The financial system has long played a crucial role in advancing sustainable development across the Global South. However, recent geopolitical developments are placing serious pressure on this role.
The White House’s 2026 budget request proposed a drastic 47% cut in funding for foreign assistance programs, slashing the budget to just $31 billion. While a compromise in the US Congress appears set to avoid the deepest cuts, raising that total to roughly $50 billion, the direction of travel is clear. In the UK, plans have been announced to reduce official development assistance to 0.3% of GDP by 2027, down from the current 0.5%. This 40% cut, which is intended to free up funding for increased defense expenditures, would shrink the UK’s aid budget to its lowest level in over 25 years. Other retrenchments are emerging across Europe, including in major donor countries like France and Germany. According to the OECD, net official development assistance from the world’s major donor countries is on an unprecedented multiyear slide, projected to fall by up to 18% through 2027.
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