From the announcement of a 90-day spending freeze on the day of Trump’s inauguration, the dismantling of the US Agency for International Development (USAID) has been swift and brutal.
“Rooting out waste, blocking woke programmes and exposing activities that run contrary to national interests” were among the reasons Donald Trump had the agency in his sights. Another, as he told reporters on February 2, was that USAID was being run by a bunch of “radical lunatics”.
Whatever the rationale, the stop-work order has already begun to hit, with HIV treatment programmes in Africa unable to access funding and warnings over the delivery of life-saving humanitarian assistance to people in Gaza.
The move has sent shockwaves through the development community, which is deeply reliant on US funding. It has also shone a spotlight on the whole issue of foreign aid: which countries spend the most, where does the money go and what will happen if the US turns off the taps?
Who spends what?
According to the most up-to-date figures released by the Organisation for Economic Cooperation and Development, in 2023 the 31 richest countries that make up the OECD’s development assistance committee spent $223.3bn on global aid, with the US at the top of the list by some margin. The US gave $64.69bn in 2023; followed by Germany at $37.9bn; European Union institutions at $26.87bn; Japan at $19.6bn and the UK at $19.07bn.
However, the countries that spend the most are not necessarily the most generous in terms of what they can afford. The United Nations has set a target for development spending – the richest countries should spend at least 0.7 per cent of their gross national income on aid to the poorest countries. Just five countries currently meet this target – Norway, which spends 1.09%; then Luxembourg, Sweden, Germany and Denmark, which all spend just under 1%. The US is relatively low down the list, spending just 0.24% of GNI.
Under David Cameron’s Conservative government, the UK met the target – and even went as far as enshrining it in law in 2015. But in 2020, in the wake of the Covid pandemic and what it described as “the biggest recession of the last 300 years”, the government cut the aid spend to 0.5% of GNI. Aid spending fell from £15.2bn in 2019 to £11.4bn in 2021. It actually rose again to £15.3bn in 2023, but with a far greater proportion of the money being spent within the UK, primarily on housing asylum seekers.
Who else spends money on aid?
The $223.3bn figure money does not include spending by the private sector, multilateral development banks, philanthropists and countries that are not traditionally seen as donors, such as the oil rich nations of the Middle East and China.
Among the countries that are not part of the development assistance committee but whose aid spending is tracked by the OECD, Turkey is the most generous, spending $6.84bn on foreign aid in 2023. Saudi Arabia spent $5.47bn, followed by the United Arab Emirates, which spent $2.07bn – around 0.6%, 0.5% and 0.4% of GNI respectively.
China is notoriously secretive about how much it spends in poorer countries but in recent years it has emerged as a big player in the global south, or developing world. It invests in Africa through its belt and road initiative and has funded public infrastructure projects such as roads and hospitals. During the Covid pandemic it provided free or discounted jabs to countries in South East Asia, Africa and South America.
Sir Masood Ahmed, president emeritus at the Center for Global Development, a research institute, said trying to work out exactly how much China gives is difficult.
“China is less transparent than traditional providers of development assistance – and it’s not just about quantity,” he said. “The terms on which these monies are provided are not transparent. Are they grants? Are they loans? And if they’re loans, what are the terms?” he said.
According to a 2021 report from the Aid Data research lab at William and Mary University in the US, China spends around $85bn a year on its overseas development programme. However, the majority of this money is provided on a loan basis, the researchers found.
“Beijing has used debt rather than aid to establish a dominant position in the international development finance market. Since the belt and road initiative was introduced in 2013, China has maintained a 31-to-1 ratio of loans to grants,” the report stated.
Philanthropy is another source of funding, although it plays only a comparatively small part. A 2021 report by the OECD looked at 205 philanthropic organisations in 32 countries and found that between 2016 and 2019 they contributed around $10bn annually.
The private sector in the form of multilateral banks plays a larger role, investing $51.3bn in 2020 – up from $15.3bn in 2021, according to OECD figures. However, 87 per cent of this goes to middle income countries, such as India, Colombia or Vietnam, which are seen as a lower risk than the poorest countries.
Another huge source of income for poorer countries is money sent to family back home by migrant workers, known as remittances in development speak. This is not aid in the traditional sense but it dwarfs the amount given by rich countries – according to World Bank data, remittances to low- and middle-income countries reached $656bn in 2023, with the average migrant worker sending $200-$300 home every couple of months. The poorer the country, the more reliant it is on this money.
However, the money given by the richest countries is still seen as the gold standard in terms of what it says about the state of global cooperation.
“The reason people are very concerned and scrutinise the OECD numbers when they come in is because they are still the most identifiable indicator of solidarity internationally. It’s what comes out of public budgets in rich countries to support developing countries,” said Ahmed.
