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This Week in Global Development
The new era of US and European foreign assistance
00:30:21
This week we look back at the https://www.devex.com/news/the-state-department-and-aid-the-story-so-far-shorthand-112926 — a period defined by the dismantling of...
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- [00:04]
A
My name is Adva Saldinger, and you're listening to this week in Global Development, hosted by myself, Rumby Chikamba and David Ainsworth. I am joined by two of my colleagues, Michael Igoe, who's the senior reporter here at devex, and Jesse Chase Lewis, who is a reporter here at devex. Michael and Jesse, thanks so much for joining me today.
- [00:23]
B
Thanks for having us.
- [00:24]
A
We have been doing this week at DEVEX some sort of big picture deep dives into key policies and sort of how we're seeing development evolve in a number of different contexts. And so I'm really excited to have both of you on to sort of talk about how on different sides of the ocean here in the US Where I'm based, and then, Jesse, where you are in Europe, how we're sort of seeing the conversations around aid evolve, how money is starting to move differently, which I know is something that people are particularly always keen to understand. And so I think maybe we'll start here in the US And Michael, I'll come to you because I think that a lot of people have been wondering what is emerging after the destruction of usaid? What is US Foreign assistance going to look like? We know Congress is appropriating a lot of money. I think the administration has been figuring out what is important to them and how they might move money. And that has been sort of an evolution and a process. So can you give us sort of a sense of, of where you see things now, what sort of focus areas are emerging and how are we starting to see some of that money move?
- [01:37]
C
Sure. Happy to. Yes. From the ashes of usaid, as our colleague Alyssa has just written in a headline of a piece on this exact topic that everyone should go read right now. It's excellent. And we were just talking before the call about how it also has some really nifty graphics that are worth checking out. Yeah. So, I mean, I think know at a sort of very broad level, a lot of folks on the outside have viewed 2026 as the year when the State Department and the Trump administration really need to put their money where their mouth has been if they're going to do that. And in other words, you know, you leveled these, this array of criticisms and critiques of USAID to justify its dismantling and sort of made the case that the Trump administration and Trump officials have better solutions than what existed before. So let's see them. I think it's a really mixed record so far, and I think something that's, that's difficult about figuring out Things are evolving internally, but I think we're. We're sort of seeing a couple of different things happen at the same time. One is some genuine and noteworthy efforts to build new things and new systems and to do things differently. And then the other is, I think, a sort of by necessity, pragmatic requirement to find solutions in a context of very limited State Department capacity to do foreign assistance. So USAID is gone, its workforce is gone. A lot of its implementing partners are either out of favor or have been, you know, significantly compromised in their operational ability. The sort of implementation infrastructure is just generally weakened. And so with congressional appropriations still getting pushed into the federal government, the State Department just has to find ways to do things. And that's not always been what we might have thought as sort of like a direct response to the criticisms of USAID that they put forward a year or so ago. It's sort of big checks to big contractors, the stuff that we thought we weren't going to be doing. So I think it's sort of a mashup right now of some, you know, you might call them kind of innovative new approaches to delivering assistance. We can talk about an announcement that came out last week for Operation End Starvation, which I think is a good example of this. And also some things that look a lot like USAID writing big grants to UN agencies, some big INGOs, just simply because there's a requirement to get money out the door. So that's how I'm sort of thinking about things at this moment.
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A
Yeah. And I think one of the things we've certainly seen is a significant focus on humanitarian assistance. And that's one of the places where we've seen, in the context of this administration, a significant amount of money actually moving. And I think to your point, that's where I think they've said, how do we actually get this money out the door? And they've determined that even though they've had some pretty sharp criticism of the United nations, that really the only way to do that at some point scale and rapidly is by use, by funneling that money through UN agencies. And so we've seen that through UN ocha, for example, getting significant pools of money in a couple different tranches. And Jesse, I know that you've done some reporting sort of looking at how some European countries are looking at humanitarian assistance as well. And I think there's a real question in this moment about a tension between sort of this immediate need, humanitarian assistance, and the longer term sort of development work. And so curious what, what you've heard on that front.
