The IMF recently highlighted a 25% cut in aid to Sub-Saharan Africa — largely, but not solely, driven by Trump’s dismantling of USAID. The UK’s own cuts echo a wider trend: aid is being redirected, relabelled under different expenditure lines or simply eliminated as defence spending and domestic social security demands crowd it out. Some of those cuts exposed genuine waste. But the scale is not sustainable — particularly for fragile low-income states where aid accounted for up to 6% of GDP. For them, this is potentially brutal.

Aid remains a fiscal lifeline for millions. It is also in our own interest to help stabilise these economies and their health systems – a simple point not rammed home to our British electorate: the ongoing Ebola outbreak in DRC and migration flows from the Horn of Africa — amidst unresolved conflicts — are a reminder of what happens when that financial lifeline frays. Disease and displacement do not respect borders. The contagion risk to richer countries is real and potentially rapid.

The immediate fiscal fallout

Countries relying on aid to fund healthcare and education face a stark choice: borrow, cut, or collapse basic services. For war-torn or post-conflict states such as South Sudan, there is no good option.

Tax collection is weak because state capacity is weak — and because in too many cases, key extractable sectors like oil have become private ATMs for a ruling kleptocratic elite. That is not a comfortable thing to say in polite development circles. But it is true, and any serious discussion of aid reform has to start there rather than talk around it.

UN agencies — themselves under the Trump-led funding guillotine — are notoriously inefficient conduits for donor co-finance, absorbing a disproportionate share through transaction costs. But they remain one of the few mechanisms capable of getting emergency assistance to the ground quickly in conflict and post-conflict environments. Inefficient is not the same as dispensable.

What might actually help?

1. For the most fragile states: dial back budget support and replace it with smaller, genuinely conditioned flows — tied to specific fiscal and governance reforms.
2. Earmark funding directly to defined expenditures — teacher salaries, healthcare supply chains — and yes, hold it outside national treasury control if the alternative is state capture. The Cashgate scandal in Malawi, in which ministers and senior civil servants systematically siphoned off external aid, is not an aberration.
3. For less fragile states: make funding more conditional and link it explicitly to concessional debt financing, with a harder push for structural public finance reform.
4. And someone needs to sort out the herd instinct on the supply side. Development banks — including the European Investment Bank and, more bizarrely, the EBRD, which was established to serve central and eastern Europe — are wading into Africa and competing fiercely for a limited pool of bankable projects. That competition systematically drives down conditionality.

The debt spiral

Sovereigns facing a fiscal gap will borrow. The question is from whom, on what terms, and with what degree of transparency.

China was the lender of first resort for much of the last decade. Faced with a mounting portfolio of non-performing loans across the continent, China is now more cautious.

What is filling the gap is more concerning. The FT has reported on African sovereigns turning to complex structured instruments — currency swaps, interest rate caps, and other financial engineering — to lock in funding or improve repayment profiles.

What would actually help?

First, push for improved transparency and disclosure of sovereign borrowing through the IMF, World Bank, and African Development Bank.

Second, use UK board positions at the major development banks to push for a genuinely coordinated approach — one that brings in the new donor landscape of China, UAE, Saudi Arabia, and India, rather than treating them as rivals. The Common Framework for debt restructuring only works if all significant creditors are inside the tent.

Third, the UK — even while cutting its own aid envelope — should push for coordinated programming with the EU. Coordination with Brussels would cost nothing and eliminate significant duplication of effort on the ground.

Fourth, focus the smaller aid envelopes on the long-term foundations of public financial management: strengthening parliamentary budget and public accounts committees, building external audit capacity in national audit offices, and ratcheting up tax administration.

* Dr Rupinder Singh advises governments and multilateral organisations on public finance, budget support and aid systems — a career spanning 80 countries from the Baltics, Ukraine and the former Soviet Union to Sub-Saharan Africa and Asia. His clients have included the World Bank, EBRD, Asian Development Bank, Agence Française de Développement, OECD, UNDP and European Union.