State Funding: Poor Prospects for Development Cooperation
Foreign aid financed by members of the OECD bloc of industrialised countries is receding - and will continue to sink. Assistance offered by new donors among emerging market economies currently makes up only a fraction of the shortfall.
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Over the past years the number of countries that provide foreign aid has expanded considerably. It is now not only the contributions of the member countries of the OECD Development Assistance Committee (DAC) that count, but also those of a whole range of other countries. However, there are still considerable problems in the cooperation between the two groups. The heterogeneity of non-DAC countries makes it difficult to understand which of them actually provide development cooperation and what exactly they do. Some of these countries, such as Turkey, Saudi Arabia or the United Arab Emirates, voluntarily report their activities to the OECD, while others, such as China, India or Russia, do not.
The OECD's Development Assistance Committee is a central forum for donor countries and multilateral organizations on development cooperation issues. The DAC has 32 members plus the European Union.
The term used by the DAC for development cooperation is Official Development Assistance (ODA). ODA is defined as government foreign aid that is essentially intended to promote economic development and prosperity in developing countries. According to the OECD, ODA is the “gold standard” in foreign aid. This is because the OECD is the only official source of reliable, comparable and complete statistics. Over 90% of global ODA funds came from DAC countries in 2024. The DAC's task is to define quality standards for development cooperation, to uniformly record the performance of its members and to regularly review the development cooperation of its members.
The figures shown in the chart refer to what the OECD calls “total ODA”, i.e. the sum of bilateral and multilateral grants or grant-like contributions. This also includes debt relief, for example. The total amount of ODA in 2024 also includes $3.8 billion in loans and equities provided to and repayments and reflows from private companies operating in developing countries.
Official development assistance from DAC members fell in 2024 for the first time in six years – by 7.1% compared to 2023, according to preliminary data from the OECD. The main reasons for the decline were lower payments to international organizations (-10.9%), a reduction in financial contributions to Ukraine (-16.7%), less spending on humanitarian aid (-9.6%) and a reduction in spending on refugees in donor countries (-17.3%).
Overall, ODA of the 33 members of the DAC amounted to $212 billion in 2024; this was 0.33% of the combined gross domestic product. The largest donor was the USA with $63.3 billion, followed by Germany ($32.4 billion), the UK ($18 billion), Japan ($16.8 billion) and France ($15.4 billion).
In bilateral cooperation, $42 billion went to Africa, of which $36 billion went to sub-Saharan Africa. Of the total funds, $35 billion went to the least developed countries, slightly less than in the previous year. Spending by DAC members on refugee costs incurred in the countries also fell in 2024, but still remained at just over 13% of total ODA. In Ireland, for example, it was 40.3%, in Italy 26.3%, in the UK 20.1%, in Switzerland 25% and in Germany 19.3%.
Announcements by individual countries, above all the USA, indicate that development cooperation by DAC countries will continue to fall in 2025; the OECD assumes a reduction of up to 17%. The US government is planning to cut its funding on international affairs by 85% - a $31 billion reduction and $21 billion in cancellations. This would mean that official foreign aid would fall to 0.03% of gross domestic product. For example, the anti-AIDS program PEPFAR (President’s Emergency Plan for AIDS Relief) will be cut by $1.8 billion, and the Vaccine Alliance GAVI will no longer receive any financial support. There are also budget items that are increasing. For example, the “voluntary return” program for migrants will grow from $100’000 dollars to $1.5 billion.
The Center for Global Development has identified 54 countries that are not DAC members but have institutions that manage foreign aid and also collect data on the modalities, sectors and target regions. The researchers also found that 89% of non-DAC members are primarily active in their own region. Nevertheless, Sub-Saharan Africa remained the most important target region for them as well.
According to the OECD, the non-DAC countries that report their ODA to the DAC totaled around $17 billion in foreign aid; however, the figures are not comparable on a one-to-one basis. Figures for countries such as China, Russia, Indonesia, South Africa and Mexico, for which only estimates are available, are even less comparable. In general, however, non-DAC countries allocate a higher proportion of their aid bilaterally than DAC countries.
But even if the non-DAC countries increase their foreign aid, they will not be able to compensate cuts by DAC countries.
