An FP ANALYTICS Issue Brief

Moving Beyond Aid

Transforming global development for long-term prosperity

A seismic shift is occurring within the global development ecosystem, with development aid expected to decline significantly in 2025, as leading donors scale back and repurpose their aid commitments for the second consecutive year. The OECD reports that its members will provide between 9 and 17 percent less in official development assistance (ODA) in 2025, representing a decline of up to USD 35 billion, compared to 2024. Leading donors, including the United States, Germany, the United Kingdom, and Japan, have announced and implemented significant cuts to their development aid budgets and adjusted the focus of their remaining work, deprioritizing vital issues including women’s health, family planning, climate mitigation and adaptation, and education, and contributing less to humanitarian relief efforts. Declines in aid will make closing the USD 4 trillion funding gap for the Sustainable Development Goals increasingly challenging.

Yet, prior to the recent rollback of ODA, the effectiveness of development aid was hindered by challenges to both quality and quantity. Aid contributions consistently fall short of targets. Tied aid and the use of third-party development contractors undermine not only the quality and cost effectiveness of implementation but also the ownership and leadership of recipient governments. Low-income countries (LICs) are trapped in a cycle in which increasingly outsized debt servicing burdens divert domestic resources, necessitating assistance and aid from the very countries and institutions from which they have received loans. As a result, aid-receiving countries are unable to transition away from aid dependency and achieve sustainable development outcomes.

The current retrenchment of aid exposes the limitations of a development model that is overly reliant on discretionary funding and donor-led priorities. As the longstanding architecture of aid falters, there is a growing imperative to reimagine development cooperation on more equitable and sustainable terms. Moving beyond the donor-recipient dynamic, new approaches center on collective responsibility, local leadership, and long-term investment. These frameworks aim to shift power and decision-making, align resources with country-defined priorities, and integrate development efforts with broader systems of public and private finance. Transforming global development will require not only fit-for-purpose tools and financing mechanisms, but a fundamental change in governance, grounded in mutual accountability and collaborative action.

This brief, part of the second installment of FP Analytics’ Global Governance Reimagined, supported by the Ford Foundation, seeks to highlight approaches transforming development from a paradigm of aid and obligation to one of investment and partnership. It is accompanied by contributions from experts and thought leaders in the field, Vitalice Meja and Dr. Jayati Ghosh. Reframing the aims and applications of international development and ensuring a seat at the decision-making table for developing economies will be crucial to transforming global governance to be more equitable and supportive of decent lives, economic justice, and sustainable development for all.

The current approach to development and humanitarian assistance does not align with the strategic priorities and needs of the countries receiving it

Aid has historically been shaped by donor countries’ interests, creating a persistent misalignment between the objectives of ODA and the priorities of the countries receiving it. This donor-driven dynamic is longstanding, reflected, for example, in the governance of multilateral institutions where decision-making power remains concentrated among high-income donors. However, recent developments such as increased domestic political and economic pressures in donor countries and evolving global challenges have further widened the gap between aid allocation and the strategic priorities and needs of low- and middle-income countries (LMICs). This imbalance is reflected in the declining quantity and quality of resources—the amount and effectiveness, respectively, of aid contributions—reaching developing economies across the Global South.

These dynamics are evident in the recent trends tracked by the OECD’s Development Assistance Committee (DAC), which serves as the principal body for defining and monitoring ODA. Its 32 member states and the EU account for as much as 90 percent of global bilateral aid. However, assistance from DAC donors has also remained well below the internationally agreed target of 0.7 percent of gross national income (GNI), reinforced in Sustainable Development Goal 17.22. In 2024, ODA from DAC countries amounted to just 0.33 percent of their combined GNI following unprecedented successive cuts to major donor aid budgets, far short of the target.

