-on impact on human capital. But other trickle-down effects are unpredictable, and outcomes depend on what counter measures are taken over time. We can foresee a number of different pathways for the development sector over the coming years – from a post-aid world that rightly relocates development decision-making and finance to global south countries themselves, to the rise of China as a replacement for the US, to a more fractured, even less coherent aid environment with many small donors funding ever more piecemeal special projects. 

There are many conversations about what happens next. In the global north, my experience of these conversations is so far, messy and stunted. There is little coherence, energy or imagination. We are at a critical juncture, with the opportunity to question shibboleths and reimagine a different world. Yet donor governments seem bogged down in wider geopolitics and have little appetite or energy to think bigger. Big bureaucracies also turn slowly, and once they start turning, can’t pivot again. So many governments are taking a wait-and-see approach. Civil society is fractured and reeling from aid cuts. And most importantly…

“Strikingly, amid growing conversations around aid reform, reduction, or redirection, it is not the recipients who express the greatest anxiety, but the dominant institutions and donor actors. The prevailing discourse continues to be framed through a “savior complex,” a worldview in which those in power see themselves as essential to progress, even as they perpetuate a system that sidelines local agency. The voices of affected communities have been gradually displaced, absorbed, or reinterpreted by those whose institutional survival depends on the maintenance of the current order^[2]”

I had a conversation this month with a diplomat from a global south country. I asked how USAID cuts had affected their country. The answer? “People will die, of course. It will hurt our people, but that is nothing new for us. We never wanted your aid anyway. We only needed it because of what you did to us. Aid is not the future of our country. We want a chance to be equals. We want you to drop your protectionist trade policies. We want equal access to financing, to grow our economy. We want freedom to travel and be educated. We want an equal say in how the world works”

It was a response that should guide donors as they pivot to meet this new era.  

• What is aid for and how does it move us towards the world we want to see? This is the big question, and I’m not sure there’s a definitive answer. In recent years, we’ve seen tensions between in-country refugee costs, climate financing and traditional poverty reduction efforts. We’ve stretched the definition of poverty reduction so far, I’m not even sure it’s meaningful anymore. We’ve romanticised aid as a white saviour charity project, and we’ve reframed it for conservative audiences as soft foreign policy power that helps impose our interests. More recently, we’ve tried global public goods as a lens. Aid is a million things and nothing. 

My view is that aid should be used to end itself. Aid will be successful when a country no longer needs it, because the country can provide for its people, and is accountable to those people. This means:

• Aid should sit within an overall effort to support a country towards its own development. Countries should move towards graduation from aid, with forms of financing to match their place on the graduation scale. LICs and humanitarian contexts will continue to need grant-based aid. But as countries move up the economic scale, concessionality should increase along with the role of domestic government. Consequently, aid should pivot to supporting equitable economic growth, domestic resource mobilisation, and strengthening the ability of the state to fairly collect and disburse resources to its people. 

• Aid must critically be accompanied by wider fiscal and foreign policy to increase access to affordable credit, reduce unsustainable debt, and increase fiscal space of government to fund their own services. We must connect donor finance ministries with foreign affairs and trade ministries, to properly address issues like illicit financial flows, tobacco taxes, or free trade areas. Donors must support more representation and voice for global south countries in institutions that hold significant sway over their futures, like IMF, World Bank and the UNSC. They must drop punitive, demeaning visa processes for visitors and students. Donors have delivered delightful rhetoric on these issues for years, but have struggled to be the first mover, or make hard domestic choices to action them.

• Donors should align aid and foreign policy with country-led plans. We must end the hodge podge of small aid projects scattered over 100+ countries, often carried out by donor country NGOs. The grant management alone is horribly inefficient – numerous bureaucrats with $150,000 salaries each, managing a $100,000 project. The projects are reported separately within and across donors, all with their own metrics, so we cannot ladder up impact across a country. We should move to a model of a single country-led plan, developed by stakeholders across a country (and not just governments), with a single set of indicators, and then funded strategically. First by domestic resources, then multiple donors crowded in according to their value add, then private sector.

