“We depend on others for our security forces, depend on donors for our health and education systems, and supply the world’s critical minerals but capture almost none of their value.” This was the stark diagnosis made by Ghana’s President Mahama at the 2026 World Economic Forum, just months after calling for “a re-engineering of the very logic of development itself”. It perpetuates a long-standing debate. Since development succeeded colonialism as the dominant paradigm for North–South relations, the very concept of development and the aid system have been contested. Critics from the neoliberal, populist, and neo-Marxist traditions have each challenged their legitimacy, effectiveness, and underlying assumptions.
Despite recurring critique, the Western-led aid system has proven remarkably resilient. Will it be different today in the face of an abrupt contraction of the global aid market? Amid rising geopolitical tensions, donors are indeed drastically reducing foreign aid while prioritising defence. In 2025, the United States (US) dismantled its aid agency and distributed less than half the funds it had provided in 2024. Japan and several major European donors are also scaling back official development assistance (ODA).
Favouring defence over development is nothing new. In recent years, the US has spent around 3% of its GDP on defence compared with roughly 0.2% on ODA according to SIPRI and OECD data. In the European Union (EU), these figures have been around 2% and 0.5% respectively. Private philanthropy remains relatively marginal but is on the rise. The Gates Foundation, for example, plans to spend around USD 9 billion a year primarily on global health before winding down by 2045.
In budgetary terms, further reducing ODA won’t pay for greater defence spending but puts the aid system under huge strain: how can it effectively address contemporary development and humanitarian challenges with less? Think of the 1.2 billion jobs that need to be created over the next decade to absorb new labour-market entrants in low-income countries. Think of the existential threats resulting from climate change and nature loss. Think of the millions of people displaced by multiplying armed conflicts.
Amid this funding crunch, some push for radical change while others seize this opportunity to reassert their own vision and priorities. There is widespread Schadenfreude among critics for whom putting the aid sector on a diet is long overdue. Yet the immediate impact of aid cuts is dramatic for those losing access to vital assistance overnight.
As aid allocation is once again driven by donors’ narrow foreign policy interests, we are witnessing the return of tied aid and the use of ODA to buy political allegiance and stricter migration controls. Another concern is the growing risk of developing countries slipping back into unsustainable indebtedness.
Development dynamics are also shaped by rising geoeconomic competition over critical minerals to sustain the digital and energy transitions. The EU has launched the Global Gateway strategy, partly intended to counter China’s Belt and Road Initiative. Meanwhile, the US has supported major infrastructure investments such as the Lobito Corridor linking mining areas in Central Africa to the Atlantic. Will such initiatives ultimately benefit producer states and local communities or result in yet another “resource curse”? This greatly depends on whether policy safeguards are being put in place early on.
It took decades of hard-won lessons to devise aid effectiveness principles such as banning tied aid and favouring partner country ownership, donor alignment, and coordination.
Even if never faithfully implemented, these principles provided a widely accepted reference for greater aid effectiveness that might now be totally sidelined.
Since the 1990s, foreign direct investment and remittances have dwarfed ODA in terms of resource flows into developing countries, with ODA now covering just a few percents of the resources required to pay for the SDGs. Global leaders gathered at the 4th International Conference on Financing for Development in 2025 reaffirmed the critical role of domestic taxes, private investment and technological transfers. Notwithstanding calls to channel more private capital into fragile and conflict-affected contexts, success remains limited to a few ventures associated with micro-finance, public-private partnerships, and blended finance.
Technological innovation is seen as an opportunity to “leapfrog development”. The home-grown mobile payment system M-Pesa in East Africa, for example, dramatically expanded financial inclusion in Kenya and Tanzania. All eyes now turn to artificial intelligence (AI), with developing countries wary of being left behind. Rwanda recently partnered with Anthropic to deploy Claude AI across its public sector, aiming to build skills and strengthen the country’s knowledge economy. AI holds the promise of enhancing health outcomes, improving agricultural productivity, and moving up the value-added ladder. Yet, the overall impact of AI on employment remains uncertain, which is a huge concern for poorer countries with a large “youth bulge”.
In any case, rising geopolitical tensions are diverting resources and political attention away from pressing environmental and development priorities. Sidelining them to focus on short-term security concerns will only undermine peace and stability in the long run. To address such dilemmas, policy coherence for sustainable development offers a powerful analytical framework for aligning relevant policy domains to reduce poverty and inequality while protecting global public goods. A case in point is reforming global taxation so that lower-income countries can mobilise domestic resources for development as ODA declines. Participatory processes at local, regional and global levels remain crucial to ensure the ownership and legitimacy needed for sustainable outcomes.
This article was published in Globe #37, the Graduate Institute Review
Photo credit: Eva Marie Uzcategui / AFP