Even before the drastic ODA reductions in 2025, a shrinking share of DAC assistance reached developing countries, as aid was increasingly redirected toward spending within donor borders, for example, for the administrative costs of distributing aid. Indeed, in 2023, nearly USD 43 billion in ODA was spent within the borders of donor countries. In contrast, ODA to developing regions declined significantly in 2023: support to Africa fell by nearly 7 percent to USD 74 billion and assistance to Latin America and the Caribbean dropped by 15 percent to USD 14 billion.

Multilateral institutions remain heavily financed and influenced by DAC donors and are therefore likely to face similar budget pressures as overall aid levels decline. ODA delivered through multilateral institutions totaled USD 58.3 billion in 2023, representing more than a third of all ODA tracked by the OECD. Multilateral channels—including the United Nations system, global vertical funds such as Gavi and the Global Fund, and development finance institutions (DFIs)—provide concessional loans, pooled funds, grants, and technical assistance. However, governance in multilateral development banks (MDBs) largely mirrors broader donor-recipient asymmetries, with power concentrated among high-income shareholders. Despite calls for governance reform, LMICs remain under-represented in both strategy setting and oversight, with the result that the priorities of multilateral institutions largely reflect the priorities of the most powerful donors and not the needs of recipients.

Selected External Finance Indicators

Note: The 2025 value in the first chart is based on projections from the OECD (2025), assuming a higher aid cut scenario of 17% drop year-on-year. Official development assistance (ODA) refers to grants or concessional loans (with grant element of at least 25 percent) provided by countries and multilateral institutions. Foreign direct investment (FDI) refers to long-term investment by a foreign entity in a country’s economy. Development Assistance Committee (DAC) countries are high-income countries that coordinate the standards and policies for ODA, responsible for the majority of ODA flows.

Data sources: UNCTADstat; OECD Data Explorer; UN Statistics Division; UN World of Debt Dashboard; OECD ODA at a Glance; OECD Policy Brief (2025); authors’ calculations.

As traditional donors reduce their aid budgets, the increasing involvement of emerging donors such as China, India, Turkey, Saudi Arabia, the United Arab Emirates, and others is reshaping the development finance landscape. Following their expansion in 2025, BRICS countries now represent a larger share of global GDP (by purchasing power parity) than the G7 and have provided 22 percent of bilateral loans to LMICs over the past decade, with China leading as the largest lender. This assistance is often framed by the BRICS and other donors in terms of South–South solidarity, mutual benefit, and noninterference. However, as Dr. Tammam Aloudat noted in an interview with FP Analytics, engagements by all countries are shaped by complex motivations, with countries aligning development assistance with strategic interests. According to Dr. Aloudat, “Whatever the international community has historically considered the norms of international aid, these norms are largely based in Western liberal countries, designed by them, and follow a model that has been constructed by them for their own way of work and interest over decades.”

In addition to emerging state donors, non-official sources of development and humanitarian assistance are becoming increasingly important in the global aid landscape. Philanthropic institutions have been influential players, with some estimates suggesting that foundations and private donors contributed up to USD 70 billion in development and humanitarian aid in 2020. The private sector also contributes through concessional and non-concessional lending, blended finance, and direct investments. While the exact magnitude of these contributions is difficult to track due to a lack of reporting, private-sector financial flows to developing countries have grown since 2010, roughly matching public financial flows in 2019.

Critically, while overall the number of donors and aid volumes have risen, the average size of ODA grants declined by 52 percent between 2000 and 2021. For recipient countries, this has resulted in fragmented assistance that has increased transaction costs and administrative burdens, particularly for countries already in or near debt distress. Civil society organizations have raised concerns about the quality of aid. In his contribution to this project, Vitalice Meja, executive director of Reality of Aid Africa, highlights concerns about aid quality, particularly the persistent failures of donors to meet effectiveness commitments related to country ownership, alignment, and the use of country systems. For many Global South countries, particularly LMICs, the current aid architecture remains misaligned with their needs. Established in the aftermath of the Second World War, today’s aid system reflects a vastly different global distribution of power and resources. It is increasingly ill-equipped to support sustainable, country-led development. These structural shortcomings are compounded by recent cuts to aid volumes, which further reduce the resources available for effective development cooperation.

