Shifting Global Aid Dynamics and the SDGs
Global foreign aid patterns have undergone notable changes. In this essay, we take a longitudinal look back to interrogate the evolution of development aid since the adoption of the Sustainable Development Goals (SDGs) in 2015. The SDGs set ambitious targets for 2030, but financing has consistently fallen short. On the eve of the SDGs, developing countries faced an annual investment gap of about $2.5 trillion; by 2023, this gap had swelled to $4–4.3 trillion due to years of underinvestment and the emergence of new crises. Major donor nations have increasingly turned inward or tied aid to their own strategic interests, complicating efforts to fund SDG programs in areas like poverty, health, and education. Indeed, aid shortfalls are hindering progress—at the current trajectory, goals such as quality education for all are now decades behind schedule. These geopolitical shifts threaten to derail global development commitments, making it crucial to assess how aid-dependent countries can adapt and explore more self-reliant growth paths.
Donor Reprioritization and Funding Changes
Several leading aid donors have significantly reoriented their foreign assistance since 2015, driven by domestic politics, economic pressures, and geopolitical events. This reprioritization has often meant cuts to traditional aid programs and new conditions on funding, impacting developing countries and SDG initiatives. Below are key shifts in select major donor countries:
United States: The U.S. has seen periods of retrenchment in its foreign aid. Under the Trump administration, especially, aid was curtailed or redirected to align with “America’s national interests.” Early this year, the U.S. halted USAID operations globally via executive order, prompting fears across aid-dependent nations like Malawi. In Malawi, for example, USAID implementing partners were abruptly ordered to stop all projects following a 90-day aid suspension directive. This funding freeze sent shockwaves through Malawi’s health sector, which has relied heavily on U.S.-funded HIV, education, and agriculture programs. Local experts warned of a “big blow” as essential services and civil servant salaries in health were left in limbo. Such program closures underscore how shifting U.S. foreign policy can instantly stall development efforts on the ground. USAID’s own strategy has long talked of helping countries become self-reliant, but an abrupt pause in support has demonstrated the vulnerability of countries that came to depend on U.S. aid see this and this.
United Kingdom: The UK, historically a top donor, has substantially cut and reallocated its aid budget in recent years. In 2020, the UK reduced its legally enshrined aid target from 0.7% to 0.5% of gross national income, citing fiscal strains. By 2022–2023, aid spending had dropped by over £3 billion (a 21% fall) and a large portion of remaining funds was diverted to domestic needs (you may also find additional analysis here). In fact, £4.3 billion of the UK aid budget was spent inside the UK in 2023 to support refugees and asylum seekers, accounting for 28% of total ODA. This use of aid for in-country refugee costs, while allowed under international rules, means less aid reaching poverty reduction programs abroad. The refocusing has already led to program closures in some of the world’s poorest places – the UK’s retreat from its 0.7% pledge forced it to shut down or scale back projects in countries like Somalia and Afghanistan. Sectors like education were hit particularly hard: education’s share of UK aid fell from 13.5% in 2013 to just 3.7% by 2022. With Britain now at roughly 0.5% (and considering even lower levels), it has walked away from the 0.7% commitment – leaving Germany as the only G7 country still meeting that benchmark. Observers worry this reversal sets a dangerous precedent and undermines global solidarity toward the SDGs. British aid that remains is increasingly tied to domestic priorities such as migration control and trade, rather than solely poverty alleviation.
The Netherlands: The Dutch government has explicitly shifted its development aid toward national interests and security objectives. This year, the Netherlands announced plans to slash its aid budget by €2.4 billion by 2027 – shrinking aid from 0.62% of GNI in 2024 to just 0.44% by 2029. This pivot will align aid with Dutch trade, migration, and economic agendas. Key aid priorities were refocused to areas deemed to benefit the Netherlands, such as water management, food security, and maternal health, where Dutch expertise or business interests are strong. Conversely, funding for traditional development themes is being pared down. The Dutch government is phasing out support for gender equality initiatives, education programs in Africa, small-scale climate projects, and even contributions to UN agencies like UN-Women. Aid will concentrate on a limited set of countries in regions linked to European migration flows (North Africa, the Sahel, Horn of Africa), and programs outside these zones – for instance, in Southern Africa’s Great Lakes region – are to be eliminated. Migration control is now explicit: Dutch aid will be tied to agreements to curb irregular migration, with more funding for refugee assistance in transit countries and deals with nations like Morocco and Uganda to manage migrant flows. In short, the Netherlands is recalibrating aid as an extension of its foreign policy and domestic concerns, even if it means retreating from global goals like climate action or education that don’t directly serve Dutch interests.
