In 1970, more than half a century ago, the United Nations General Assembly passed resolution 2626 committing economically advanced countries to spending 0.7% of their gross national income (GDI) to official development assistance (ODA) by 1975. Few countries ever actually met that target. And this year both the United States and the United Kingdom have announced further cuts in foreign aid spending.
The OECD’s most recent figures – released this week – show that in 2024, total international development spending fell by more than 7% in real terms – the first fall in five years. 2025 looks set to see an even greater fall.
As of 2024, only four nations actually met the 0.7% target (Norway, Luxembourg, Sweden, and Denmark), although both Germany (0.67%) and the Netherlands (0.62%) came close. The UK met the target from 2013 until 2021 when, as part of the post-pandemic fiscal consolidation, aid spending was dropped to 0.5% of GDI. American ODA spending, on the OECD definition, was just 0.22% of GDI in 2024.
Of course, looking at aid spending in absolute monetary terms rather than as a share of national income gives a very different picture. Norway and Luxembourg are, after all, very small economies. Ranked in dollar terms, the United States was the largest donor in the developed world in 2024 with spending of $63.3B, followed by Germany ($32.4B), the UK ($18B), Japan ($16.7B,) and France ($15.4B). With total ODA spending put at $212B by developed countries, according to the OECD, the US represents almost 30% of total development spending (and the top five donors approaching 70% of the total).
That, though, now looks set to change. The majority of programmes of USAID have now been cut, with the government saying that around 5,800 of the organisation’s 6,200 programmes are to be eliminated. Translating that into a cash number is not straightforward, and one needs to be especially careful given that not all US ODA flows through USAID. But an annual figure of in excess of $20B and possibly as high as $30B is the best working assumption of analysts. Meanwhile, in March, the United Kingdom announced it would be cutting its own ODA spending from 0.5% to 0.3% of GDI in order to fund higher defence spending. Germany’s new government has not been explicit on its aid policy, but a pledge by the previous administration to aim for the 0.7% of GDI target was not a feature of the Christian Democrat manifesto.
The base case for 2025 then has to be a fall in advanced economy aid spending of at least 10%, in dollar terms, and very possibly more.
What would that mean in practice? Last week, the Clark Center’s US and European Experts Panels gave their views.
To begin with, the US Panel was asked whether “the cancellation of the majority of programs run by the US Agency for International Development (USAID) will have no measurable effects on GDP growth in the recipient countries over the next five years”, which is very much the optimistic case as set out by the administration. Whilst 41% of respondents (weighted in all cases below by confidence) were uncertain, 49% of respondents either disagreed or strongly disagreed.
The European Panel was asked the slightly broader question of whether “the reductions in Western programs of development assistance will have no measurable effects on GDP growth in the recipient countries over the next five years”. This time, just 24% of the respondents were uncertain with 69% either disagreeing or strongly disagreeing.
The higher levels of confidence amongst European respondents might well be driven by the broader nature of the question. Whilst uncertainty remains high, the broad opinion of the experts is that large cuts in foreign aid are likely to have a measurable impact on growth in the less developed world.
There was far more certainty when it came to the second question. Asked whether “The cancellation of the majority of USAID programs will have substantially negative effects on the most vulnerable people in the recipient countries over the next five years”, a staggering 99% of respondents either agreed or strongly agreed. The European panel was asked a similar question (although substituting Western aid for USAID), and 97% of respondents either agreed or strongly agreed.
There is then almost unanimity across the panels that cuts in aid will have substantial impacts on the most vulnerable people in aid-receiving countries in the years ahead.
Finally, the panels were asked a wider range question. Whether “development assistance motivated by the potential benefits for the donors in terms of prosperity and security is measurably more effective in promoting GDP growth in recipient countries than aid based on humanitarian or other moral principles”.
On this matter uncertainty was generally high (59% of US respondents and 41% of European respondents), but the experts tilted towards either disagreeing or strongly disagreeing (a combined 41% of US Panel respondents and 50% of European Panel respondents).
There is a strong case to be made that foreign aid, as the system has developed in recent decades, does not work especially well. The Economist, for example, has made a reasoned argument that it has done little to actually encourage economic growth. But, whatever the merits or not of the existing system, there is widespread consensus that the kind of cuts now programmed in for 2025 and beyond will measurably negatively impact the most vulnerable people in the world and likely lead to even slower growth in poorer countries.
