Interview: How foreign aid cuts reshape global development assistance

Official Development Assistance (ODA) from major donor countries is shrinking. What should donors prioritise now? IDOS researchers Dr Tim Hailer-Röthel and Dr Heiner Janus shed light on the political dynamics behind the cuts, and on what should be done.

What is the state of development budgets?

Development budgets are under pressure in many OECD countries. The most prominent case is the dismantling of USAID, but other providers like the UK or France have cut spending too. Germany’s targeted core development budget has fallen from €12.4 billion in 2021 to €9.9 billion in 2026 – a decline of about 20%. A recent Lancet study projects that aid cuts could lead to an additional 9.4 million deaths by 2030 – a contested figure, but it signals the scale of what is at stake.

The picture is more nuanced though. Germany’s budget remains above its 2018 level, and the US Congress has passed a $50 billion foreign affairs bill, still 16% below 2025 levels. However, it remains to be seen whether funds will be spent as intended. Aid is shrinking, but not disappearing. The key challenge is to concentrate budgets where they will have the greatest impact.

What is driving these cuts?

As we discussed at a recent CGD-IDOS panel on aid cuts, the issue is primarily a political squeeze on aid, not only a budgetary squeeze. Development cooperation is being pulled apart by two opposing, polarising forces. From parts of the political left, the scope of what aid should achieve is constantly expanding. Climate targets are being added to health programmes and governance conditions to infrastructure projects, meaning that every intervention risks becoming a “Christmas tree” of maximalist ambition rather than focusing on the most urgent needs. Meanwhile, from parts of the political right, development cooperation is seen as a means of advancing narrow self-interest. Aid budgets are being redirected towards migration deals, private-sector promotion, and geopolitical competition.

The result is a political centre that is being hollowed out. In Germany, this is evident from the erosion of the cross-party consensus on development, and international cooperation as a whole. What is missing, and what we believe is worth establishing, is a realistic centre that acknowledges the limitations of aid, while recognising and protecting its strengths.

You have described a political squeeze on aid. When budgets tighten in this context, how should donors decide what to keep and what to cut?

The key is to cut strategically rather than across the board. As the OECD DAC Chair has noted, aid is fragmented, involving too many countries and too many small projects. Research by CGD shows that radically simplifying, by implementing fewer, larger, evidence-based interventions, can maintain high impacts even with shrinking budgets.

In a recent CGD-IDOS paper, we applied this logic to Germany, proposing reform along three dimensions. First, thematic focus: projects targeting four or more SDGs have increased nearly tenfold over the past decade. Concentrating on areas of comparative strength would build expertise and improve results. Second, country allocation: many partner countries receive substantial support from other providers, while others remain underfunded relative to extreme poverty. Redirecting funding to these countries could increase impact. Third, multilateral channels deserve protection ­– they perform well in independent assessments and have become more vulnerable following US withdrawals. Making such trade-offs has proven difficult across all donor systems, but tighter budgets offer a rare opportunity for reform.

How do partners view the recent aid cuts?

Many partner countries have been severely impacted by sudden aid reductions. However, the reactions have been more varied than is often assumed. Some recipient governments have cautiously welcomed certain aspects of the change, particularly co-financing models that increase their ownership. As Ken Opalo has argued, the development community has been slow to adapt to the new reality, partly because nostalgia for the old aid paradigm prevents them from considering alternative approaches honestly.

Yet, a siege mentality risks being overtaken by inevitable change, speeding up a loss of influence. Our research in South Africa suggests that such dynamics are already unfolding. South Africa works with multiple international partners, and was preparing for the decrease in US funding long before it happened. This does not diminish the real harm caused by sudden withdrawals. But it illustrates that shifts in cooperation require a proactive approach that goes beyond defending the status quo. The development community should heed this lesson and meet their partners on equal footing, underpinned by a joint commitment to evidence and accountability.