As the initial shock of the official development assistance cuts from the U.S. and other major donors subsides, new conversations are emerging on how to fill the gaps.
On the African continent, while many in the aid sector responded with alarm, some leaders and analysts are now calling this moment “a necessary pain,” writes my colleague Ayenat Mersie. They argue that the deepening crisis could force governments to break old habits of dependency and begin charting their own course.
“There has been an aid trap,” one Somali official tells Ayenat, describing a system where foreign funding became a kind of “opium.” Others, such as former Kenyan President Uhuru Kenyatta, mocked the handwringing over U.S. cuts, saying it’s time African countries stopped crying over decisions made in Washington and started asking: “What are we going to do to help ourselves?”
Still, the effects of the cuts are being felt most acutely in sub-Saharan Africa, where countries such as Ethiopia, Nigeria, South Sudan, and the Democratic Republic of Congo have long relied on aid flows to fund everything from health care to disaster relief. About 54% of Malawi’s health budget comes from foreign sources.
From Ethiopia’s new domestic taxes to Somalia’s efforts to tap financing from Persian Gulf States and broaden the tax base, governments are scrambling to fill this gap. But while some moves may yield results, many are politically risky or simply insufficient in the long term.
Across the continent, finance ministers are now under pressure to mobilize more of their countries’ own resources — and to finally address deep-rooted issues that aid has long papered over, from illicit financial flows to overreliance on external sources.
This reaction seems to be a trend. From multilateral development banks to international funds, the development world is accepting its fate — and many people are seeing a silver lining.
Read: From 'aid trap' to 'brutal' cuts — African leaders confront a new reality (Pro)
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A coalition for debt relief
As African countries try to get back on their feet in the wake of aid cuts, their debt burdens are still mounting. A coalition of former leaders is demanding a new deal for the continent — one that includes fairer credit terms, meaningful debt relief, and a reimagined global financial system.
Former Mauritius President Ameenah Gurib-Fakim warned that skyrocketing debt service is starving African nations of investment in health and education — the very foundations of growth.
“About 90% of African countries are using their resources to service debt interest — so they are, of course, not investing enough on health, not investing at all, if anything, on education. And yet, we know these are the prime movers of growth,” she said earlier this month on the sidelines of the Fourth International Conference on Financing for Development, or FfD4, in Sevilla, Spain.
The African Leaders Debt Relief Initiative, launched earlier this year, is calling for sweeping reforms through what they called the Cape Town Declaration. Their demands include debt restructuring from all types of creditors and a lower cost of capital for the most vulnerable countries.
Read: African countries need debt relief, says former Mauritius president
Related reading: How Africa’s schools and hospitals are paying the price of IMF austerity
Philanthropies look to strategy over scale
One of the biggest questions following the dissolution of USAID was whether philanthropies could fill the gap. They said no. But in a conversation at FfD4, Eric Pelofsky of The Rockefeller Foundation emphasized that philanthropy’s power lies not in scale, but in strategy.
Rather than trying to replace public spending, Rockefeller is focused on catalytic interventions — from pushing multilateral development banks to unlock more of their existing capital, to spotlighting global debt distress through partnerships such as the Vatican’s Jubilee initiative.
The foundation is also investing in data-driven tools such as its new Climate Vulnerability Index to guide smarter investment in countries most at risk from climate shocks.
“It allows you to not just say, OK, who’s going to [be] hit, who doesn’t have access to money to respond or to prevent — but also, what will the government be able to do with that money if you were to give it to them and sort of what is their effectiveness?” he said. “Over time, we hope it’ll catch on.”
Read: Rockefeller pushes policymakers to pay attention to debt, climate shocks
Related: New Vatican-backed push for debt cancellation gains steam (Pro)
No US funding? No problem
The U.S. aid cuts slashed funding for the International Fund for Agricultural Development. But IFAD President Alvaro Lario isn’t panicking.
The Rome-based specialized U.N. agency, which financially supports small-scale farmers and entrepreneurs, has seen this before: It lost U.S. support under Trump’s first administration, only to regain bipartisan backing in the U.S. Congress. But now, IFAD is embracing the shift happening across the development world — less dependency on major donors and more focused on innovation and financial inclusion, writes my colleague Elissa Miolene.