Other Funding Shifts: Beyond the U.S., UK, and Netherlands, other donors have adjusted their aid in response to crises and political pressures. Germany, for example, initially increased aid during the late 2010s and has met the 0.7% target in recent years, but it announced cuts in late 2024 of almost €1 billion, including a 50% reduction in humanitarian aid. Domestic refugee costs have strained European aid budgets across the board. In many donor countries, a growing share of “aid” is now spent domestically to support refugees or on projects in middle-income strategic partner countries, rather than in the poorest nations.
The war in Ukraine marked another turning point: in 2022, global ODA reached a record high of $211 billion, but much of the increase went to refugee support and Ukraine itself, not to long-term development in Africa or Asia. Donors collectively spent $31 billion on hosting refugees in 2022 (15% of all ODA) and $17.6 billion on aid to Ukraine. By contrast, aid to the Least Developed Countries (LDCs) fell by 4% that year. This indicates a diversion of resources: even as headline aid sums rose, fewer funds actually flowed to the world’s poorest communities due to shifting geopolitical priorities. Traditional donors are also increasingly framing aid in terms of competition with rising powers – for instance, Japan channels large aid loans to Asian countries like India as a counterweight to China’s influence. Meanwhile, non-Western donors (such as China, India, and Gulf states) have expanded their development financing, but often in the form of loans or infrastructure investments rather than the grant-based aid counted toward SDGs. The net effect of these trends is a more fragmented global aid architecture and an uncertain outlook for countries reliant on steady donor support.
Implications for the Sustainable Development Goals
The reorientation of aid by major donors has direct ramifications for the SDGs. Many of the goals—ranging from eradicating poverty (SDG1) and zero hunger (SDG2) to quality education (SDG4) and health (SDG3)—depend on sustained funding for projects in developing countries. When donors pull back, those programs face abrupt funding gaps. For example, cuts in UK aid have meant fewer resources for education, gender equality, and health in low-income countries, stalling progress on SDGs 3, 4 and 5. Furthermore, experts note that the drop in UK support has left efforts to get every child in school by 2030 “fatally” under-resourced, pushing that target further out of reach. Likewise, Germany’s reduction in humanitarian aid comes at a time of proliferating crises, contributing to a growing global humanitarian funding gap – by 2024, nearly 70% of worldwide humanitarian needs were unmet. These shortfalls impair SDG targets on poverty, hunger, and peace (SDG16) because emergency aid often stabilizes communities so development can proceed.
Beyond specific sectors, the credibility of the SDG partnership (SDG17) is at stake. Developed nations had pledged to support their developing counterparts, but decisions like the UK’s retreat from its 0.7% aid commitment strike a chord, including undermining trust. There is concern of a domino effect, i.e., if one leading donor cuts back, others may follow suit. Indeed, some aid-dependent governments now face budget crunches due to donor withdrawals, forcing them to shelve SDG-aligned development plans. The SDG financing gap widening to over $4 trillion per year illustrates how far off-track funding has become and will be a major contention at the Fourth International Conference on Financing for Development (FfD4) scheduled to take place 30 June – 3 July in Seville, Spain. While domestic resource mobilization in developing countries can cover part of this gap, international support was always envisaged to play a critical role. When global development funding becomes a casualty of geopolitical shifts – be it due to donor fatigue, isolationist policies, or competing priorities like Ukraine – the poorest communities bear the cost in delayed development outcomes. To meet the SDGs, stakeholders are calling for renewed commitments and innovative financing to replace the withdrawn aid. Otherwise, many countries risk missing the 2030 targets, entrenching inequality between those who can self-fund progress and those still reliant on dwindling aid.