Reimagining aid to achieve lasting results will require seats at the table for Global South governments, civil society, and businesses

The current system of governance, financing, and support for development in LMICs does not meet the needs of these countries to achieve their goals. In 2024, prior to rollbacks in aid financing, ODA to least developed countries (LDCs) reached only USD 35 billion, with Eurodad noting that this inability to meet aid commitments represents a loss of legitimacy for the donor community’s actions and strategies. This loss of legitimacy suggests an opportunity for an overhaul and restructuring of global governance and financing for development in order to facilitate sustainable, long-lasting development. As Martha Bekele, co-founder and director of DevTransform, noted in an interview with FP Analytics, “People talk of reform, but is it possible to reform a system that was deliberately designed to work in favor of an elite group of countries or societies?” Instead, new models for development need to address local priorities and challenges, ensure that resources are deployed efficiently and effectively, and contribute to long-term capacity building in addition to short-term emergency response.

Official Development Assistance Flows

ODA from BRICS countries pales in comparison to the combined ODA from the top five OECD donors. 2021–2023 average, in USD

Note: OECD-DAC refers to Development Assistance Committee members. There are currently 33 DAC member countries. The top 5 OECD donor countries are the United States, Germany, the United Kingdom, Japan, and France. BRICS refer to Brazil, Russia, India, China, and South Africa.

Data sources: AidData.org; Bartosiewicz (2025); OECD Data Explorer Devex; OECD.org; authors’ calculations

Changes in the current paradigm are underway; however, it is vital that high-income countries are held to their longstanding unmet commitments, conceptualized by organizations such as Eurodad as “aid debt” or “ODA debt.” Maintaining pressure on donors to meet their historic obligations will necessitate an overhaul in the global governance of development, to expand the role, voice, and power of countries that receive aid within multilateral institutions. Coalitions such as the G77 represent a promising start, convening LMICs to agree on a shared agenda and negotiate from a position of collective power and solidarity. However, significant barriers remain to expanding the influence of G77 countries, with recent negotiations—such as over increases in climate finance commitments to developing countries at COP29—resulting in limited successes. Indeed, increased representation in the governance of multilateral institutions alone will be insufficient to address historic imbalances and achieve national, regional, and international development priorities.

Addressing imbalances, including the representation of developing countries, is critical to building a cooperative global development financing system. To strengthen their position in these forums, Global South countries will need greater access to high-quality data, technical expertise, and strategic coalitions. Martha Bekele, co-founder of DevTransform, shared with FP Analytics how her team worked with G77 leaders during the 4th International Financing for Development Conference, in June 2025, to collect and analyze data to better support their demands. Increasing and improving the quality and amount of data available will require governments and civil society organizations to work together, and to bring in the support of international actors where necessary, making use of complementary skills and resources. A truly equitable, effective approach to development, therefore, needs to progress as part of wider international financial and global governance reform to support LMICs’ leadership and unlock holistic, cost-effective interventions.

Development strategies aligned to national priorities and goals can mobilize holistic, context-specific interventions to unlock social and economic progress and growth

Interviewees for this report consistently highlighted the need for development agendas, strategies, and practices that are guided by the priorities, needs, and practices of LMICs themselves. Such an approach can manifest in two ways: Governments can align their own development policy with domestic economic, social, and health policy and seek to govern the distribution of funds and resources; and grassroots and local organizations can undertake community-based and -led development interventions. Both approaches represent an opportunity for Global South countries to move away from a donor-led approach to development, and to seek financing and resources from a wide range of sources beyond the traditional ODA donors and Bretton Woods institutions. An approach aligned with national policy priorities in which governments direct and distribute funds can be more holistic and less fragmented in order to address overlapping challenges, such as climate change and health. In support of this goal, ODI Global calls for external support and financing to focus on strengthening local systems, policy environments, infrastructure, and strategic planning to support locally identified priorities and development goals.