Where does the money go?
According to the OECD, 2023 was a record-breaking year for aid spending, with the richest countries increasing donations by 1.6% compared to 2022. The vast majority of the $200bn plus aid budget is spent on in-country programmes in areas such as improving governance, education and water. There was a large focus on health in 2020 and 2021 in response to Covid but that has fallen away.
While a bumper aid budget might seem like good news for poorer countries it is important to look at that spending in more detail. In 2023 Ukraine was the top recipient of aid, receiving $38.9bn, nearly five times as much as India, number two on the list of aid recipients. Ukraine was the largest ever single recipient of international aid in one year.
Countries are also including the cost of hosting refugees and asylum seekers as overseas aid, even though that money is spent in their own countries. The richest countries spent $30.52bn on refugees in 2023, compared to just over $10bn in 2019. Under OECD rules on what is officially classed as aid, countries can pay for a refugee’s first year out of their aid budget but then should find the money elsewhere. In 2023 the UK spent 28% of its aid budget on refugee costs - compared to 3% in 2016.
The UK is “an international outlier” in terms of repurposing its aid budget this way, says Jillian Popkins, chief commissioner at the Independent Commission on Aid Impact (ICAI), an arms- length body that scrutinises government development spending.
"ICAI has repeatedly made the point that while it's important to look after refugees, spending billions on hotels represents poor value for money for the taxpayer and diverts aid away from the crises overseas that cause people to leave their homes in the first place,” she said, adding that the Labour government has pledged to tackle the problem.
However, other countries are not far behind. Germany spent $6.67bn on hosting refugees – just over 20 per cent of its total aid budget.
The growing number of humanitarian crises, such as averting famine in South Sudan and the war in Gaza, is also diverting money from in-country programmes. Spending on these crises has increased from $18.58bn in 2020 to $25.32bn in 2023.
But despite these competing pressures, Nilima Gulrajani, principal research fellow, at the Overseas Development Institute, believes that the world may have reached “peak aid”. The Netherlands is planning to cut its aid budget by €8.7bn over the next four years; the EU is implementing cuts of about €2bn; and Germany has also said it will cut its budget by about the same amount. Sweden and Norway – both traditionally generous donors – have also signalled an end to their largesse, with Sweden announcing that by 2026 it will spend five per cent less than it currently does.
And, of course, there is a huge question mark over the US, which has not only provided cash but a huge amount of expertise and knowledge.
Gulrajani says the altruism that may have motivated countries in the past seems to be less prevalent.
“We are in an era where the aid complex fits with a much more geopolitically fragmented word order. There’s a sense that aid should service countries’ diplomatic and economic interests. If it doesn’t it’s easier to cut,” she said.
She believes that, as the US has already signalled, countries will want to demonstrate some kind of “return of investment”.
“Aid will become an instrument for more parochial national interests,” she says.
What is the future for aid?
Ahmed believes that the aid world is at an “inflection point”. In June, the United Nations is gathering countries together for a development finance conference, a once in a decade opportunity to rethink aid spending. He believes the time is right for radical reform of foreign aid and what it’s actually for.
Aid has a crisis of purpose and of credibility, he says.
“More and more aid from the richer countries is being used for purposes that have moved away from its original mandate, which was to reduce poverty and help the poorest countries increase their living standards. Now, aid is going to the Ukraine and to refugee costs. It’s also being used on global crises such as the pandemic or climate change,” he says.
While spending money in Ukraine looks sensible to people in Europe, for someone in a poor country in Africa it’s not going to make much difference, he says.
“Developing countries want an honest conversation. Of course, donor countries have their priorities but they shouldn’t be spending money on mitigating climate change and then saying it’s to help poverty reduction,” he says.
Gulrajani believes any wholesale US withdrawal from aid and development will test whether other countries are willing to step in.
“There is potentially an opportunity to reassess what the purpose of this funding should be and what the obligations of richer countries are. The danger, of course, is that it opens up a black box at a time when we have a fragmented political order,” she says.
Development experts are thinking up creative ways of distributing aid. One proposal in a report by the Center for Global Development is to give all adults in the poorest countries a lump sum of $550 as it would enable them to buy assets to lift them out of poverty.
Gulrajani says that helping poorer countries is not just about cash hand outs. Countries in the global south could do more in terms of imposing taxes and richer countries could introduce policies that would make it easier for poorer countries to trade with them.
But Gulrajani says the purpose of aid should be about tackling inequality, rather than poverty.
“Inequality is a scourge and I hope that’s where the reinvention and rethinking of development can go,” she says.
The Independent receives funding from The Gates Foundation to help support its reporting on international aid, maternal health and the climate crisis in low and middle-income countries. All of the journalism is editorially independent.
