Funds sent home by overseas workers are a huge source of external finance for many countries in the global south, outpacing official development assistance, or ODA, and foreign direct investment, or FDI. While not a cure-all, remittances significantly improve living standards, making them crucial for poverty reduction.
Also in today’s edition: We look at donor government rules that favor their own NGOs, lift the torch of the Olympics, and examine where ODA goes.
Resilient financial lifeline
Living thousands of miles away from home and still being able to support a family — that’s the power of remittances. Such funds, sent by overseas workers, have become the largest source of external finance for low- and middle-income countries, outpacing both ODA and FDI.
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Last year, remittances to the global south totaled a chunky $656 billion, with projections to hit $690 billion by 2025. For perspective, FDI clocked in at about $400 billion and ODA at around $224 billion. Despite these sizable figures, countries in the global south still shell out more in debt repayments than they receive in grants and loans, according to the ONE Campaign.
But unlike ODA and FDI, which can be fickle, remittances have shown remarkable resilience, barely flinching during the COVID-19 pandemic and bouncing back quickly.
Over the past eight years, remittances have steadily climbed, increasing by 42.4% from 2016 to 2023. And this upward trend is likely to continue, driven by factors like climate change, demographic shifts, and income disparities.
So, what’s the big deal? Remittances significantly boost education, health care, nutrition, housing, and job opportunities for recipients. These funds also provide a steady income source during economic downturns like the pandemic and conflicts.
It’s not all good news, though, writes Sophie Edwards for Devex. Remittances can create inequalities in recipient communities by driving up prices for goods, housing, and land. They can also reinforce migration patterns, although this effect tends to wane after two generations. Plus, the high cost of sending remittances remains a major hurdle.
While remittances outperform FDI and ODA, they aren’t a panacea. FDI is crucial for infrastructure and green investments, and ODA addresses public financing needs and issues like fragility and climate change. Still, countries should embrace the power of remittances to reduce poverty, finance health and education, and promote financial inclusion.
Read: Remittances outstrip aid 3 times over. Can they transform development? (Pro)
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Funding bias
If you’re an NGO and receive a grant from the Belgian government, chances are you're Belgian. It’s the 17th-largest donor in the OECD Development Assistance Committee but has strict criteria that limit funding to accredited NGOs, mostly based in Belgium.
This process excludes many NGOs from the global south, which receive only 1.8% of Belgium's civil society funding. Although the system is theoretically open, it remains skewed toward Belgian organizations, perpetuating a neocolonial dynamic and hampering truly inclusive development efforts. Attempts to localize aid and support global south NGOs are progressing slowly, facing both systemic inertia and practical challenges.
While Belgium is one of the worst offenders, over 90% of ODA to civil society organizations goes to development groups in the global north. And in some cases, there are rules saying that only NGOs headquartered in a country can receive funds. In other cases, there are rules and regulations — like having to apply in the native language — which make it prohibitively difficult.
Devex contributor Burton Bollag digs into a #ShiftThePower report, “Too Southern to be Funded,” that examined the funding behaviors of a dozen mostly large donors.
Read: Why do some countries mostly fund their own NGOs? (Pro)
ICYMI: New report reveals limited funding for global south organizations (Pro)
+ Listen: In the latest episode of our weekly podcast series, Devex’s Raj Kumar, David Ainsworth, and Adva Saldinger discuss the role of international NGOs amid the push for localization and other top global development stories from this week.
Olympics drive progress
With the Paris Olympics set for opening ceremonies today, French President Emmanuel Macron and the French Development Agency, AFD, hosted the first Sport for Sustainable Development Summit yesterday afternoon in the basement of the Louvre.
To driving music — it was not unlike being in a Nike commercial, my colleague Fiona Zublin tells me — a panoply of speakers including International Olympic Committee President Thomas Bach, Senegalese President Bassirou Diomaye Faye, FIFA President Gianni Infantino, and of course, Macron himself waxed lyrical about the symbolism of the Olympics and the importance of sports to several of the Sustainable Development Goals, including health, equality, and sustainability.
There were concrete commitments made, of course. NBA Deputy Commissioner Mark Tatum promised that in partnership with AFD, the U.S. basketball organization will build 1,000 basketball courts across Africa over 10 years. Not to be outdone, Infantino promised 1,000 soccer pitches worldwide, and to match any built by others. But to get back to the real money, Antonella Baldino of Finance in Common announced $10 billion to fund sustainable sports infrastructure through 2030 from a coalition of public development banks and others.