One critical component of ensuring nationally aligned development will be ending tied aid, in which the procurement of goods and services as part of loans, aid, or grants is limited to organizations from specific countries, usually the donor country. Eurodad calculates that tied aid represented nearly one-fifth of eligible ODA from DAC countries in 2022. Tied aid compromises the ability of recipient governments to channel funds where appropriate, undermining the development of local and grassroots businesses and development implementing partners, and—as highlighted by the #ShiftThePower movement—perpetuates stereotypes that actors in developing economies are untrustworthy and unreliable. In addition, tied aid is inefficient, costing the recipient country 15 to 30 percent more in transaction costs than untied aid. Indeed, researchers in 2022 found that directing just 25 percent of aid flows to local organizations over international non-governmental organizations (INGOs) could increase cost efficiency by 32 percent. As a result, Eurodad has called for a renewal and expansion of the OECD Recommendation on Untying ODA, first introduced in 2001, including by improving data availability on aid subcontractors and expanding its geographic coverage to include all aid-receiving countries.

Untying aid will only be possible by supporting the capacity-building and technical expertise of local organizations and governments to implement development interventions. In 2024, #ShiftThePower calculated that less than 10 percent of DAC support for civil society organizations goes to CSOs within recipient countries. Channeling funds to local organizations will therefore require those organizations to expand their capacity to handle more resources, including by training staff in accounting and finance, procurement, and human resources. Building the capacity of local and grassroots organizations can enable a greater role for locally led development that is more transparent and accountable to the communities on whose behalf development actors work. Locally led strategies can also leverage “organic, indigenous approaches,” created and implemented independently of any international aid architecture and utilizing practices familiar to local communities, as Martha Bekele, co-founder of DevTransform, explained in an interview with FP Analytics. These approaches can be scaled up and folded into broader development strategies and socioeconomic agendas to increase community involvement.

There remains a role for INGOs and multilateral development banks to scale up their existing capacity-building projects and tailor them to provide the necessary training and business infrastructure for local organizations to expand their impact. The Pledge for Change 2030 campaign, for example, is securing commitments from major INGOs to this end, to transfer power to local organizations in LMICs. Capacity-building can also be supported by the use of grant-pooling and distribution mechanisms run by and for Global South organizations. Funds of this kind enable civil society organizations to receive smaller grants from major donors and provide the opportunity to support, sustain, and expand locally driven and designed development interventions.

Cooperation and collaboration among Global South countries can leverage innovative partnerships and practices to transform development

South-South Cooperation (SSC) and Triangular Cooperation (TrC) mobilize resources and expertise outside the dominant aid architecture, offering models of development based on mutual interests and solidarity. SSC, in particular, can enable Global South governments to pool their resources and form alliances to achieve shared or aligned priorities, strengthening relationships and enabling collective self-reliance. China is a major SSC actor, recently increasing its investments in green and clean energy projects in Africa and Asia. However, China’s role has drawn criticism: initiatives like the Belt and Road have been linked to environmental harm, rights violations, debt burdens, and a focus on Chinese interests over local needs, benefits, and development.

Triangular Cooperation, in contrast, blends resources from both traditional and emerging donors, typically under the leadership of recipient countries. It offers a mechanism for Global North actors to contribute in ways that address their historical responsibilities, including so-called “ODA debt,” while supporting recipient-defined priorities. Between 2000 and 2022, Germany, Chile, Norway, and Mexico were the leading triangular cooperation countries as reported to the OECD, with over 40 percent of their reported projects based in Latin America and the Caribbean, and nearly half involving a non-governmental partner. Recent TrC platforms launched by the EU, Spain, Portugal, and Germany reflect varied priorities. Germany focuses on cooperation with Asia, while Spain and Portugal emphasize engagement with former colonies, presenting both opportunities to address historical injustices and risks of reinforcing past imbalances.