Aid Dependency in Developing Countries: The Case of Malawi
Malawi exemplifies the dilemmas faced by aid-dependent nations amid changing donor priorities and attitudes. Our country has long relied on foreign aid to fund a large share of the national budget and basic services. Over 40% of the national budget is supplied by foreign aid, reflecting a dependency dating back to independence in 1964.
In the 2010s, Malawi was frequently cited as one of the world’s most aid-dependent economies, according to Afrodad.org. At times, aid inflows have averaged roughly 20% of Gross National Income (GNI) – an extraordinarily high ratio indicating that external donations prop up a significant portion of the economy. Such dependency means Malawi’s development programs in health, education, agriculture, and infrastructure are deeply influenced by donor funding attitudes. While aid has enabled Malawi to make gains in areas like child health and HIV treatment over the years, it has also left the country vulnerable to any donor pullback or conditionalities.
Recent geopolitical shifts have delivered painful lessons. When major partners like the U.S. and UK scaled down or redirected aid, Malawi felt immediate impacts. The abrupt freeze of USAID funding in 2025 (due to the ongoing U.S. policy review) threatened many projects mid-stream – from university scholarships to community health initiatives. Public universities, for instance, had to tell thousands of students on USAID scholarships that their support was suspended, jeopardizing their education. “It’s like we have just started school, then we get the news...the only hope I had,” recalled one affected student when her stipend was suddenly cut off. Similarly, Malawi’s health NGOs warned that a halt in U.S. aid would mean immediate gaps in HIV prevention, family planning, and even the salaries of healthcare workers. The Malawian government under the Lazarus Chakwera’s presidency, acknowledging these risks, has urged its citizens to recognize the need for economic independence. “We cannot continue to rely heavily on donor aid,” a government spokesperson stressed, reacting to the USAID freeze. The episode has galvanized discussions in Malawi about over-reliance on aid and the importance of building shock absorbers.
We have experienced aid volatility before. In 2014, the corruption scandal “Cashgate” led many donors to suspend direct budget support, causing a fiscal crisis. Cashgate, and the recent donor shifts, highlight how unpredictable aid can destabilize Malawi’s national planning (see this and this). Essential services can be thrown into uncertainty by decisions made thousands of miles away in Washington, London, or Brussels. Moreover, heavy donor involvement can sometimes skew government accountability – officials may become more answerable to aid agencies than to their own citizens in setting priorities.
There is also the issue of “aid conditionality,” where funds come with policy strings attached that might not always align with local needs. For Malawi, reduced aid inflows in the short term are undeniably painful (given the budget holes they create), but they also reinforce the urgency of reducing dependency. It is a classic catch-22 for aid-dependent states: continue relying on aid and remain exposed to external shocks, or find ways to wean off aid, which itself is challenging given limited domestic resources. The Malawian leadership appears to be left with no choice but lean toward the latter, seeing the writing on the wall that aid cannot be counted on as reliably as before. As one expert noted, “It’s high time that Malawi and other developing countries start to think about how they can reduce their dependence on foreign aid.” The question for Mr. Chakwera is how to do so without derailing development progress. He has frequently demonstrated cluelessness.
Benefits of Reduced Dependency on Foreign Aid
While foreign aid has been crucial for Malawi and similar countries, there are clear potential benefits to reducing dependency over time. Decreased reliance on aid can empower developing nations to take full ownership of their development agenda, making planning and budgeting more predictable. When half of a country’s health or education budget comes from donors, any cut or delay can harm the desired impacts the requisite services intend. A self-sufficient financing model insulates vital programs from geopolitical whims or donor fatigue. It also encourages governments to strengthen domestic institutions – for example, improving tax collection and public financial management – so they can raise and manage their own revenues for development. Malawi’s government has openly recognized that economic independence will require diversifying the economy and increasing domestic revenue to fund services internally. Achieving this would allow the country to set its own priorities, e.g., investing in rural agriculture or technical education without being constrained by donor preferences.
