By Lydia Poole and Ben Parker
Official development assistance (ODA) could be set to contract by around 29% by 2027, from its peak in 2023.
It’s a lot, but that might still leave $176 billion per year and an opportunity for aid to do better with less. Before you breathe a sigh of relief, meet some unknowns.
We don’t know whether the US will meet its remaining commitments to multilateral institutions and funds. The biggest unknown is whether the US will honour Biden’s $4 billion pledge for the replenishment of the World Bank’s fund for the poorest countries, and commitments to the African and Asian Development Banks.
Further cuts from European donors may follow as they rush to ramp up military spending.
If spending on in-donor refugee costs and on Ukraine (an upper middle income country) are maintained at 2023 levels, by 2027, these two areas could account for an outsize share (38%) of total ODA.
Meanwhile, a dramatic undoing of the consensus values, norms and frameworks of international development is underway. A shift away from targeting aid to the poorest countries for poverty reduction and towards “migration management” and quid pro quo donor transaction is likely to follow.
Not only is the pie shrinking, less of it could be benefitting the poorest and most vulnerable people.
How big is the overall hit?
From what we can deduce of the cuts to US aid so far, and cuts already in train or recently announced by other DAC members, we could be looking at a 29% reduction in ODA from 26 OECD DAC member countries plus the EU Institutions, to around $176 billion by 2027.
Where are the cuts coming from?
The cuts by the US are by far the most severe in volume and percentage. Two other big donors, the UK and Germany, weigh heavily on the data.
How did we get here?
Growth in ODA in recent years was driven by COVID, Ukraine and spending on refugees in donor countries. Reductions by some donors, such as Canada, represent a correction after exceptional increases.
Notes
Based on total ODA (grant equivalent) in constant 2022 prices from OECD DAC for 2020-23; projections from Radbout Universiteit and DonorTracker.org for 2024-25; projections based on government policy statements, author research and calculations for 2026-27. Where no policy announcements have been identified, a ‘neutral’ scenario of DonorTracker.org 2025 projections have been repeated for 2026-27. USA estimates are speculative, based on what is reported so far to have been ‘unfrozen’ in February, plus an assumption of continued multilateral spending and that some humanitarian and other programmes will be retained.
In Europe however, years of low growth, a cost of living crisis, and growing domestic criticism of aid, mean that aid seems politically not worth defending.
Others point to the need to divert aid budgets towards military spending, such as the UK and Switzerland. Another group is looking for quid pro quos or transactional aid. These include the US, Netherlands, Sweden and EU. The US cuts are the most extreme ideological rejection of the assumed values, norms and frameworks but have emboldened others.
Growing rivalry in the aid landscape is also driving change. Some recipient countries, including in the Sahel, wonder whether they want what is on offer from Western donors.The EU’s shift is in part a response to competition from China’s Belt and Road Initiative. It is also in reaction to a loss of influence and falling demand for Western aid as China, Russia, UAE and Saudi Arabia offer a range of new aid and security partnerships.
See also: Global Trends in Development Cooperation Budgets at a Glance 2020-2025 (Radbout Universiteit)
Originally posted on LinkedIn: Life after “peak aid”