London, UK, April 29, 2025 — The argument I am going to make today has four parts: That the convulsions in the aid system are lead indicators of major geopolitical reordering in other parts of the international system; that aid has lost focus on the extreme poor and has been stretched too thin, especially as the greatest needs are increasingly concentrated in conflict states; that elements of a clear reform agenda are visible if we are prepared to look, but it will require tough prioritization; and although the UK aid budget is being reduced, it can still play an important role.
The task is not to “retell” the aid story; it is to tell a different story, matching aid finance and aid instruments to the different purposes of international aid, in order to optimize results for different populations in different places, and focus on the most fundamental task, which is to accelerate rather than abandon the fight against extreme poverty, where aid has its greatest impact.
Multi Aligned World
The world is always changing, but this feels like a moment of genuine geopolitical flux, at least as significant as 1989/90, when the world transitioned from the Cold War to a unipolar moment. The Trump Administration is both a symptom and a cause of the change. The trouble is that while it is clear what we are inflecting from, a world in which the US was the anchor of the global system, it is not clear what we are inflecting to.
We know that America retains global interests but is more unilateralist; that China is a superpower, but it still calls itself a developing country; that Europe and Japan have been steadily losing their share of global economic wealth and rely on the multilateral system for political sway; that countries like India, Saudi Arabia, Brazil, South Korea, Turkey have all grown economically, but political power in the UN system is out of sync with the distribution of economic power, to the rising resentment of those denied a full say.
But there is also a lot we don’t know. How much global responsibility China is willing to take on. Whether immensely wealthy Middle East powers want to take on responsibility beyond their own region. Whether and what sort of African solutions can be brought to scale to address African problems. Whether Europe has to sort out its internal economic and social problems before it becomes a global power, or whether it can only sort out domestic problems by becoming more powerful globally.
And of course we don’t know whether the climate crisis will cross tipping points, whether the next global pandemic is five or fifty years away, whether any of the 59 conflicts in the world today will sprout into a larger war, and whether AI will create a crisis of human purpose or a new era of human freedom. These global risks interact with geopolitics in ways that are non linear.
I see this not as a newly-balanced “multipolar world”, which is a popular concept today, but instead as a more fluid, transactional “multi-aligned” world (Shashi Tharoor’s phrase), in which different coalitions of values and interests are built on different issues. We already see that in the aid sector, both in the problems we face, notably in conflict zones, and in the struggle for funding, and between funding needs, to address those problems.
Aid and Poverty
The US has long been the anchor of the aid system. And when the anchor of a boat is pulled up in choppy seas, things get dangerous. That is what is happening in the aid sector at the moment.
US foreign aid payments represent around 30 per cent of all funds, and over 80 per cent of programmes have been terminated. The US pays between a third and half of the bills for the main UN agencies. NGOs headquartered in the US, including the IRC, are big players. Its philanthropists, notably the Gates Foundation, are leaders in the field. Its private sector are the biggest players. And its scientific, cultural, organizational reach is the widest.
The primary danger of the cuts is that they cost lives. But there is another danger: that they reinforce salami slicing and conservatism elsewhere within the aid system. While the right has criticized the aid system for alleged fraud, and the left has criticized it for hierarchy, neither have addressed the reality that the aid system can’t do everything on its plate with the money it currently has.
The “Official Development Assistance” budget was around $212bn in 2024. Over the last ten years, with the launch of the 18 Sustainable Development Goals in 2015, and especially since Covid, aid funds have been used for a range of goals, each desirable in and of themselves, but increasingly in competition with the immediate needs of the poorest people.
When you look at what aid is spent on, humanitarian aid averages around 14 per cent of the budget, and health spending around 10 per cent. OECD analysis shows the largest share, around 60 per cent of bilateral aid in 2017-21, up from less than 40 per cent ten years earlier, goes on addressing global challenges like climate mitigation, infectious disease control, international peace and security, and research and development. Meanwhile richer, donor countries are spending more or less as much of the aid budget on supporting refugees and asylum seekers in their own countries as is spent on humanitarian aid globally.
There are good reasons for all this spending. But there is a snag: when it comes to spending on global challenges, the poorer a country, the weaker the state, the more complex the delivery and the less is spent.
When you look at where aid goes, Ukraine gets more foreign aid (around $30bn) than any other country. It needs help and we are proud to work there. But the other 19 countries on the IRC Emergency Watchlist, representing the greatest humanitarian crises and 84 per cent of the 300 million people in humanitarian need, receive just 12 per cent of the total aid budget.
