Five predictions about the future of aid

Are we seeing the end of global development cooperation?

That's what Masood Ahmed reflects on in an essay published by Center for Global Development (CGD). With leadership positions at the IMF, the World Bank, the UK aid ministry DfID and the CGD, he has extensive experience to draw on.

Ahmed is worried but also pragmatically optimistic. He delivers five predictions that anyone dealing with aid and development should note. Therefore, we reproduce them here:

1. Higher requirements for efficiency

We need to prepare for a lasting lower level of traditional development support. At the same time, a growing proportion of the remaining funds are tied up in refugee costs, humanitarian crises and global commons, such as climate cuts. That means further pressure on initiatives such as poverty reduction, health and education.

The scaling down of the classical assistance is probably lasting, and this must have consequences. The funds that are left must be used smarter.

Ahmed believes too much aid is given as grants, even there concessional loans could do the same good. He also calls for more clarity. performance measurement, with quantifiable indicators such as cost per ton of CO₂ saved or health benefit per dollar invested. Too few projects can do that today. Should aid retain its legitimacy, he believes measures with weak documentation must be phased out.

He points out that we have an increasingly large knowledge base about which measures are cost-effective, so-called “best buys” - and that these must be applied more systematically than at present. At the same time, he warns against falling into the trap of prioritizing Short-term effective projects. What really counts is the return for the recipient country itself, through lasting change.

2. Back to self-interest

Development aid is increasingly being legitimised through the interests of donor countries. The narrative of aid primarily driven by solidarity is losing ground, while considerations of migration, trade, security policy and geopolitical influence are becoming more important.

Ahmed warns that this could undermine confidence in development cooperation, if recipient countries find that their own priorities are being overridden.

Whatever the motivation, politicians must be transparent about the purpose of aid, Ahmed believes, and separate altruism from self-interest.

If aid funds are used to create jobs in Norway or promote other Norwegian interests, then it should be stated clearly — and the cost of it should be taken into account (for example, per workplace).

Self-interest under the guise of solidarity undermines trust in the system.

3. The old regime is passé

The classic aid model -- with donors in the north and recipients in the south -- is coming to an end.

New entrants, such as China, India and the Gulf countries, are challenging the traditional OECD-DAC system not only with money, but also with new ideas and norms.

Many recipient countries themselves have acquired a very different position in the world economy than just a generation ago.

Future cooperation will also be more horizontal, Ahmed predicts, where partners share resources and responsibilities -- rather than one giving and the other receiving.

4. More bilateral aid

The shift to more national interests is likely to produce a shift of funds from multilateral arrangements to more bilateral aid. Donor countries can more effectively manage their own resources.

This may particularly affect the United Nations and international organizations that operate grant aid. Ahmed therefore urges multilateral development banks to reduce their reliance on direct budget contributions from donor countries.

The solution for development banks lies in mobilising more capital through their own balance sheets (the new Norwegian guarantee scheme is relevant here, but also measures within the bank), and increase the use of loans rather than gifts.

As Ahmed writes, “If an IDA country cannot service a 40-year loan at virtually zero interest rates, what does that say about our confidence in the country's development strategy?” Taken together, this will strengthen the capacity of development banks to finance investments in infrastructure, energy and human capital, even at a time of tighter budgets.

5. The Global South Is Becoming More Self-Conscious

Finally, Ahmed recalls that the countries of the Global South, despite these crises, are primarily asking for support to realize their own strategies for development and growth.

They want broader cooperation on international framework conditions—from trade policy and debt management to climate and technology—that affect their ability to participate in the global economy on an equal footing with us.

To be relevant, development cooperation must therefore veer away from a narrow focus on transfers, and instead be built around partnerships and countries' own priorities.

What does this mean for Norwegian aid?

Norwegian development policy is at the centre of the controversy Ahmed describes. We want both to be in solidarity and to safeguard national and global interests.

He believes we can potentially do both, but that we need to be honest about what is what, as well as keep in mind that it is the solidarity part that gives the aid legitimacy.

A concrete example is Norwegian energy investments in Africa. These can both contribute to poverty reduction and to emissions cuts, but some focus more on one than the other.

When we bet on cheap energy access for the world's poor, then there is solidarity. On the other hand, when the focus is on cutting or avoiding emissions (a purely global common good), such as through the Norfund Climate Investment Fund, we should not call it aid. This justifies the long term in a recent note. Unfortunately, Norwegian politicians are not honest about this today.

Ahmed rejects the prediction that aid is at the end of the road. On the contrary, he points out that there are solid rational reasons for further cooperation, even for those who are only concerned with Norwegian interests. Global challenges such as climate change, migration, pandemics and trade can only be tackled through global efforts.

There is still strong popular support for solidarity-based aid, according to Ahmed. It also shows surveys in Norway. And many of the world's poorest can't wait any longer. This is what Long-Term Norwegian politicians remind of going forward, in a national campaign. We hope that politicians, the Ministry of Foreign Affairs and Norad will take action to strengthen and adapt Norwegian aid to a new era.

International aid both must, and will, persist, albeit in a new form -- with clearer goals, honesty about the goals and harder priorities.

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