One element of IFAD’s new strategy is remittances. Migrants from low- and middle-income countries sent home $685 billion in 2024 — more than foreign aid and foreign direct investments combined — and IFAD’s latest partnership with the European Commission aims to channel those flows into savings, credit, and climate resilience across countries such as Honduras, Pakistan, and Senegal.
“We cannot continue just talking or crying about whether there is more or less financing,” Lario told Elissa at FfD4. “We need to move forward.” That means betting on local capital, public-private partnerships, and financial tools that can help communities build long-term economic strength — with or without traditional donor support.
Read: IFAD looks beyond US aid, and toward catalytic solutions
ExCITD to end dengue
The Asian Development Bank is also stepping into the development finance gap with a new flagship initiative to help the Asia-Pacific region eliminate some of its most stubborn and climate-sensitive diseases.
Dubbed ExCITD — or Ending CompleX and Challenging Infectious and Tropical Diseases — the effort aims to mobilize a blend of concessional loans, country budgets, and catalytic grant capital to scale solutions to malaria, tuberculosis, dengue, and more. “We want to go together … we want to go faster and stronger to achieve these elimination goals in some of our [developing member countries] over the next decade,” Amandeep Singh, senior sector specialist at ADB, tells my colleague Jenny Lei Ravelo.
The initiative, still in the design phase, reflects a growing push to treat disease elimination as an investment strategy, rather than a donor-led aid program. With billions needed to eradicate malaria alone and climate change worsening disease burdens across the region, ExCITD is drawing interest from major players such as the vaccine alliance Gavi, the Global Fund to Fight AIDS, Tuberculosis and Malaria, and even local philanthropies.
“It seems clear, and I think we can say now, that the old model of international aid and development is over and it’s not coming back,” says Martin Edlund of Malaria No More. Now, all eyes are on whether ADB can build a financing model that turns short-term concessional support into long-term domestic health system investment — before the next outbreak hits.
Read: New ADB platform aims to help end malaria, TB, and dengue in Asia-Pacific
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The risk of risk perception
Another way to tackle the development finance gap is through rethinking risk, writes Trisha Mani of the University of Cambridge’s Institute for Sustainability Leadership in an opinion piece for Devex. She says that despite growing recognition that private capital is essential, our risk perceptions are outdated, and they are diverting finance away from the countries that need it most.
Drawing from recent discussions at FfD4, Mani outlines how a lack of accessible data, fragmented finance pipelines, and complex deals lead to hesitancy among investors.
She provides a solution — well, five solutions:
1. Strengthening market infrastructure and transparency so that investors can better assess actual risks, beyond perceived risks.
2. Building local capacity and partnerships.
3. Addressing information gaps and giving investors access to real transaction data, instead of proxies.
4. Aligning policy frameworks and investment mandates is equally vital, helping public and private actors work toward shared outcomes.
5. Promoting greater standardization and certification to streamline deal-making and lower transaction costs.
Without structural reforms and greater coordination, she says, risk misperception will remain a bottleneck. But with the right changes, private capital can be mobilized at the speed and scale required to meet today’s most pressing development challenges.
Opinion: To get more investment in emerging markets, we must redefine risk
What we’re reading
Barbados is set to pilot a new standardized “debt-for-resilience” swap backed by major development banks, enabling countries to trade expensive debt for lower-cost loans and free up funds for social and climate-related projects. [Reuters]
As global demand and geopolitical tensions over critical minerals intensify, experts call for the creation of an International Materials Agency to coordinate supply, ensure sustainability, and protect resource-rich low- and middle-income countries. [Financial Times]
China’s treatment of its two policy banks — China Exim Bank as an official creditor and China Development Bank as a commercial lender — in sovereign debt restructuring creates an inconsistent double standard that delays debt relief and undermines fairness for debtor countries. [Consultant Paul Mudde via LinkedIn]
About the author
Jesse Chase-Lubitz
Jesse Chase-Lubitz covers climate change and multilateral development banks for Devex. She previously worked at Nature Magazine, where she received a Pulitzer grant for an investigation into land reclamation. She has written for outlets such as Al Jazeera, Bloomberg, the Organized Crime and Corruption Reporting Project, and The Japan Times, among others. Jesse holds a master’s degree in Environmental Policy and Regulation from the London School of Economics.
