Making foreign aid work

The foreign aid system has its problems. We are stuck in a model of development that echoes the colonial past: Rich countries and institutions like the U.N. continue to hold the power and resources, and often control what is done (and how it is done) in poorer countries. They give money to international non-governmental organizations (INGOs) or companies to implement programs in poor countries; who then sometimes design and implement them without consulting the communities that will be impacted.

Meanwhile, locally led institutions (such as national-level NGOs, community groups, and women’s organizations) are overlooked, despite the fact that they are best placed to design and implement the most effective aid programs. Only four percent of the funding of the U.S. Agency for International Development, the world’s largest donor, went directly to local organizations in 2022.

The international financial institutions such as the World Bank, International Monetary Fund, and the Development Finance Corporation, as well as private lenders (governments and banks), often put profits above the best interests of people. More than half (57 percent) of the world’s poorest countries are in debt, and lenders often insist that the governments institute austerity measures (cutting back spending on health, education, and development) so they are able to service their debt. While these austerity measures impact most citizens, they disproportionately harm the poorest.

Oxfam is working to address all the problems of foreign aid, so that poor countries are able to develop according to their own priorities and local organizations are given the authority and resources to implement solutions, don’t have to choose between repaying debts and providing services for their people, and are able to develop taxation systems so that they can have a sustainable source of revenue. Our ultimate goal is to eliminate the need for foreign aid.

TRANSFORMING FOREIGN AID

Locally led aid: Foreign aid should be “locally led.” This shifts funding, decision-making. and power from rich donor countries to the local organizations and leaders as close as possible — geographically and culturally — to communities. Oxfam is ensuring that donor promises to localize aid leads local organizations having more resources, power, and decision-making authority. When foreign aid supports local solutions to complex problems, it helps more people build critical skills to help themselves and creates a more equal world.

Maintaining the quantity of aid: We fight against ideological attacks on aid, attempts to reduce or eliminate foreign aid, and efforts by donors to artificially inflate the amount of aid they give.

Development and humanitarian needs globally are immense. While the total amount of funding given by wealthy governments has increased over time, less funding is going to the poorest countries. This is because donors are allowed to count money that stays within their wealthy countries as official development assistance (by counting the cost of caring for refugees in the United States, for example, as assistance to the poorest countries). In 2023, $31 billion, or almost 14 percent of the total amount of development assistance, went to funding to support refugees within a donor’s own borders (called “in-donor” refugee costs). So, donors boast about giving record amounts of development assistance while less and less is ending up in the world’s poorest countries. Oxfam is fighting to change these rules, and to push rich countries to increase foreign assistance funding.

Helping countries fund their own development: The goal of foreign aid is for countries to be able to finance their own development. The most important piece of this financing puzzle is creating or strengthening progressive tax systems, which enable more accountable public investments in health, education, and social safety net programs that are essential to fighting inequality and end poverty.

To achieve this, we urge donors and their partner governments to take action in two ways:

1. Focus aid for Domestic Revenue Mobilization (DRM) on building progressive tax systems, like the efforts in Uganda to improve taxation of high net-worth individuals. Only a small percentage of aid for DRM prioritizes equity (11.6 percent in 2019). Working with local partners, our research and advocacy have helped make equity a greater priority.
2. Encourage reforms that strengthen the taxing rights of poorer countries. It’s not enough for countries to build better national tax systems. Donors’ own policies and positions in global decision-making spaces must support systemic reforms that significantly curb tax avoidance and strengthen the taxing rights of poorer countries.

Each year, about $200 billion is lost annually due to tax avoidance by the wealthiest corporations and individuals. At the same time, around $2.7 billion is added to the world’s wealthiest bank accounts each day, more than annual revenue collection in some low-income governments. And an increasing percentage of government budgets is debt payments to private creditors (often to those wealthiest bank accounts). Oxfam and its allies push donors like the United States to change their policies and get behind transformative initiatives.

Supporting women and girls

Most of the world’s poorest people are women and girls. They face unequal treatment when it comes to education, health care, job opportunities, pay rates, and the right to own land and other assets. But when women and girls have the same opportunities and access to resources as men and boys, society as a whole benefits. Aid can help advance gender equality, yet less than 40 percent of the aid from the richest countries targets equal rights for women. Oxfam is working to make gender equality a top priority of U.S. assistance.

IMPROVING FOREIGN AID FOR AGRICULTURE

The majority of people around the world living in extreme poverty live in rural areas and rely on agriculture for both income and food security. Hunger persists because of stagnating financial resources, rigged rules and policies that make farming and market access more difficult for small-scale producers, and the effects of climate change on agriculture.

Increased pressures on donor aid budgets and threats to foreign assistance have affected the availability and quality of funding for agricultural development. Oxfam presses donor countries and national governments to improve policies and investments in agriculture and food security by prioritizing the needs of small-scale producers, thereby ensuring fairer, more resilient food systems.

HELPING MOVE FOREIGN AID AWAY FROM COLONIAL SYSTEMS AND THINKING

Poverty results from centuries of marginalization of certain groups—particularly indigenous peoples, racial and ethnic minorities, and women. Virtually all low-income countries were once colonies, from which colonizers extracted raw materials, agricultural products, and sometimes human beings. Oxfam is working to make sure that aid programs move away from leftover colonial thinking, such as the idea that people from rich countries know what’s best for people living in poverty. In fact, people in poverty themselves have the best understanding of what will work and have lasting results in their contexts.

Foreign Aid 101

50 Years of Broken Promises

Hitting the Target: An agenda for aid in times of extreme inequality

Funding the Localization Agenda: Measuring progress of United States development and humanitarian assistance to local organizations

Does Aid to Domestic Revenue Mobilization Support Tax Fairness? A synthesis of Oxfam research