Reduced aid dependence can also foster greater accountability to citizens. If a government’s budget is mostly funded by taxpayers and local resources, the social contract between the state and its people strengthens – leaders would have to answer to the electorate on how Account Number 1 spends, rather than mainly to international donors. This can improve governance and reduce corruption, as citizens demand results for the taxes they pay. In contrast, heavy aid inflows sometimes create perverse incentives or parallel systems that bypass local governance; moving away from that can integrate development programs into national systems for lasting impact. Another benefit is flexibility: countries not overly tied to aid can respond more flexibly to crises. For instance, when a climate disaster strikes, an aid-dependent nation might have to wait for emergency donor appeals, but one with its own reserves or fiscal space can react faster to help its people.
Ultimately, the pride and dignity of self-reliance are an important, if intangible, benefit. Several African leaders have spoken of wanting to shed the “donor-dependent” label and chart a future defined by trade and investment rather than handouts. Populations too may become more self-reliant and entrepreneurial when aid is not seen as the default solution to every problem. Of course, aid phase-out must be managed carefully to avoid sudden shocks to the poor. But as countries develop alternative funding sources, they can gradually shift aid from a permanent lifeline to a supplemental or transitionary role. Success stories such as South Korea (which moved from aid recipient to donor in a generation) or Botswana (which leveraged initial aid and mineral revenue to achieve middle-income status) show that graduating from aid dependence is possible and often correlates with stronger economic growth and governance. In sum, while foreign aid will remain important for the poorest nations and for emergencies, reducing dependency can yield greater autonomy, stability, and ultimately more sustainable development outcomes.
Alternative Growth and Development Strategies for Self-Reliance
To transition away from heavy aid dependency, countries like Malawi must pursue proactive strategies for economic growth and development financing. Multiple pathways can help replace aid with more durable sources of income and investment. Key strategies include:
Economic Diversification: Breaking dependence on a narrow range of commodities or sectors is critical. Malawi’s economy, for example, has historically been dominated by agriculture (notably tobacco, which alone makes up a huge share of exports). This leaves the country vulnerable to price shocks and declining demand (as seen with global tobacco trends). A more resilient approach is to invest in diverse sectors. Malawi has opportunities in tourism, agro-processing, mining, and renewable energy that remain untapped. By expanding into these areas, the country can create new revenue streams and jobs. For instance, developing agro-processing industries would add value to crops (like turning groundnuts or maize into packaged products) rather than exporting raw produce. Likewise, nurturing a tourism sector around the country’s natural attractions (lake resorts, wildlife, culture) can boost foreign exchange reserves. Diversification reduces over-reliance on any single source (be it an export crop or aid donor) and makes the economy more shock-proof. Countries like Rwanda and Ethiopia have pursued diversification – investing in light manufacturing, services, and technology – to lessen their historical dependence on aid and agriculture, with notable success in boosting growth.
Regional Trade and Integration: Tapping into larger markets through trade can accelerate growth far beyond what aid inflows provide. Initiatives such as the African Continental Free Trade Area (AfCFTA) present a major opportunity for accessible markets. By engaging more in regional trade, Malawi can export more goods to neighboring countries and beyond, earning income through commerce rather than aid. Enhanced trade relationships also encourage infrastructure development (roads, power, border facilities) which further supports economic activity. In Malawi’s case, better integration with SADC (Southern African Development Community) and COMESA regions, and simplifying cross-border trade, could open up markets for its farmers and entrepreneurs. “Trade, not aid” becomes more than a slogan when a country actively increases exports of goods and services. Greater export revenues can then fund public services. As one Malawian analysis noted, intra-African trade under AfCFTA could help the country reduce reliance on external aid by building a more sustainable development model based on commerce. Neighboring countries that have grown their manufacturing (like Kenya with textiles or Tanzania with processed foods) provide examples of how regional demand can drive industrialization.
