In this blog Alexander Arkadjevitsj Medik explores how cuts in development funding in the Netherlands and other European countries could actually serve as a catalyst for innovative changes within the development sector while also highlighting a positive view on global Official Development Assistente trends.

Recent announcements from European nations, including the Netherlands, Germany, and France, signal a significant shift in the allocation of official development assistance (ODA). The Netherlands is planning cuts totaling €350 million in 2025, escalating to €2.5 billion by 2028. Similarly, Germany has already implemented €1.7 billion in cuts for 2023 with an additional €1 billion anticipated for 2024. France is not far behind, with a reduction of €742 million, representing a 12.5% decrease in its development aid budget. An the UK has notably reduced its (ODA) budget in 2022 from 0.7% to 0.5% of its Gross National Income, translating to a significant decrease in funding by approximately £4 billion.

Across the board, the response to the proposed cuts in international cooperation has been strikingly similar in every affected country. Stakeholders from various sectors have voiced concerns that during times of global crises, what is truly needed is an amplification, not a reduction, of investment in ODA. Also, investing in ODA is not merely an act of international solidarity but also a strategic investment in the donor countries' own long-term interests. It helps in building more stable, resilient societies abroad, which in turn contributes to global security and economic prosperity.

Of course, it is undeniable that these cuts will have adverse effects. Reduced funding means less support for vital development projects that can significantly improve the quality of life for the most vulnerable populations and protect the environment. Areas such as education, healthcare, and climate action could face setbacks, potentially slowing progress towards the Sustainable Development Goals (SDGs) and exacerbating global inequalities.

However, while these reductions might initially seem like dire setbacks for the SDGs, due to the decreased funding slowing progress toward global targets, they also signal a complex realignment of global development finance dynamics. This shift is not merely about budgetary contraction; it reflects deeper changes in how development funding is structured and sourced.

Interestingly, the global landscape for development funding is not uniformly declining. In 2023, total spending from members of the Development Assistance Committee totaled $223.7 billion, accounting for 0.37% of their combined gross national income. This marks the fifth consecutive year that Official Development Assistance (ODA) has reached a record-high percentage of GNI, although it still remains around half of the 0.7% ODA-to-GNI ratio target (1). Furthermore, investments from philanthropic entities and private sector initiatives are on the rise, indicating a diversification of funding sources that could compensate for reductions in traditional governmental aid.

I always believe that in every crisis lies a seed of opportunity. The current shifts in the international cooperation landscape are no exception. These budget cuts offer also a unique opportunity for development organizations to drive significant and much needed changes.

Re-evaluating Legitimacy and Existence: International Non-Governmental Organizations (INGOs) are compelled to reassess their roles and the impact they have on the communities they serve, especially considering that over 90% of ODA funding is reportedly retained within the Global North. (2). I firmly agree with Dylan Matthews who wrote that NGOs from the Global North need to shift from growth-oriented strategies to what he refers to as the 'Growing Smaller Strategy.' By consciously reducing the organizational footprint, NGOs from the global North should pave the way for the vibrant array of local civil society organizations that are well-positioned to take their place (3). Well, this is a great momentum.

Innovative finance and multi-sectoral partnerships: The shift in traditional funding models necessitates INGOs innovation in finance, diversification of funding streams and exploration of new business models. Also related, it provides space explore partnerships with actors beyond the ‘usual suspects’ like private sector and social enterprises.

Strengthening ties with constituencies. Organizations can use this time to build stronger relationships with their constituencies aspiring to increase a stronger public support for their cause and that of ODA.

Leveraging IT and AI for efficiency. Adopting IT and AI technologies allows development organizations to streamline operations and amplify impact. These tools can enhance data analysis, automate processes, and tailor interventions, ensuring optimal use of reduced resources.

Fostering creativity and innovation. With constraints often come creativity. Organizations are now prompted to think outside the box and implement novel solutions to organizational and development challenges.

The road ahead for global development is undoubtedly complex and fraught with challenges. However, by embracing these changes, the development community can transform these hurdles into catalysts for substantial and sustainable progress. Disrupt Development stands ready to support organizations through these transitions, helping to leverage these shifts to enhance the effectiveness and impact of their work in fostering a more equitable world.

Resources;

(1) https://focus2030.org/Slight-increase-in-Official-Development-Assistance-in-2023

(2) https://shiftthepower.org/toosoutherntobefunded/

(3) https://www.bond.org.uk/news/2024/02/is-your-strategy-an-impediment-to-your-transformation/