Sweden pulls $1B in foreign aid for Ukrainian refugees at home

Sweden plans to use almost one-fifth of its annual aid budget to pay for the influx of refugees from Ukraine, depriving the Global Fund, Gavi, the Vaccine Alliance, and other groups of millions of dollars in expected funding.

The move has thrown the country’s aid community into chaos, sparked lobbying from the likes of Peter Sands — the head of the Global Fund to Fight AIDS, Tuberculosis and Malaria — and raised fears of a knock-on effect, given Sweden’s reputation as one of the world’s most generous donors.

Responding to an initial estimate of 76,000 Ukrainians coming to Sweden in the first half of this year, the government earmarked 10.3 billion Swedish kronor ($1 billion) from its foreign aid budget — set at 57.4 billion kronor, or around $5.8 billion — to cover hosting costs. Last week, the Swedish Migration Agency revised down its estimate to 80,000 Ukranians arriving by the end of the year, though the government is yet to alter its planned changes to aid spending.

“In other words,” Carl Björkman, the head of Nordics at the Bill & Melinda Gates Foundation, told Devex in an email, “Sweden will become the biggest recipient of its own development aid.”

Andreas Dolk, international director of We Effect — a Swedish NGO hit by the latest cuts — called it “shameful.”

The 10.3 billion kronor for in-country refugee costs includes 1.2 billion kronor, or roughly $121 million, already foreseen for this purpose in the 2022 budget. Organisation for Economic Co-operation and Development rules allow donors to claim the costs of caring for refugees on their own soil as official development assistance — or ODA — under certain conditions, though critics have long argued that this artificially inflates aid numbers.

According to a letter from the government to the Swedish International Development Cooperation Agency, or Sida, only 250 million kronor of the 350 million kronor pledged to Gavi this year — or $25 million out of $35 million — will be delivered, amounting to a 29% cut.

Other organizations affected include the Global Fund, down 32% to 650 million kronor, or about $65 million; the Green Climate Fund, down 46% to 860.4 million kronor, or roughly $87 million; and UNRWA — the United Nations’ Palestinian refugee agency — down 20% to 420 million kronor, or about $42 million. Funding for the Climate Investment Funds was cut entirely, with all of its 100 million kronor — about $10 million — for 2022 reallocated.

Asked to confirm which organizations would be affected by the changes, a spokesperson for Sweden’s development minister, Matilda Ernkrans, told Devex, “This is not finalized and depends among other things on the financial adjustments made later this year.”

Humanitarian aid is exempt from the changes, and the spokesperson told Devex that the government had prioritized maintaining support for the lowest-income countries.

Sweden’s pledge in October 2019 of 2.85 billion kronor — worth about $290 million at the time — for the Global Fund’s three-year cycle has been included in country allocations that were signed into grants during 2020, a fund spokesperson told Devex.

“The reduction in funding would therefore have the direct effect of reducing funding available to fight AIDS, tuberculosis and malaria and building health systems at the country level,” the spokesperson wrote.

Sands, the Global Fund chief, visited Stockholm on April 27 “for high level discussions with the government both on the proposed cuts to ODA and the Global Fund,” the spokesperson added. “We are assured of Sweden’s ongoing commitment to the Global Fund and their appreciation of the life-saving role of the partnership. We will continue to discuss the situation with the government.”

Gavi declined to comment.

‘Domino effect’

Referring to Gavi and the Global Fund, Björkman from the Gates Foundation told Devex that his organization was “shocked” by the government’s decision “to cut hundreds of millions of [kronor] to the these organizations, which Sweden has helped to create and improve, and which have shown incredible results by saving tens of millions of lives.”

Citing Sweden’s previous leadership in hitting and exceeding the target of spending 0.7% of gross national income on ODA, promoting gender equality through its development assistance, and instigating a “feminist foreign policy,” Björkman wrote, “My concern now is that Sweden using development for housing refugees in country will cause a domino effect, and others will follow.”

Sweden gave $5.9 billion in ODA in 2021, according to initial OECD figures released last month, making it the ninth-largest donor in OECD’s 30-member Development Assistance Committee. That represented 0.92% of GNI — the third-highest percentage, behind Luxembourg and Norway. Of Sweden’s 2021 ODA, $87.9 million was for in-country refugee costs.

Denmark recently announced it would divert around 2 billion Danish kroner ($280 million) in foreign aid to cover the costs of hosting refugees from Russia’s war in Ukraine. Oxfam International and OECD have been among those warning in recent weeks that donors could shift money initially budgeted for low-income countries to deal with the domestic impact of the conflict. Under OECD rules, donors can claim spending on “temporary sustenance” such as food, shelter, and training.

We Effect’s Dolk told Devex that not only is it “just plain wrong” to use development aid to cover the cost of caring for refugees at home but that the Swedish government is also misapplying the existing OECD rules.

“The directives clearly [state] that governments should use a conservative approach,” Dolk said in an email. “This is not it. It is shameful and the consequences are enormous.”

One Swede defending the move was Tomas Tobé, the chair of the European Parliament’s development committee.

The changes will “enable the country to assume responsibility and help those fleeing the war,” Tobé emailed Devex. “It is an appropriate measure for a large donor country like Sweden, given the extraordinary circumstances that require us to offer concrete support to our Ukrainian friends.”

A fight for survival

Swedish NGOs were told by Sida this week that their core funding would be cut by an average of 39% this year. However, Dolk and others pointed out that with the changes announced four months into the year, NGOs will need to make cuts by much more than that for the rest of 2022 to hit the target.

“[It] will mean a lot of the work that we were planning to conduct will need to be stopped,” Anna Eggelind, international director of Diakonia, told Devex in an email, citing its support to survivors of human trafficking and land rights of Indigenous people.

“Diakonia always works in partnership with local civil-society organisations and these cuts threaten the survival of some of them, fighting hard for democracy, human rights and gender justice in their countries,” she added.

Changes to aid spending “will have serious consequences for people living in poverty in various parts of the world,” including preventing children going to school, according to remarks by Carin Jämtin, director-general at Sida, in a statement issued last month.

Sida told Devex that the government’s decision might affect about 2,000 funding agreements, and it is now trying to mitigate the negative consequences on NGOs.

“One thing we are looking into is the possibility to move contributions to next year as an alternative to cancelling them and restarting them when the restrictions are lifted,” a Sida spokesperson wrote. “We don’t know yet to what extent this will be possible but that is one of the options that will be part of the dialogue with the partner organisations.”

Gudrun Brunegård, a Swedish member of Parliament from the Christian Democrats, told Devex that by working through a letter to Sida, the Social Democratic government was also circumventing Parliament by robbing MPs of the chance to vote on the changes. “This is cowardice,” Brunegård wrote by email.

The “shameful” decision to reduce aid spent abroad was also the wrong one geopolitically, Anna Sundström, secretary-general of the Olof Palme International Center, wrote to Devex. It will “impair the ability to prevent crises and conflicts and reduce support for the democratic forces that are needed today more than ever,” she argued.

Ernkrans’ spokesperson told Devex by email Thursday that the government will adjust funding for 2022 when the numbers regarding refugees and related costs for this year are “deemed sufficiently certain.”

“Sweden will still be one of the largest donors in the world, even with in-donor refugee costs excluded from the aid budget,” the spokesperson wrote. “This current decision to reserve resources from the aid budget should be seen in the context of the exceptional humanitarian and refugee crisis caused by the Russian invasion of Ukraine.”

Update May 6, 2022: This article has been updated to clarify that there are about 2,000 funding agreements that might be affected by the changes to aid spending.