- [05:18]
B
Yeah. I was reading Alyssa's piece and seeing a lot of parallels there. I wrote a piece about Switzerland's aid situation a few weeks back, maybe just a week ago, and learned that they're actually increasing their humanitarian aid from 26% to 40% of their cooperation budget. Pretty big increase. While overall the budget's obviously decreasing like it is everywhere. And I mean they're justifying this by saying, look, we've gotten like a different requests for humanitarian aid over the last year and it's, you know, there's climate change, there are wars going on. Like we just, there's more of a need and therefore we need to put more money into it. But some experts are kind of concerned that it's maybe indicating a trend towards less investment in these longer term health and education programs that might help avoid these humanitarian disasters in the long run and instead these shorter term commitments that could potentially, I don't know the exact numbers, but potentially be a little bit less money. For now, it's not necessarily something we're seeing everywhere across Europe. Every country has its own development process, but we're going to start seeing more and more as the budgets come out for 2027, whether or not this is a broader trend.
- [06:33]
A
And I do think it's interesting because this isn't, it's not a new debate. Do we spend the money today on prevention to try and prevent the next humanitarian crisis? Right. And most of the math tells you that if you spend the money to try and do the prevention, it will cost less than addressing whatever the disaster is down the line if people have that sort of inbuilt resilience. But I do think it's interesting as budgets shrink and people have to make harder and harder decisions, it's like, do you feed the people who are starving today? Which I think there's like a push to do. Right. Or do you try to build the food systems of the future to prevent the future crisis? And if you, only if you have much fewer resources, how do you do that? And so I think that will definitely be an interesting trend to watch.
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C
I mean, I think it's a really important thing to pull out. Like this was seen as a huge problem for years and years and years was that humanitarian assistance was increasingly cannibalizing development budgets. And so exactly to your point, there was no. Because, you know, the budgets were relatively limited with obviously some massive influxes due to Covid response and some other big kind of global crises. But there's the immediate necessity to respond to a humanitarian crisis where People's lives are at risk. And I think for Republicans, I think of people like former USAID administrator Mark Green, this was a big cause for concern. We're not able to invest in that sort of self reliance agenda that he championed because so much of US foreign assistance is going to short term crises. So I think it is interesting to see that at the end of the day, that humanitarian bucket is the one that seems to have kind of protective guardrails around it. And you know, you can understand why that would be like no administration wants to preside over a totally neglected crisis where, where lots and lots of people are dying, particularly in the wake of, you know, such a massive destabilization of the US foreign assistance system.
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A
Yeah. And I think one of the things that's interesting to track with the US government, so we've talked about sort of that humanitarian aid pillar. Right. That, that does seem protected. And it's where they are trying to move some money there. You've seen them still, you know, respond to disasters in Venezuela and Haiti elsewhere. Right. And try to maybe maintain some of that sort of capacity or some element of the teams, maybe at a smaller scale that, that do respond to those disasters. But we're also seeing a significant evolution in the global health space. And that is a place where this administration has still said that it wants to spend money, though I think there are questions about how exactly it will move. And so Michael, I wanted to ask you a little bit because I think in the global health space you were talking about how we're seeing sort of the emergence of new types of partnerships, new ways of working, sort of starting to see how this administration might want to work, particularly with private sector actors. I think we've seen a number of those examples in the global health space. And so curious if you want to sort of chime in on that.
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C
Yeah, sure. So the big evolution or innovation here, as most folks are likely aware, is this effort to negotiate and broker bilateral agreements with the US Government's global health partners, partner countries around the world. We've seen a few dozen of those come to fruition so far. I'll get to the sort of private sector thing in a second. But I think first and foremost, you know, that effort is about, quote, unquote, burden sharing with partner governments and ensuring that those governments are putting some of their own resources into those health programs and then gradually transitioning the share of those resources onto them over like a five year period. I think a really interesting point here is that that's sort of like a shift in Thinking, particularly on the HIV front, which I think is sort of emblematic of a lot of US Global health assistance efforts for the last couple of decade. A shift from thinking about our goal here is to control the HIV epidemic or to end aids, you know, whatever you want to put out there is kind of like the big ambition to. Our goal here is shifting responsibility to partner governments so that they're increasingly able to take responsibility for these programs and take responsibility for protecting the health of their citizens. I think that's like an important strategic change to make note of. And then sort of in addition to that, or I suppose supplemental to that. Yes, there's this effort to sort of bring in new partners, particularly partners who can sort of champion American innovation. So we've seen this most clearly so far with the grant to Zipline, which was some State Department funding to help Zipline set up new distribution centers so it can do more drone delivery of health commodities in five African countries. And then the second big example of that is the partnership with Gilead to get Lenacapavir, the HIV prevention drug, out in the. Into the US Government's partner countries for global health.
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A
There's one on malaria is one.
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C
Yeah, yeah. The guardian. You're right. S.C. johnson. Can't forget S.C. johnson. This spatial emanator to push mosquitoes out of an area and help control malaria. That's one rural area. I would love one of those.