According to the ONE campaign, in 2023 16 per cent of aid went to low income countries (there are 25 according to the World Bank), where average income is no greater than $3.13 a day ($1145 per year). There are about twice as many countries in each of the next two categories and they both got a higher share of total aid distribution: lower middle income countries (average income of $3.13 to $12) received 23 per cent, and upper middle income countries ($12-38 per day) 22 per cent.
There are three critical factors at work here.
First, while aid is widely spread, extreme poverty is increasingly concentrated.
In 1987, 30 per cent of countries were classified as low income. In 2023, it was 12 per cent. In South Asia, the share of countries classified as low income has shrunk from 100 per cent to 13 per cent – a remarkable achievement. Meanwhile, the number of people in extreme poverty in sub Saharan Africa has risen from 282 million in 1990 to 464 million in 2024, so nearly 70 per cent of the extreme poor live in sub Saharan Africa. And amongst the extreme poor, the concentration of the most extreme need is now such that 84 per cent of people in humanitarian need live in the 20 countries on the IRC Emergency Watchlist.
If you look at which countries satisfy five criteria of extreme need - they have a Humanitarian Response Plan, receive over 90 per cent of ODA in the form of grants not loans, are categorized as a Least Developed Country facing or already in debt distress, are most affected by USAID cuts and are conflict and/or climate vulnerable – there are only 13 counties which satisfy all five indicators, including Sudan, the worst humanitarian crisis in the world, Afghanistan and Yemen.
Second, conflict is increasingly the common denominator in explaining extreme poverty, but the aid system focuses on government structures, and they find it hard to deliver in these conditions. By contrast, local, national and international humanitarian agencies, because of their base in civil society, have a proven ability to work in the most difficult contexts and sustain service delivery while conflict continues.
From a position in 1990, when less than 10 per cent of the extreme poor lived in conflict states, the World Bank estimate today is 50 per cent across 39 countries, rising to 65 per cent by 2030. The OECD estimates of the crossover between fragility and poverty is even higher. But when you look at where aid goes, the share going to fragile and conflict states declined from around a third in 2019 to 22 per cent in 2023.
Third, aid remains focused on development as the means to reduce poverty, but aid is not the main driver of development.
Just think of the story in India or South Korea, Ghana or Vietnam, the success stories of development. Aid was not a driving factor. Markets and domestic policy took center stage in development. Remittances are worth $120bn for India alone, $114bn for the other three countries, and nearly $700bn globally, three times the level of ODA. Aid saves lives, but it takes politics to make development possible.
Add it all up and there is a Gordian knot.
Needs are increasingly concentrated in fragile states where governments are weak or at war. The focus of the aid budget is being diluted across multiple priorities, and its overall size is being reduced. Meanwhile the hope that public-private partnerships would “turn billions of dollars into trillions” for the poorer parts of the world has not been fulfilled. And the macro-economic environment has turned sour, even before the trade war induced by unilateral American tariffs, with rising interest rates sucking money out of developing countries.
Thinking Forward
If this is right, then there are some clear implications. First, we should argue strongly for broadening the base of aid donors as we argue against aid cuts. The G7 group of industrialized democracies constitutes 30 per cent of global GDP and 75 per cent of foreign aid. It is legitimate to point out that the combined income of the BRICS countries is equivalent to US GDP, with nothing like the US aid contribution, and to call on newly wealthy countries, notably in the Gulf but also elsewhere, to play their full part in helping those left behind by globalization.
Second, let’s remember how critical the macro-economic context is to development. The work led by Larry Summers for the G20 in 2024 showed how the rise in global interest rates after Covid was draining health and education budgets in places like South Sudan and CAR. As Larry wrote last year: “2023 was a disaster in terms of support for the developing world…rising interest rates and bond and loan repayments meant that nearly $200bn flowed out of developing countries to private creditors in 2023.” Aid cannot fill this gap. That’s why we need new imagination about how to reduce debt burdens, including the idea of humanitarian debt swaps that IRC is trying to support to shift resources from paying off debts to investing in humanitarian action. The idea of climate debt clauses that the UK has championed is relevant here.
Third, for stable states that are trying to develop themselves, there is big opportunity for leveraged finance and public-private partnership. The struggle to turn public-private partnership into realizable investment in conflict states should not turn the world away from the drive to mobilize private resources for common good in more stable places. Funding for key global efforts like climate mitigation and adaptation was originally meant to be additive to efforts to help the poorest. In fact what has happened is that climate finance has grown as the overall aid flows have stagnated well short – about half - of the recommended UN target of 0.7 per cent of GDP.
Fourth, aid is most needed in the poorest countries, with the largest concentrations of very poor people, the highest levels of humanitarian needs, and the least capacity to meet those needs. The aid effort in these places needs to be better funded, and the funding also needs to go further. So it’s the old formula of “investment and reform”: invest in scalable, high impact interventions, and deliver them in the most cost effective way. This yields a clear agenda.