Domestic Resource Mobilization: Strengthening the capacity to raise and manage funds at home is fundamental. This includes improving tax collection systems, broadening the tax base, and curbing illicit financial flows. Many low-income countries collect less than 15% of GDP in taxes, compared to over 30% in advanced economies, leaving much room to increase revenues for public investment. Rwanda offers a case in point – the government has focused on boosting domestic revenues to reduce aid dependence, recognizing this as key to resilience. By reforming tax policy and administration, Rwanda increased its tax-to-GDP ratio and used those funds for infrastructure and social programs, thereby gradually lowering the share of aid in its budget. Malawi can similarly work to capture more revenue from its economic activities: for instance, formalizing more of the economy so businesses pay taxes, adjusting tax rates or eliminating unnecessary exemptions, and strengthening enforcement to reduce evasion. Every additional dollar of revenue collected is one less dollar needed from donors. Domestic resource mobilization also encompasses prudent debt management – leveraging concessional loans or bond markets wisely to finance development without falling into debt distress. While Malawi’s public debt is high, improving creditworthiness by using funds effectively can unlock sustainable financing options beyond grants.
Private Sector and Entrepreneurship: Foreign direct investment (FDI) and local private sector growth are engines that can propel development independently of aid. Creating a business-friendly environment – through stable policies, ease of doing business reforms, and investment in human capital – can attract investors and encourage local entrepreneurs to start companies. Small and medium-sized enterprises (SMEs), in particular, are crucial for job creation and innovation. Malawi can boost programs that support SMEs with training, microfinance, and market linkages. A vibrant private sector generates employment and increases tax revenues, while reducing poverty. In recent years, Malawi has seen startups in agribusiness, fintech, and tourism that, with the right support, could scale up and reduce the country’s unemployment and reliance on subsistence farming. On the FDI front, Malawi can seek investors in sectors like mining (it has minerals like rare earths and uranium), energy, or commercial agriculture. Countries such as Ghana have launched initiatives like “Ghana Beyond Aid”, explicitly aiming to use private investment and public-private partnerships to finance development projects instead of aid. Ghana attracted billions in infrastructure investment through such partnerships. Malawi too could pursue public-private partnerships (PPPs) for infrastructure (roads, telecom, power plants), leveraging investor capital for development gains with a vengeance. By fostering entrepreneurship and investment, countries build an economy that stands on its own, driven by market forces rather than donor agendas.
Good Governance and Anti-Corruption: An often overlooked but vital strategy is improving governance in earnest. Reducing corruption and ensuring transparency in public spending can free up resources and increase the impact of every dollar – whether from taxes or aid. When citizens and investors trust that funds will be used wisely, they are more willing to pay taxes or invest locally, creating a virtuous cycle of self-reliance. Malawi has taken steps, albeit largely superficial, in this direction after past scandals, strengthening its public finance oversight. Continued reforms, e.g., digitalizing government payments, empowering anti-corruption bureaus, not only make aid more effective but also build the case for greater budget support from domestic sources. Moreover, accountable governance attracts development partners on better terms – for instance, Millennium Challenge Corporation grants or climate finance funds that reward good policy. By contrast, poor governance can scare away both donors and investors, perpetuating dependency. As Malawi’s “Aid Paradox” analysis pointed out, improving governance and reducing corruption are crucial for creating a conducive environment for business and for citizens to thrive without perpetual aid. In short, sound governance is the glue that makes all the other strategies – diversification, trade, mobilizing resources, private sector growth – work effectively.
Lessons from Other Developing Nations
Several developing countries have managed to significantly reduce their aid dependence by implementing the kinds of strategies outlined above. Their experiences offer valuable lessons. For instance, Rwanda leveraged substantial aid in the immediate post-conflict period but simultaneously invested in building domestic capacity and revenue. Over time, Rwanda’s reliance on aid dropped markedly – by one estimate, aid went from financing 86% of its budget to about 45%. This was achieved through consistent economic growth (averaging 7–8% annually), expansion of the tax base, and attracting investors in sectors like tourism and services. Rwanda’s government explicitly set a goal to “reduce aid dependency... through sustained domestic resource mobilization”, demonstrating high-level commitment to self-reliance. The country also insisted on aligning aid with national priorities, which increased aid effectiveness and allowed for a smoother transition when aid was scaled back.