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A
I was like, how do we get them here? Also, like, I would pay a premium to have them here in D.C. where we have terrible mosquitoes and.
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C
Well, actually, that's the model. Right.
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A
It's to. It's to sell them into and then. Yeah, subsidize.
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C
Yeah. So go out there. I think you can find them anyway. But then this, this other piece that I think you're talking about bringing additional private sector dollars in or philanthropic dollars is kind of like doing more through public private partnership. And this is the example of operation and starvation that I mentioned at the outset. We've been tracking this for months now. But finally last week, the State department announced $100 million in funding towards this partnership. The idea is essentially that philanthropists are putting up the capital to cover a lot of the operating costs of getting ready to use therapeutic foods and prenatal vitamins out to places that need them. And then the US Government public funds can be used just to, like, purchase the commodities. So it sort of addresses that issue of US Taxpayers don't want to be spending their money on, you know, an NGO's operating costs or something like want to fund the goods themselves and fund products that are saving people's lives. That initiative, it's a nonprofit organization that's a public private partnership. It has a goal of raising something like $4 billion over the next five years. I think, obviously not there yet, but this is sort of an additional model that we're seeing sort of brought to bear in this area.
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A
Yeah. And I think one of the things to note, especially on that example, is that it's products that are made in the US And I think that that's an important piece of this, that the US Dollars are being used to purchase US Commodities that are going to help people.
- [13:33]
C
Yeah. You can start to see sort of like a checklist emerging, and you need to check each of the boxes if you want to be working with the Trump administration on foreign assistance. It's like, champions American innovation or, like, you know, involves U.S. american business, works very efficiently. You know, there's sort of a list of things that I think are starting to emerge as Trump administration foreign assistance, pr, and we're not seeing much sort of fall outside of those parameters.
- [14:02]
A
No, I think that's absolutely right. But, you know, I mean, I think that's part of what's interesting is that we're starting to see, okay, this is the type of thing that might succeed. I will note. One of the things I've been thinking about is, like, in this era of, like, sometimes you can destroy something only to realize that, like, some of the things you destroyed, like, maybe you need to work with UN agencies to transmit aid. When I was first hired at Devex nearly 13 years ago, my original beat was actually writing about public private partnerships and a lot of the work that USAID was doing to have, like, work with private businesses on aid. And so that just struck me recently that it's interesting that, like, there is this focus, but it's actually, it's not that new of a thing for the US Government to do, so I just had to throw that out there.
- [14:48]
C
But you'll find a lot of angry LinkedIn comments to that effect, too. Every time the State Department makes an announcement of something new that it's doing or some, you know, big hiring push that it's. It's making, there are plenty of folks chiming in that's, you know, to the effect of, wow, that that sounds a lot like usaid.
- [15:06]
A
And I think the other big sort of focus or pillar of US Foreign assistance has really been on this sort of commercial diplomacy side of things, looking at how do you engage countries on economic issues and on sort of private investment. I think it's probably the area where we've, where we still have the most questions, where we've seen perhaps more like rhetoric than money flowing. And obviously I cover DFC pretty closely, and I think that will be one of the big vehicles through which we see some of this money flow. But I think there are, or at least a lot of what I'm hearing is questions. And you saw this at a congressional hearing I covered last week where DFC CEO Ben Black was testifying, a lot of questions around DFC sort of remaining true to its development mandate versus focusing more of its investments on sort of upper or upper middle income countries. And I think one of the things the State Department has said is, you know, our, our focus is on working with countries where we have a strategic interest. And so I think there will be some countries where that means that, you know, like countries that are, you know, low income countries might be strategic for the US For a number of different reasons. But I think there are real questions about what that means for sort of development writ large. Michael, I don't know if there's anything else you want to add on that piece of things.
- [16:29]
C
No, I just think that really speaks to sort of a broader direction of travel here, which is like there's this criticism that the Trump administration has made of past US Foreign assistance efforts that they were somehow not in the US national interest. And so they're focusing on that piece very sharply. But then in the transition, what you lose is a lot of programs that really helped people inevitably. And so I think that is sort of the process that we're going through right now. And that's why there's so much noise and so much kind of cognitive dissonance, I think, involved in trying to make sense of where we end up at the end of the day.
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A
I think one of the things that's interesting on this sort of commercial diplomacy piece, this idea of focusing on what benefits the US is that we're also seeing that in Europe, right? Jesse? We're seeing how, how do, how does sort of foreign assistance or aid serve domestic economic and geopolitical interests. And that's something that you've written about quite a lot recently. And so I'm hoping you can tell us a little bit more about sort of how you see that, what you're sort of hearing in the European negotiations about how aid is evolving and changing.