Investment in global public goods offers an alternative to traditional, donor-led aid by framing global development as a shared, mutually beneficial responsibility

The concept of collective investment in global public goods arose in the early 2000s, as development practitioners, policymakers, and thought leaders highlighted the need for international public finance to pay for global public goods such as health security, climate resilience, and pandemic preparedness. This approach reframes support for LMICs as an investment in global resilience, recognizing the cross-border impacts of health crises, climate change, and economic instability. In an interview with FP Analytics, Harpinder Collacott, founder and interim executive director of the Global Public Investment Network (GPIN), noted that while not all policy areas are suited to a Global Public Investment (GPI) strategy, it is vital that any future initiatives are “public purpose first … [and] benefit people and planet.” By promoting strategic investment in the well-being and resilience of the global community, a GPI approach can encourage continued funding from traditional donors, even as their domestic policy shifts away from aid funding.

An emphasis on global public goods strengthens the case for sustained investment in infrastructure, climate financing, gender equality and good governance, all of which are key to national prosperity and global stability. As a result, it provides a compelling alternative to over-reliance on private-sector financing, particularly in sectors in which the private sector has been found to benefit from subsidies while providing little positive impact, such as climate in some cases.

The GPI model has gained traction conceptually, and a growing number of organizations, scholars, and practitioners are interested in piloting and expanding its implementation. While widespread adoption is a long-term goal, challenges to effectively implementing and scaling up GPI include entrenched donor-recipient dynamics, lack of institutional frameworks, and limited political will among major funders. Still, GPI represents a promising new way forward, and organizations like GPIN are identifying practical approaches to implementation, including identifying policy areas that would benefit most from a model in which each country contributes according to its resources. Governance of a potential GPI framework could be the responsibility of a UN agency or a multilateral development bank—in her expert contribution to this project, Dr. Jayati Ghosh highlights in particular the convening potential of the World Health Organization. However, realizing this model will require rethinking decision-making power and resource allocation within international financial institutions (IFIs). Further exploring and building the evidence base for GPI can benefit from the strategies, successes, and challenges of other approaches to financing global public goods, such as those being trialed by the Global Solidarity Levies Task Force. Specifically focused on climate and development, the task force aims to impose progressive taxes to finance climate mitigation and adaptation strategies at a global level. 

Domestic resource mobilization can enable Global South countries to set and carry out development agendas that reflect their national priorities

LMICs are under growing pressure to mobilize domestic resources to advance development agendas aligned with national priorities. Limited domestic resources force governments to make trade-offs and prioritize how to maximize the impacts of their available funds, which can lead to sectors being perceived as low-value, or having a low return on investment, thus being neglected. Responding to acute financing crises as well as planning for long-term, sustainable financing for development outcomes will therefore require multiple approaches. Indeed, analysis by the Boston University Global Development Policy Center finds that an additional USD 3 to 4 trillion annually of investments is needed in emerging markets to meet the SDGs and take decisive action on climate change.

Domestic and international tax reform, including curbing illicit financial flows, represent significant sources of domestic financing. UNCTAD calculates that Africa could leverage an additional USD 89 billion per year by addressing illicit financial flows through capital flight, tax evasion, and criminal activity. Accessing these funds could be catalytic for broader domestic resource mobilization for development but will require significant adjustment to domestic tax policy and legislation, alongside national and regional cooperation on illicit finance. As Farah al-Shami, senior fellow at the Arab Reform Initiative, noted in an interview with FP Analytics, “Increasing the use of progressive and redistributive taxes such as personal and corporate income tax could create significant fiscal space for domestically financed development policy.”