Before the summit, AFD CEO Rémy Rioux told Fiona: “For decades, we said that sport was not that serious an issue, and probably countries, they have to deliver other investments before having the capacity to do sports.” But the message from the summit, he said, is more nuanced. “Sports could be part of the fabric of SDGs way more ambitiously at an earlier stage, and that’s not naive.”
Spotted at the summit: Six-time NBA All-Star Pau Gasol (hard not to spot when he’s 7 feet tall), World Health Organization head Tedros Adhanom Gebreyesus, Rwandan President Paul Kagame, Nobel Peace Prize winner Muhammad Yunus, Olympic Refuge Foundation head Jojo Ferris, and Prince Albert II of Monaco.
Read: France's bid to use the Olympics to advance the SDGs
ODA: The global helping hand
ODA is a lifeline for development aid worldwide. It’s all about grants and concessional finance aimed at boosting the economic development and welfare of lower- and middle-income countries. We hear a lot about who gives the cash away, but who actually gets the money?
We've crunched the numbers on the $251.5 billion of ODA distributed in 2022 — the latest year with comprehensive Organisation for Economic Co-operation and Development data — to uncover where this aid is coming from, where it’s going, and how it's being spent.
In 2022, ODA saw a spike, largely due to the war in Ukraine and support for refugees arriving in donor countries. Most of this money came from the 32 members of the Development Assistance Committee — more on that if you click on the downloadable report. But there were big shifts in who received cash, compared to the previous year. And big inequalities, too. Different countries received very different levels of support, relative to their size and income.
Download the special report: Where does ODA go? (Pro)
Budget blues
U.S. lawmakers will have a lot of negotiating to do on the foreign affairs budget. There’s a $10 billion gap between what a Senate committee approved yesterday and what the House of Representatives has advanced.
Sen. Lindsey Graham, a Republican from South Carolina, took his fellow Republicans in the House to task for their proposed cuts. “It makes no sense,” he says. “This 1% of the federal budget is used to protect those who are in harm's way, represent our interests in faraway places, it is used to help people save lives.”
The hearing focused on one contentious issue: whether to fund UNRWA, the U.N. Palestinian refugee agency, with many Republicans, including Graham, firmly pushing to extend a ban on its funding due to concerns around its ties to Hamas.
Democrats argued against the extension, saying it would mean more people would be unable to access key humanitarian services or arguing that the U.S. could perhaps just fund its work outside of Gaza. In the end, a provision extending the ban on UNRWA funding was approved.
The Senate bill would provide $61.605 billion for the U.S. State Department, USAID, and other agencies and programs, including:
• $9.5 billion for development programs — governance, environmental protection, and economic growth.
• $9.7 billion for global health initiatives, including PEPFAR.
• $8.9 billion for humanitarian assistance.
• $2.9 billion to the U.N. and other international organizations.
• $685 million for the new Economic Resilience Initiative, which will fund investments in infrastructure and energy security.
ICYMI: Billions slashed in House's 'meat cleaver approach' to foreign affairs
Related reading: US isolated over UNRWA funding freeze after UK restores support
+ Catch up on our U.S. foreign aid coverage.
In other news
Ahead of G20 talks in Brazil focusing on taxing the super-rich, Oxfam revealed the world's top 1% accumulated a staggering $42 trillion over the last decade. [France 24]
Ethiopia's landslide death toll hits 257 and could reach 500 as heavy rains devastated the southern region earlier this week, burying both victims and rescuers. [Reuters]
United Nations chief António Guterres called for global action on the “extreme heat epidemic,” urging a shift from fossil fuels as record temperatures threaten vulnerable communities worldwide. [Al Jazeera]
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About the author
Helen Murphy
Helen is an award-winning journalist and Senior Editor at Devex, where she edits coverage on global development in the Americas. Based in Colombia, she previously covered war, politics, financial markets, and general news for Reuters, where she headed the bureau, and for Bloomberg in Colombia and Argentina, where she witnessed the financial meltdown. She started her career in London as a reporter for Euromoney Publications before moving to Hong Kong to work for a daily newspaper.