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B
Yeah, there are a few things that Michael said that I also wanted to kind of like use to compare to the eu. First of all, you know, we talked about the sort of rising from the ashes mentality in the US And I think it's important to note that that's really not what's happening here. This is not a situation where the US aid, you know, entire nexus fell apart and then the European one fell as another kind of domino. The EU has been trying to adjust its, its aid towards this kind of partnership and commercialization for at least five years. And this was because of the Russian invasion of Ukraine, the rise of the far right, just the economic sit continent wasn't doing well. The competition with China. There were a bunch of reasons building up for the last, maybe for the five years preceding that and then into the last five years that led them to feel like development needed to benefit the countries within the continent more. It's kind of an interesting like case study because you're watching two comparable continents or, or, and countries deal with a new 8 axis in a very similar way but for very different reasons. And you know, right now the EU is redesigning its next multiannual financial framework. So it's a seven year budget essentially that will run from 2028, but they want to, they want to finish it by the end of 2026 because French elections are next year and they don't want to deal with a whole new like political dynamic depending on who wins the French election. So we've got six months really to see what happens. And they've already put out a, a draft so we're able to kind of see what might happen on, on external action as they call it. And that's sort of the whole development plus like pre accession EU countries mandate. And so basically as sort of a quick briefer on this, back in 2021, five years ago, the EU came out with this, this kind of framework called Global Gateway and it was meant to be a competitor to the Belt and Road Initiative in China. So super infrastructure related, very like partnership based. They want European companies to be the ones doing this so that the money is coming back into the continent also to kind of show the different populations of European countries that like development could benefit their economies as well. And then that same year, Global Europe, this is very confusing. Global Gateway versus Global Europe. Global Europe came out and sort of consolidated 10 different financing instruments into one budget for external action. So Global Europe was the framework and Global Gateway was the process through which money was used. And now I think, well I think then it was more of a branding push. They were sort of like, we're just going to call all of our infrastructure projects Global gateway. Now, since 2024, there's been a push to actually change the way that the EU does its development to be more infrastructure focused. And that was a result of Joseph Sikala coming into office as the Commissioner for International Partnerships. He has sort of a banking background and, and he was like, okay, now let's redesign development. So I say all this background just to really highlight the fact that Europe has been in this process for, for a long time and we're not. I mean, the resources aren't decimated in the same way that they were, that they are in the US right now. But of course, you know, every country that is a donor to the EU or a part of the EU is wanting to cut down how much money they give. So they are going to be dealing with less money. Right now the budget proposals at 200 billion in the multiannual financial framework. But everybody who I've talked to is saying, like, that external action is sort of the most likely thing to get cut. Agriculture and defense are far higher on the EU's list of priorities than, than development. So, yeah, we're likely to see some cuts there. I'll stop there for now.
- [21:51]
C
Just make a quick comment. I've been having a lot of conversations with folks on the sort of US advocacy side about how the phrase foreign assistance might be due for a rebrand, particularly if you're talking about, you know, efforts that actually help the United States. Sort of funny to call them foreign assistance, but anyway, I think external action might be even worse.
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B
Yeah, I, There is some. An interesting thing here too. Like there's a whole colonial past to, to all of, to this whole development conversation. And a lot of the, a lot of the time that you ask people about, like, what is strategic, what's the purpose of strategic partnerships? The response is, you know, we're not trying to be a donor anymore. We're trying to be a partner to these countries, which is a, you know, it makes sense kind of moving forward that they partner up, that they hear what these countries need, that they help their economies prosper. But like you said before, there are a lot of projects that, that USAID was doing that were saving people's lives that don't necessarily benefit the US or the eu.
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A
One could make an argument that some of them still had positive benefits, but not in like a direct economic correlation. That is easy for people to see.
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B
Yeah, absolutely.
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A
I think I wanted to ask you a little bit more about this. You know, you talked about this $200 billion potential envelope. I think, think it's funny that you know, I mean, I think in the US as someone who's covered the budget process for a long time, the foreign assistance budget here is often like, if they're looking to try to find money for something else, it's often sort of the piggy bank that gets raided or you know, ends up facing cuts at the last minute in these negotiations as well. So it's something we've seen over a long term here as well. But I was curious about this new sort of Global Europe instrument that they're discussing and sort of what that would mean to sort of put everything in, into a single bucket and how different that might be. And I know you've also written a little bit about sort of implications for the European Investment bank, which is, is actually the world's largest multilateral development bank in terms of the assets it manages. So curious, some, some of the other details in the sort of proposals, what changes are being discussed.