Globally, tax regimes can act as reparations for historic inequities between countries, or between rich and poor, while mobilizing funds for global development action. Oxfam notes that through the current global financial system, the richest 1 percent—more than two-thirds of whom live in the Global North—received USD 263 billion from the Global South. A global wealth tax, advocated for by several civil society organizations, could therefore contribute to reversing this extractive trend while using the levies to address global development challenges or fund global public goods. The planned UN Tax Convention represents a critical victory in reconfiguring the balance of power in global governance and is an essential step forward in this work, as discussions have included the possibilities of a corporate and individual wealth tax. 

In addition to taxation, domestic revenues can also be enhanced by strategic investment in local and regional industry and by increasing the Global South’s presence in global trade and investment flows, including by increasing foreign direct investment (FDI). This process is already underway as the Global South is a major destination for FDI. South-South trade reached a value of USD 5.3 trillion in 2021, and it is predicted to expand at 3.8 percent annually until 2033. The continued growth of Global South economies presents opportunities for investment that support both economic development and climate action. Organizations such as the Energy for Growth Hub work to identify investments that present a high return for investors while supporting the delivery of clean energy in Africa, for example, by investing in grid capacity and functionality, an aspect of energy delivery that has been historically neglected. 

However, ensuring FDI contributes meaningfully to development will require significant reforms, including to the legislation of foreign investment and operation, the process of contract negotiation, and investment and dispute governance. For example, investor-state dispute settlement mechanisms currently favor foreign investors, often at the expense of developing countries. In 2023, 60 investor-state dispute settlement arbitrations were initiated, nearly three-quarters of which targeted developing countries. In recognition of this imbalance, the UN Commission on International Trade Law Working Group has been working, in partnership with CSOs and other actors, to reform investor-state dispute settlement since 2017. In addition to this work, CSOs and other actors can provide legal and technical advice and assistance to governments and companies promoting FDI. The African Legal Support Facility, for example, is an international organization hosted by the African Development Bank which provides legal advice to African governments. Creating a more transparent, accessible, and equitable FDI system will be essential to enabling Global South governments to negotiate from a position of strength, in line with broader goals for inclusive global governance.

Looking ahead: Transforming the approach to aid to achieve global prosperity

With just five years remaining until the 2030 deadline for achieving the UN SDGs, and many targets far from completion, a new approach to development financing is necessary to create lasting change. The recent Compromiso de Sevilla at the 4th International Conference on Financing for Development is a step in the right direction, but much more needs to be done to secure additional commitments and turn all commitments into action. While reductions in aid spending by traditional donors are disheartening, they present a critical opportunity for change. Aligning development strategies to be localized, country-led and focused on capacity-building, while encouraging investment in global public goods, will enable a more equitable, more sustainable approach to global development.

Stakeholders in global development can facilitate this shift in several ways:

• Strengthening data collection and transparency, including closing gaps in longitudinal, comprehensive, age- and sex-disaggregated data. This can support the national development priorities of LMICs, by enabling better progress monitoring, and identification of areas for improvement and successes that can be replicated or adapted elsewhere. UNCTAD, for example, launched a three-year program in 2023 to collect data on South-South Cooperation projects, to better understand the work underway and its impact and make the case for future SSC investments.
• Encouraging and establishing a framework of mutuality, where the interconnected nature of the global community is acknowledged and addressed, with countries contributing according to their capacity, including via knowledge-sharing and technical assistance, as well as through funds and in-kind resources.
• Making the case clearly and compellingly for investment in global public goods, and creating the infrastructure and frameworks for transparent, trustworthy global public investments that do not reinforce traditional power dynamics between rich and poor nations.
• Reconceptualizing governance for international development cooperation to empower countries from all regions, of all sizes, and at all stages of development to govern and guide development outcomes and financing and establish an inclusive framework for ODA and broader development interventions.

In supporting developing countries to identify, set, and work toward priorities that align with broader policy goals, traditional donors and established multilateral institutions can upend historic paradigms and work toward a just development framework.

By Isabel Schmidt (Senior Policy Analyst and Research Manager), Miranda Wilson (Senior Policy and Research Analyst), and Dr. Mayesha Alam (Senior Vice President of Research).

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