Opinion: Don’t panic, history shows development orgs can survive budget cuts

The World Health Organization witnessed a big blow to its budget when the United States announced its intention to withdraw from the institution on the first day the current Trump administration took the helm. The U.S. exit could mean an immediate loss of one-fifth of its budget, jeopardizing crucial health programs. The U.S. withdrawal significantly hinders WHO's financial stability. In 2022, member states had aimed to increase assessed contributions — the most flexible type of resources for international organizations — from $956.9 million to $2.182 billion by 2028-2029. This goal now appears to be unattainable. The shortfall is unlikely to be offset by other donors, who are facing their own budget constraints and shifting priorities, such as increased defense spending, as seen in the United Kingdom. Still, despite pessimists predicting a WHO demise due to its current budget crisis, history suggests otherwise. Past funding cuts have not crippled WHO or similar international organizations, demonstrating their strong resilience to external pressures. A glance at the numbers We have conducted an analysis exclusively for this article on the incidence of major funding cuts in development-focused international organizations, or IOs. Among IOs that, like WHO, are eligible for official development assistance, are not multilateral development banks, nor have a replenishment-based funding model, we found that prolonged budget crises due to hefty budget cuts are rare. A budget crisis is defined as a sustained cut in the voluntary contributions an organization received over two years, with reductions exceeding 20% in each of any two years — the approximate amount a U.S. withdrawal from WHO represents, according to reported numbers. Between 2010 and 2020, the two highest years for budget cuts were 2020 and 2013, with 20 and 18 IOs losing over 20% of funds in those years respectively. (Figure 1) These numbers exclude organizations using replenishment-based models for which we would expect declining commitments in between replenishment rounds. Once we unpack these figures by individual donors to IOs, we find prolonged cuts in well over 60 financial partnerships per year between a given donor and a given organization. This goes to show that funding is more volatile at the level of individual funding partnerships, but few of these lower-level cuts evolve into survival-threatening budget crises at the organizational level (Figure 2). In line with this observation, all of the IOs affected by budget crises have endured. In other words, organizational death remains a rare event — especially among multipurpose IOs with global reach. Related work has examined the impact of member state withdrawals, finding limited effects on the survival of international organizations. In fact, member state withdrawals might even resolve institutional gridlock and prompt the remaining states to endow organizations with more robust mandates — as the case of the European Union after Brexit illustrates. In sum, the general takeaway is that every crisis is an opportunity: IOs are often capable of enduring crises and sometimes do emerge stronger out of them. The case of WHO WHO is no exception to this pattern. Throughout its institutional history, it has weathered several financial crises. Just a few years after its founding, the agency encountered a severe budget shortfall when nine member states withdrew. In response, it zeroed in on core health priorities, such as tackling communicable diseases, while scaling back less critical functions. It also teamed up with UNICEF, which provided vital funding for WHO-approved projects. In the 1970s, the collapse of U.S. dollar convertibility and a sharp rise in the Swiss franc triggered another budget crunch. WHO responded by introducing an output-focused program budget that emphasized self-evaluation and spending transparency, and by tapping into extrabudgetary voluntary funds. By the 1990s, finally, powerful donors led by the U.S. mandated zero real growth in regular funds for most U.N. bodies, once again pushing WHO into financial trouble. To cope, the agency ramped up its reliance on extrabudgetary resources — eventually making up nearly half its budget — and forged multistakeholder initiatives with institutions such as the World Bank, paving the way for the global health partnerships boom of the past decades. What it means for the resilience of IOs Our analysis is a plea for better historicizing current trends in multilateral development finance. Although the attacks on development IOs from its major donors are far-reaching, they are not without precedent. More importantly, they should give us hope that development IOs will also endure the current crisis. To emerge stronger from this crisis, however, they need to take swift action and organize collective support around their core missions. A key lesson emerging from our analysis is development IOs need to diversify their funding base — a recommendation that has been repeatedly made in the context of the U.N. Quadrennial Comprehensive Policy Review and the Financing the UN Development System reports. But IOs should avoid expanding their donor base at any cost: They should instead be mindful of donor preferences, as different priorities can paralyze institutional decision-making and further increase funding fragmentation. When IOs turn to donors that do not share the same priorities as existing ones, conflicts between member states can become more common, leading to gridlock. Another risk IOs run with increased donors is hypertrophy: trying to do too many things at once in an attempt to please all their different member states, thus overstretching their capacities and ultimately not getting any of their priorities done well. For their part, donors seem to be aware of the need for swift action. In recent Devex news, the former vice chair of WHO’s executive board urged member states to take swift action on prioritization — deciding which areas WHO should keep and which ones to abandon. In this context, donors should continue to support IOs in their fundraising efforts and should provide long-term support for IOs to engage in reform. Budget crises can be opportunities for reform, but only if donors allow for such reform, being patient and supportive.