- A prioritization drive. Evidence of impact as well as need should drive prioritization. For example, acute child malnutrition is the apex of the humanitarian pyramid. 45 million under fives suffer acute malnutrition and it is the leading contributor to death (in about half of all mortalities). Yet 80 per cent of acutely malnourished under fives in conflict states today don’t get the appropriate help, despite the proven impact of a reform approach using community health workers to diagnose and treat the disease. Another example: Cash support is the most direct and efficient way of helping people out of poverty. It also brings benefits to local economies, and creates sustainable change. Yet less than 20 per cent of the humanitarian aid budget goes in cash disbursements, even before US cuts take effect.
- A cost effectiveness drive. In the malnutrition case, IRC showed how to achieve 20 per cent cost efficiency gains. More broadly, IRC has conducted around 400 cost effectiveness and cost efficiency studies over the last ten years. There are big gains to be had. We think that just lengthening the life cycle of grants from less than a year to multi year could deliver 30 per cent efficiency gains. That means helping 3 million kids with severe acute malnutrition or 5 million with moderate acute malnutrition. Also, the bundling of programmes, for example immunization and malnutrition programing, breaking down silos, could also save 20 per cent. A shift towards outcome based accountability, rather than obsession with inputs, could deliver a minimum of ten per cent gains. There is also a big agenda to drive coordination among donors to agree priorities, streamline bureaucracy, reduce duplication and drive impact. This would help get the aid sector focused on clients. CGD analysis shows that the median size of an aid project is just $100 000. They describe a “Christmas Tree” approach that is the antithesis of effective and efficient implementation.
- An innovation drive. From farmer information systems to education for kids on the move, IRC’s own research has shown how AI holds out the prospect of quite striking advances. We can use AI to make the aid sector more pro active and less reactive, for example using IRC’s “Follow the Forecast” model of anticipatory action for intervening with aid before a flood or drought hits. We can also make the system more personalized: for example we are developing an AI-powered offline functional app for frontline health workers to rapidly diagnose mpox by analyzing photos of lesions. And we can make it more accountable.
- An access drive. The poorest people on the planet are cut off from cash and services by conflict so humanitarian law and humanitarian access need to be defended as legal as well as moral rights. This is where humanitarian principles of neutrality and impartiality are a life saver. In East Africa, IRC in partnership with GAVI and UNICEF has turned conflict ridden administrative districts from no go zones for immunization into hotspots for immunization of zero dose kids, with 11 million vaccine doses so far delivered. Talking to parties to conflict is part of the humanitarian toolkit and needs to be defended, especially in a world where there are 43 de facto ie non state authorities in the world.
UK Role
This leads to what should the UK be doing.
“More in Common” polling in February of this year shows the public are more than twice as likely to say that UK international aid has a positive impact than a negative impact; and the public across all parties want aid to focus on urgent humanitarian issues rather than long term systematic issues. So this is not a political third rail.
The decision to cut the aid budget has been made. I regret it. But now it has been made, the danger can either be mitigated or magnified. Here are some thoughts about mitigation:
- The commitment to an aid budget worth 0.3 per cent of national income should mean just that. It should not be 0.3 per cent minus refugee and asylum costs, and minus a range of other calls on the resource. Let’s make sure it really is what it says on the tin.
- Let’s prioritize. That can be by country, per the analysis above of where the greatest need exists. Or by program: the UK was the leading donor to GAVI, and that would be a strong priority. But in all cases let’s make sure the focus is proven programmes that can build public support by the impact they have.
- Let’s use our voice to support innovation, including in areas where the UK has strength, like financial services. About half of the global aid budget goes through multilateral bodies like UN agencies and the World Bank. The UK sits on many of the Boards of the institutions that administer these funds, whether grants or loans. Let’s be a force for innovation in those fora.
- Let’s work with allies, notably in Europe, to pool resources and make aid money go further. The reset of European policy being conducted by the government could be augmented through aid cooperation. The EU has geographical coverage, scale and a variety of instruments that could make UK aid go further.
Conclusion
To return to where I started, this is a moment of flux across the international policy terrain. Global risks, technological revolution and geopolitical fragmentation are combining to break up old systems. That is nowhere more true than in the drive to help the poorest people in the world. There are big dangers, but also opportunities for leadership.
I have been inspired by the commitment, innovation and value for money of the aid sector that I have seen over the last ten years. I don’t believe that responsibility from richer to poorer should be cut back. But we will only rebuild it with an agenda that is clearer, more impactful and more focused. I hope that is the debate we can now have.