Ghana provides another example. In the early 2000s, aid constituted nearly half of Ghana’s government expenditure. By the mid-2010s, Ghana had reduced that figure to roughly a quarter. Fueled by newfound oil revenues, robust growth in services, and improved tax collection, Ghana declared a vision of “Ghana Beyond Aid.” It created strategies to harness private financing for infrastructure and increase exports, e.g., industrializing its cocoa and aluminum sectors. Though not without challenges, Ghana’s trajectory showed that with political will and economic reforms, a country can lessen its aid reliance while still improving human development indicators.
Even Mozambique, one of Africa’s most aid-dependent countries, has made efforts to pivot. Aid was once 70% of its state budget; through mineral exports (coal, aluminum) and foreign investment, that share has declined somewhat. Recently, when the U.S. suspended aid, a Mozambican health NGO warned that over 70% of the country’s health funding (for HIV, TB, etc.) comes from donors, calling the situation unsustainable. The crisis became a wake-up call, with local voices urging the government to “gradually start thinking about internal strategies to finance health services” and avoid future shocks. This reflects a growing consensus in aid-receiving countries: the need to plan for an exit from aid reliance, or at least a significant downscaling, over the medium term. Countries like Bangladesh and Vietnam have transitioned from low-income, aid-recipient status to middle-income status largely by developing strong export sectors (garments in Bangladesh, electronics in Vietnam) and improving social indicators, thus reducing the relative importance of aid in their economies. They did so by leveraging some aid and loans in the early stages to build infrastructure and capacity, but ultimately it was trade and domestic enterprise that took over as the main drivers.
Each country’s context differs, but common threads emerge: visionary leadership setting a course for self-reliance, prudent use of aid to lay foundations (rather than create permanent programs), focus on education and human capital, and creating an enabling environment for economic activity. These case studies underscore that foreign aid should ideally be a catalyst – a temporary boost – rather than a permanent engine and must be a stark departure from Bakili Muluzi’s “chief beggar syndrome”. When countries treat aid as supplemental, and prioritize internal development engines, they tend to progress to a point where aid becomes marginal. For Malawi, looking at peers like Rwanda, Ghana, Bangladesh, or even its own Vision 2063, can provide inspiration and practical policy ideas in crafting its own path beyond aid.
Conclusion
Since 2015, geopolitical shifts have undeniably reshaped the landscape of foreign aid, posing new challenges for developing nations. The retrenchment or redirection of aid by key donors—whether through the closure of USAID programs, the diversion of UK aid funds to domestic uses, or the Netherlands’ turn toward nationalist aid policies—has contributed to a more uncertain funding environment. This comes at a critical juncture for the Sustainable Development Goals, which depend on a robust flow of resources to meet 2030 targets. For aid-dependent countries like Malawi, these shifts have been a stark reminder of the vulnerabilities inherent in over-reliance on external assistance. The immediate impacts on Malawi’s students, patients, and budget underscore why reduced dependency is not just desirable but necessary for long-term resilience.
Fortunately, the solutions remain largely unchanged from what the country has enshrined in its development strategies for decades. There are alternatives to the status quo. By embracing economic diversification, strengthening regional trade ties, mobilizing domestic resources, and fostering a vibrant private sector, countries can gradually substitute aid with more sustainable development finance. The benefits of doing so—greater autonomy, stability, and alignment of development with national priorities—offer a compelling vision of self-driven growth. Achieving this will require steadfast reforms, smart investments, and often difficult transitions, but examples from other nations show it can be done.
In the end, the goal is for our country to reach a point where foreign aid is a complement to, not the foundation of, development. As global aid patterns continue to evolve with geopolitics, developing nations that proactively reduce their aid dependence will be better placed to thrive and uphold their development agendas, come what may. The current shifts, though challenging, can thus be a catalyst for positive change—spurring countries to build the robust economic and governance structures needed for a future beyond aid, in line with the spirit of the SDGs.
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