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B
Yeah, so like I said, in, in 2021, they'd already started to consolidate a bunch of different finance instruments into one, into, into a more flexible budget and that was what became Global Europe. But yeah, as you said, now they're, they're trying to further consolidate it. So it's sort of like broadly breaks down into development, humanitarian and pre accession finance. And typically the budget was split, there were buckets for each of these things and the EIB or the EBRD or whatever, they could say, okay, we're going to get these, we're going to apply for funding within these different buckets. And now the proposal is to further combine the funding so that there really aren't distinct budgets between development, humanitarian and pre accession financing, which could both become an issue for accountability and give the commission a lot more flexibility to decide what money goes where. Right now my understanding is they're thinking about kind of subdividing this by country or region. So, you know, sub Saharan Africa would get a certain amount for development, humanitarian and precession. Obviously not pre accession in this case. But this creates a lot of questions over, I mean, sort of going back to our humanitarian conversation. It could add a lot more space, like kind of gray area between what is development and what is humanitarian aid. And it also will make it a little bit harder for, for reporters and NGOs to keep track of exactly what money is going where, but it's still not final. So we don't really know how the subdivisions are going to work within the Development bank side. I think they're also a little bit in the dark about how this would potentially how this subdivision would go because right now the commission is really pushing further consolidation. And just to say the rationale behind consolidation is that it is supposed to kind of reduce the bureaucratic process for getting money. It's supposed to make things faster and easier and all that stuff. But it depends on how you look at it. Is it a flexibility, power thing or is it a, a way to ease the bureaucracy? And yeah, eib. So this, this gets kind of technical but basically EIB is the, the EU's bank, it's like their main bank, all of their shareholders are European countries. And as a result of that the EIB has always had a sort of preferred status. It gets a special guarantee window. So, you know, a certain amount of money is set aside to definitely go to the EIB. And that amount was I think 26.7 billion euros. In the like the current MFF that we're in right now in the official draft budget, there's no reference to the EIB getting any particular amount of money. The last EU rotates council presidencies every six months to the last presidency was Cyprus and they put 19 billion on the table, which is a pretty big cut. Although there's some, you know, details within that I won't go into right now that will be in my story, that kind of change, like how much 19 billion actually covers because you know, nothing can ever be clear cut in these, in these things. But it's an interesting question because of course if the EIB just gets less money outright, there's less competition and like, you know, it doesn't necessarily go to the bank most that will best serve that project. And so a bank like EBRD, for example, might look at that and be quite happy to see that maybe they'll have more of a chance to get in there and, and compete for some, some more of the funding. So that's definitely something to keep an eye on here. I don't know, I don't, like I said, the details are fuzzy. So we have to kind of, it's not a clear cut 26 to 19, but you know, it still shows that there's questions about how much of a preferred status EID should get.
- [27:58]
A
Yeah, well, I would definitely recommend that people continue to follow Jesse's reporting on this. I know that you have some more stories coming out and a number of the stories we've talked about this week are what we call devexpro stories. Those are stories that are written for our members and we have a lot of member only insights and events and we are running a discount this week. So I'm going to chill a little bit here that I think there's still time to take advantage of a 40% discount to join Devex as a pro member. And you can sort of see notes for a link on that. And I'll encourage you to sort of sign up so you can get some of these deeper sort of insights, rundowns on the numbers, a lot more detailed information on everything that's happening. So Jesse, Michael, I don't know if either of you have any final thoughts very quickly.
- [28:51]
C
This has been a sort of up to the moment forward looking conversation. I'm also continuing to look backwards at the endless agonizing process of closing out USAID contracts. This is something that is still happening in at a very large scale but also in very sort of painstaking ways. So.
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A
And at a large cost, right?
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C
And at a large cost, yeah, the interest payments already are higher than like something like the last five years combined or something like that. But anyway, I think I might have some more on that coming soon. That's a process that we're continuing to follow and if anyone wants to reach out, I think you know where to find us.
- [29:35]
A
Great. Well, I would definitely recommend that you stay tuned on that. I know you've been doing some really great reporting on that, Michael, and it's the actual process of shutting down an agency is actually quite challenging as it turns out. And I think there's a lot of organizations that had contracts that are also still in limbo as we sort of track that. So Jesse, Michael, thank you both so much for joining me today. And this has been another episode of this week in Global development.
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C
Thanks a lot, Sam.