• Donors should prioritise and sequence aid in the context of a country’s other fiscal flows. Should countries first fund their own core responsibilities, like health and education? How much of a health budget for example, should first be filled by the country, then topped up by donors? What do we assume non-traditional donors and private sector capital will fund? For example, it is likely that China and Middle Eastern states will fund self-interested infrastructure projects in their own backyards. Is there therefore a case for global north donors to concentrate on Africa? For all the talk of China taking over Africa with the withdrawal of USAID, the early signs are China is only picking up classic development projects in South East Asia. 

• The more interesting tension is how to align with country goals and plans, in a way that reflects the whole of a country’s aspirations and needs, and not just the government’s. Especially when that country is not a full democracy, and certain populations are often left out of government efforts. While we should support state capacity development as the ultimate sustainable goal, the government is not the entirety of a state. We must recognise what populations want and what governments want are often very different things. How do we ensure aid supports initiatives that reflect general population needs? How can aid support civil society and a free press for instance, in holding governments accountable for their spending, without playing into donor-recipient power dynamics? We also know that global north lectures on LGBTQ rights, or gender equality for example, are largely performative and often result in entrenchment of said attitudes.

• Sort out the chaos that is blended-innovative-private-sector leveraging. Again, donors need to move from rhetoric to action on the role of private sector. Too often, public money generates embarrassing levels of private return. Or ODA competes with itself, and tries to generate returns where there is little market. Public and private money have very different roles, and both are wasted when they do not play to their strengths. ODA should be reserved for countries who need concessional financing, and sequenced alongside other financial flows. Private sector should pay its fair share of taxes, and private investment should be directed where ODA cannot or should not go. Finally, ODA should not be used to subsidize private sector while they deliver very little. 

• Support a clean-up of the multilateral architecture. We have created a sprawling hodge podge of global north-dominated funds, efforts and initiatives, across climate, global health, finance and more. They compete with each other, have mandate creep, result in verticalization of cross-cutting issues, duplicate responsibilities, and are far too complex to navigate. We need to strip back the global architecture so it is fit for purpose and delivers for developing countries. And I don’t mean in a Lusaka agenda way where progress is slow and institutions try to protect themselves while still looking cooperative. I mean, for example, merging all the global health bodies into a single organisation located in Africa, not Geneva. That sort of change. 

• Support democracy and local accountability. This is ultimately the key, and answers a number of the conundrums above. It’s also why a technocratic-only or development economist approach to aid is a mistake. Yes, we can make aid more effective, align it better with evidence, and target it at high-impact initiatives. We should use cash transfers more, and vaccines are indeed a no-regrets use of aid. But politics matters, and technocratic solutions can only be sustainably and fairly implemented where there is political will, national ownership and accountability. Too much of technical aid discussion imagines itself outside of politics. As if politics is a vague, unscientific and distant issue. Yet ultimately, what aid should be working towards is a manifestation of democracy – that people in a country can identify and speak their needs, and then hold their governments accountable for the choices it makes and money it spends. Accountability cannot be imposed from outside. A country’s future belongs to its people. It is possible there is no end to aid, until the needs of citizens are reflected in the policies and spending of their own states. I’m not so interested in labels, and am frankly fatigued by a lot of global north rhetoric on decolonialism, which has often been more about progressive positioning to each other, than about structural change that acknowledges and dismantles harms, but I suppose this is a decolonial approach to aid.

• Finally, we must make compelling, unapologetic cases for international engagement, including aid, to global north populations. In a world turning in on itself, we need to be unapologetic about why global engagement is good and what role aid plays in that good. We need a new narrative about why we spend public money on other countries. We must remake the basic case for helping others. Much of the above, and to be honest, what global south countries want from donors, is often at odds with domestic global north’s understanding of development. And this is probably the biggest barrier to change. As voters turn inwards and rightwards, as they scapegoat immigrants and we see rising attacks on racial minorities, politicians have been afraid to lead electorates in a different direction. They have fallen for the fallacy that they can only succeed by becoming a lite version of a far-right political party. When all evidence from every country around the world shows that voters will always pick the full-fat version of populism. If donors are going to shift their foreign and development policies, they need to lead their populations with a compelling narrative, and build political cover for their actions. 

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^[1] Mostly USAID, but also UK, France and Germany amongst others

^[2] https://www.development-today.com/archive/2025/dt-3–2025/rethinking-aid-a-call-for-genuine-transformation-in-the-development-paradigm