Why Sweden tore up its funding agreements with its NGO partners

Sweden’s right-wing government last month sent shock waves through the development community with an announcement that at the end of the year it will terminate all its funding agreements with Swedish NGOs — through which an important part of the country’s generous foreign aid budget is currently disbursed. The move, announced on March 15, is part of an historic reform that the government has previously said will place more “focus on Swedish interests and humanitarian support.” Other elements of that plan include an aid freeze that effectively means real terms cuts, a new focus on trade and immigration, and a shift away from funding the lowest-income countries. Several aspects of Swedish policy mirror shifts that have already taken place in the United Kingdom and are under way in Germany and France. But the biggest controversy has been caused by the most recent announcement — that at the end of the year all agreements to deliver aid through 17 strategic partner organizations, all Swedish NGOs, will be terminated. Starting next month, those NGOs can reapply for funding in a competition that will now also be open to NGOs from outside Sweden, including in the low- and middle-income countries receiving the assistance. The government has said its changes will partly remove one layer of management — the Swedish NGOs — and increase support going directly to civil society organizations in low-income countries, while empowering them. But the Swedish development sector said the reforms are rushed, have not been well thought through, and will wreak havoc in ongoing development projects operating with nearly 2,000 local NGO partners. In a March 25 statement, Anna Tibblin, secretary-general of We Effect — one of the 17 SPOs — condemned the decision. She forecast that it would force the cancellation of funding agreements the SPOs have with NGOs in dozens of low- and middle-income countries, many of which span multiple years. Her own organization may have to tear up agreements with up to 150 partners in 19 countries, she said. “This process will destroy the results of Swedish development aid and entail an enormous waste of both human and financial resources,” she wrote. “And those who pay the price are the people living in poverty we work to support. It is neither effective nor sustainable and risks damaging Sweden’s reputation.” With an official development aid budget of $6.1 billion in 2023, Sweden is the world’s 9th biggest donor country, but gives more aid as a percentage of gross national income — 0.88% of GNI in 2023 — than any country except Luxembourg. Most bilateral development aid is distributed by the Swedish International Development Cooperation Agency, commonly known as Sida. Few details of the new funding system have so far been provided. But Sida has announced that NGOs — now including those from outside Sweden — that are interested in renewing their contracts or winning new ones must submit a letter of interest by May. Those with the most promising offers will be invited to submit a formal bid, and in the fall Sida will announce which ones have been chosen and provide details of their funding, meaning that organizations will potentially learn if they have funds only weeks before the new spending period begins on Jan. 1, 2025. This means that Swedish development organizations that may be in the midst of multiyear agreements with organizations in low- and middle-income countries to provide education, health services, or other development assistance, will only learn at the last moment whether their funding will continue. NGO leaders are particularly upset that the decision to cancel the agreements was announced even before a new funding framework had been decided. The government has tasked Sida with producing three urgent studies, to be handed over by April 8, May 15, and June 30, looking at how funding could be transferred from SPOs to Sida itself, including the risks involved, and the financial implications. But it has gone ahead before receiving this evidence. "We think this system is working well," said Anna Stenvinkel, secretary general of ForumCiv, Sweden’s largest platform for foreign aid organizations, and one of the government’s 17 SPOs. “It's always good to look into how to tweak it to make it better, but by throwing everything out, so much experience and knowledge will be lost.” “What I find so striking is the very short time frame,” Tobias Denskus, an associate professor of development studies at Sweden’s Malmö University, told Devex. He said the change “seems politically motivated.” Since assuming power in November 2022, Sweden’s right-wing coalition government has also taken several other steps to reshape the country’s foreign aid. It ended the yearslong commitment to spending 1% of GNI on development aid. Instead, Sweden’s 2023 budget set the ODA budget at SEK56 billion (then worth $6.1 billion) annually from 2023-2025. The government says decoupling aid levels from GNI will provide stable, predictable funding. However by holding spending steady while the economy grows, it is implementing an aid freeze that will lead to a real terms cut. If inflation and economic growth remain at 2023 levels for the next two years, Devex estimates that aid spending will effectively be 11% lower in 2025 than if it had remained tied to GNI. The 2023 aid budget also contained several changes in priorities. Sweden has reduced the portion of its assistance going to multilateral organizations such as the United Nations and its agencies, instead redirecting the money into bilateral aid through Sida. Sweden is also controversially ending its previous focus on providing aid to the least developed and to conflict-affected countries, saying it can do more good in more prosperous nations. Swedish officials say the new approach puts more emphasis on “linking aid and trade” and promoting Swedish business. The link between aid and trade was emphasized by the government’s decision to hand both cabinet portfolios to a single person: Johann Forssell, minister for international development cooperation and foreign trade. “Swedish companies … can offer investments and innovative solutions to various societal challenges,” Forssell is quoted as saying, in a government statement accompanying the presentation of a new strategic direction for Swedish aid in December. The new strategy called “Development assistance for a new era — freedom, empowerment and sustainable growth” indicates that Sweden will look closer to home when deciding where to spend its development funds. A government statement quotes Forssell saying: “The Government’s strong focus on Ukraine and our neighbourhood is a key component of this development assistance policy shift.” At the same time, the provision of aid will now be conditioned on a country’s willingness to cooperate with Sweden’s increasingly strict immigration policy. Countries receiving aid must agree to take back any citizens rejected for asylum or residence in Sweden and take measures to stop unauthorized migration from its territory. This has been a key demand of the Sweden Democrats, an anti-immigrant nationalist party, which while not a part of the governing right-wing coalition has a formal agreement to support it. The government statement on the new aid strategy goes so far as to quote a senior member of Parliament from the Sweden Democrats — Aron Emilsson, chair of the foreign aid committee — on this issue. "Aid's function as a foreign policy lever will be an important tool for, among other things, removing obstacles to enforcement in deportations and countering human smuggling," Emilsson said.