Foreign aid in decline as realism shapes global assistance
A major geopolitical realignment is dismantling traditional foreign aid systems in favor of limited measures to bolster strategic national interests.
In a nutshell
- The U.S. and UK are reducing aid to reflect defense and fiscal priorities
- Aid cuts particularly impact African nations relying on U.S. health funding
- Realist approaches favor trade and investment over traditional liberal aid
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United States President Donald Trump’s February executive order instructing all department and agency directors to pause new obligations and disbursements of development assistance funds sent shockwaves across the international aid system. The move reflects a belief that the U.S. foreign aid sector, and the enormous bureaucracy that sustains it, are detached from, and in many cases opposed to, American interests.
Under the new directive, development assistance programs must meet two cumulative criteria to be eligible for funding: programmatic efficiency and consistency with U.S. foreign policy. In March, Secretary of State Marco Rubio announced the cancelation of 5,200 foreign aid contracts at the U.S. Agency for International Development (USAID), and that the remaining 1,000 contracts would be administered by the Department of State, which absorbed USAID as part of this major restructuring.
The American policy shift was mirrored across the Atlantic by the United Kingdom. Shortly after Washington announced cuts to aid, London followed suit and said it would slash foreign funding to the UK’s lowest levels since the 1990s. The British government says the reduction will allow for an increase in defense spending.
An outdated foreign policy tool
Foreign aid, the transfer of money, goods or services from one nation to another, is facing resistance. While donors have traditionally used the threat or temporary suspension of aid as a punitive tool, what we are now witnessing is a substantial and potentially definitive withdrawal of aid flows by the central actors in the global aid system.
The Trump administration’s radical shift in U.S. aid policy mirrors other sweeping changes, such as the American withdrawal from multilateral institutions, in one key aspect: These developments are not root causes but rather symptoms or consequences of deeper transformations in the international system. Just as President Trump’s decision to exit some multilateral forums is a consequence of a previous and deeper crisis of multilateralism, the collapse of the aid system as we knew it had been in the making for some time.
Foreign aid may be considered as one of many tools that states can deploy in pursuit of their foreign policy objectives.
The rationale behind this move is rooted in a realist approach to international relations. This perspective holds that states act primarily to maximize their power within the international system, guided by strategies that serve their national interests. In this context, foreign aid may be considered as one of many tools that states can deploy in pursuit of their foreign policy objectives.
In less dramatic ways, in addition to the UK, key donors like Germany, France and Norway have also been reducing aid as they adapt to new demands. Chief among current priorities is addressing the rising number of immigrants and refugees and the pressure to increase defense budgets.
In 2024, the European Union was already planning a 2.2 billion euro aid cut, to be implemented until 2027. In fact, since 2016, the EU has strategically used development assistance to foster cooperation with countries of origin and transit along key migration routes. Turkey, which remains one of the largest recipients of EU aid, exemplifies this approach.
Views on handouts versus development
In the face of recent events, some observers have claimed that the removal of aid would have devastating consequences and that, despite its limitations, aid effectively contributes to development and growth in the long term. Others, however, claim that not only is aid ineffective, but it may actually be counterproductive to the extent that it fuels corruption, prevents the development of competitive industries and reduces accountability, leading to the perpetuation of authoritarian regimes.
In practice, foreign aid has been losing both its appeal and volume in recent years. After reaching a peak in 1990, aid flows to Africa have decreased. In 2008-2009, the volume of remittances surpassed international aid, becoming the primary source of international funding for the region.
The decline in aid stems from a combination of factors, including a lack of success stories, the crisis of multilateralism and a shifting geopolitical landscape. The failure of high-profile initiatives like the Millennium Villages Project – an ambitious effort launched in 2005 to eradicate extreme poverty through health, education, agriculture, infrastructure and business development – further contributed to the momentum to slash global aid outlays.
Impact of aid cuts varies but is centered in Africa
From a global perspective, almost a quarter of total aid assistance was, until now, provided by the U.S. In the 2023 fiscal year, foreign assistance provided by the U.S. Congress totaled $66.1 billion. In Africa, the U.S. accounted for 26 percent of aid flows, including through the financing of flagship initiatives launched by different administrations such as the President’s Emergency Plan for AIDS Relief (PEPFAR), Feed the Future, Power Africa and Prosper Africa.
The main component of U.S. aid to Africa has been assistance in the health sector, including the funding of tuberculosis and malaria control programs, AIDS prevention and treatment (in 2023 alone, the U.S. channeled $10.6 billion to combat HIV/AIDS), health emergency responses (in the case of Ebola outbreaks, for example) and family planning. The latter has been a contentious issue since the first Trump Administration, which banned funding to organizations providing abortions overseas. Along with the health sector, significant development aid was also channeled to education and agricultural programs throughout the continent.
However, aid cuts will not affect all countries in the same way. Low- and lower-middle-income countries, in particular those where a large portion of aid was provided by the U.S. or where aid is mostly in the form of emergency or humanitarian assistance, are more exposed to the negative effects of this decision.
According to the Center for Global Development, eight of the world’s 26 poorest countries have received more than a fifth of their aid assistance from USAID. Excluding Afghanistan, the remaining seven countries are in Africa: South Sudan, Somalia, Democratic Republic of the Congo (DRC), Liberia, Sudan, Uganda and Ethiopia. In some cases, like Somalia, the Central African Republic and South Sudan, aid represents more than one-fifth of the gross national income.
Other countries, although less dependent on aid, are also feeling the effects of the U.S. decision. In Nigeria, the U.S. provided $600 million for health assistance programs in 2023, representing 21 percent of the overall health budget. In Zimbabwe, the government – led by the Zimbabwe African National Union-Patriotic Front, which has been ruling since independence in 1980 – has relied on U.S. aid to fund a significant part of the health system, through HIV response programs and infrastructure development.
Gatekeepers and partners
The aid system is now at a critical juncture, mirroring dynamics shaping the international trade framework, and the global order itself. It seems quite certain that the days of an aid system anchored in the liberal internationalism of the post-Cold War period are over. Just like the World Trade Organization faces growing irrelevance, the institutions and frameworks of the international aid system seem unfit to navigate the challenges posed by the emergence of a post-liberal international order.
In addition to those countries more dependent on aid in general and U.S. support in particular, the gatekeepers of the international aid system, including international nongovernmental organizations, United Nations agencies and other implementing partners, are also facing the consequences of these shifts.
It is important to note that, according to official data, between 2013 and 2022, while 67 percent of nonmilitary foreign aid approved by the U.S. Congress was delivered through project-based assistance, 19 percent was in the form of core contributions – those going to public international organizations such as the World Bank, United Nations High Commissioner for Refugees or the Green Climate Fund. UN agencies such as the World Health Organization, which the U.S. has again withdrawn from, or the United Nations Population Fund, will be forced to adapt to new circumstances, and rethink their ambitious agendas.
Aid for trade?
As enthusiasm for aid assistance has declined over recent years, the idea that trade not aid is the pathway to prosperity has gained traction (as evidenced, for example, by the Prosper Africa Initiative). However, Africa’s share of international trade has remained low over the past decade, at around 3 percent of global exports and imports. From a continental perspective, wide disparities remain, with countries in North Africa, Southern Africa and Angola accounting for more than 50 percent of Africa’s total trade.
While intra-African trade has increased, regional market integration is still low. Despite the momentum generated by the launch of the African Continental Free Trade Area, major obstacles persist, including low levels of industrialization, lack of diversification, infrastructure gaps and informal barriers.
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African countries now face the dual challenge of adapting to what appears to be the collapse of an already waning global aid system, alongside growing uncertainty regarding the future of free trade amid a rising tide of protectionism. The fate of initiatives like the African Growth and Opportunity Act (AGOA), which for over two decades granted duty-free access to U.S. markets for a range of African exports, remains unclear. While AGOA was already on life support, it offered more favorable conditions for African economies engaged in trade with the U.S. than the current environment.
As President Trump completed the first 100 days of his second administration, one thing became clear: Tariffs are, once more, a key instrument of economic and foreign policy as the golden decades of free trade seem to be over, giving way to a period of protectionism. While countries like China and Canada, with which the U.S. has a trade deficit, are more exposed, African countries are also being impacted.
Now, regional economic heavyweights such as South Africa and Nigeria, both dubbed by Mr. Trump as among the “worst offenders” due to his belief that they use unfair trade practices, are expected to be hit particularly hard. Tariffs ranging from 11 to 104 percent now apply to imports from around 60 such trade partners. It is worth noting, however, that oil and gas remain exempt from these new tariffs.
Scenarios
The dismantling of the foreign aid system is another symptom of a changing world order. But as always happens in periods of structural change, new dynamics, actors and institutions are expected to emerge in the medium term. Considering this, two main scenarios present themselves.
More likely: Aids cuts to sharpen focus on business, investment climates
Under a first, more likely scenario, the aid system developed and consolidated in the post-Cold War period is definitively finished. Mirroring the transition from a period of hyper-globalization to one of competition and tension between blocs, the global aid system will be replaced by more localized strategies.
Donor countries will continue to reduce and reorient aid assistance, as the principles of international liberalism are replaced by realist approaches and geoeconomic imperatives. Under this scenario, aid will not necessarily disappear, but it will undergo a process of “near-shoring,” as evidenced, for example, by Italy’s Mattei Plan. Aid-dependent countries, especially those more isolated from international markets, are expected to struggle and face additional hardship in the short to medium term.
However, the effects of cuts may accelerate efforts to improve business environments to attract foreign investment, increase local entrepreneurship and unleash processes of economic transformation. As a result, African governments facing lower aid inflows will increasingly prioritize public-private partnerships as they shape their development agendas.
Another outcome of reduced dependence on traditional donors will likely be the emergence of more diverse and results-oriented approaches to development, tailored to the specificities of local contexts and less constrained by donor-driven, one-size-fits-all agendas.
Less likely: Global Majority countries entirely replace Western aid
Under a second, less likely scenario, traditional donors would be replaced by other actors from the Global Majority, such as China, Turkey or Gulf countries. This outcome is less probable because these countries are already deeply engaged with Africa’s top aid recipients, including Ethiopia, Kenya, Angola and DRC, through a mix of investments, loans, trade partnerships and security agreements. This involvement is expected to continue and potentially expand.
Beijing, in particular, is expected to step up its presence across the continent through the Forum on China-Africa Cooperation. But this does not mean a full retreat by the U.S. In fact, American investments in strategic sectors, like energy, infrastructure or defense are likely to increase in countries like Angola and the DRC, or Mozambique, where the U.S. Export-Import Bank recently approved a $4.7 billion loan for a liquefied natural gas project. Alternative donors may, however, increase their leverage over aid-dependent countries with weaker economies and less strategic relevance.
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