This month, the United Nations (UN) and the Organisation for Economic Co-operation and Development (OECD) almost simultaneously released reports on development finance. The OECD’s data on official development assistance (ODA) for 2025 revealed a dramatic 23.1 percent decline in a single year – the largest drop the world has ever seen. The UN’s Financing Sustainable Development Report 2026 explores whether other sources of finance might fill this growing development financing gap. 

The collapse of ODA

“Never before have we seen such a decline in official development assistance,” concluded Carsten Staur, Chair of the OECD’s Development Assistance Committee (DAC) at the launch of the 2025 ODA dataset. The 23.1 percent drop takes ODA levels back to where they were before 2015, when the Agenda on Sustainable Development was agreed and at least some richer countries made an effort to support poorer ones in achieving the Sustainable Development Goals. 

The USA is responsible for 75.1 percent of this decline, with its ODA falling by 56.9 percent in 2025. According to the OECD, this was “the largest reduction by any provider in any year on record”. The data reflects the dismantling of the US Agency for International Development (USAID) by the Trump Administration and the work of Elon Musk’s ‘Department of Government Efficiency’ in early 2025, as well as US cuts to the UN budget. The ODA gap for the USA – in other words, the amount by which they would need to scale up ODA provision in order to reach the UN target of 0.7 percent of Gross National Income (GNI) – now amounts to US$ 196.6 billion. This is more than the 34 DAC members and associates collectively provided in 2025 (US$ 174.3 billion).

Germany’s rise to become the world’s largest aid donor, despite a record 17.4 percent drop in its contributions, underscores the dire state of the aid system. Over the past year, 26 out of 34 DAC members reduced their ODA. And the cuts are worst in areas and regions where there are least alternatives, especially in low-income countries and least-developed countries (LDCs). ODA to LDCs and sub-Saharan African countries fell disproportionately. The largest individual recipient of ODA remains Ukraine, although it is arguable to what extent the financial support of DAC members to an ally at war is ‘development-related’ spending and whether it should qualify as ODA at all. 

Remarkably, these shocking figures were recorded in a year in which the international community at the Fourth International Conference on Financing for Development (FfD4) in Sevilla prominently recommitted to the UN targets, which call for DAC member states to provide ODA volumes representing 0.7 percent of their GNI. Only four countries actually delivered on this commitment in 2025 (Norway, Luxembourg, Sweden and Denmark), and the trends for the majority of countries clearly point in the wrong direction. 

The search for alternatives 

Last summer, FfD4 took a holistic approach to development finance and considered a number of other financial courses of action, including tax revenues, private investments, multilateral development bank (MDB) lending and special drawing rights, and even debt relief, which could free up fiscal space for development. The conference agreed a substantial number of actions in these areas, but implementation seems to be glacially slow. 

The first major opportunity to review – and perhaps speed up – implementation is coming up at the UN level. The Financing for Development Forum is being convened in New York from 20-24 April 2026. In preparation, the UN’s Financing for Sustainable Development (FSD) Report was launched on 9 April. The report focuses on three action areas of the FfD agenda, namely private finance, trade, and data and follow-up. This follows an agreement made at FfD4 that, in future, the different areas will be reviewed in a biannual cycle only, to allow for more in-depth discussion.

Mobilising more private capital is often presented as an alternative to declining ODA. However, research carried out for the FSD report shows that private capital is not a viable alternative for low-income countries as long as borrowing costs remain at such an elevated level. Average coupon rates (the interest payments on sovereign bonds) in low-income countries and LDCs surged to 8.4 percent in 2025, up from 6.1 percent a year earlier. Private capital remains unaffordable for many countries as the price of money is simply too high. 

Even foreign direct investment by transnational corporations – most of it in the form of equity investment where investors want to make profit but carry the risk – is on a downward trend. The Compromiso de Sevilla, the political agreement made at FfD4, contains commitments that aim to reduce the costs of capital – for example, by addressing the system of credit ratings and harmful financial regulation that put unnecessary burdens on banks and drive up the risk premiums for investments in the global South. 

Taxation – the other alternative to ODA – is making some progress, but it is very slowly indeed. In the 22 years from 2000 to 2022, the average tax ratio in LDCs increased by just two percentage points, from 10 percent to 12 percent of Gross Domestic Product (GDP). It remains a fraction of the ratio seen in OECD countries. To make things worse, tax systems in developed economies are around six times more redistributive than in developing countries. In other words, the tax system does little to transfer wealth or income from the rich to the poor, particularly in countries where a large part of the population lives in poverty. The Compromiso includes commitments to address tax evasion by the super-rich, and to improve tax transparency and international cooperation so that developing countries can collect more tax. 

Next steps

One year after the FfD4 conference, the FSD report devotes substantial space to implementing the Compromiso de Sevilla. In a number of rather complex and confusing tables, the authors count and present:

• 120 actions that could be taken domestically
• around 175 actions complemented by efforts to strengthen international coordination and institutions
• and last but not least, 115 actions related to cross-border financial and technical support.  

Unfortunately, however, the FSD report does not assess the extent to which implementing these commitments would help to close the SDG financing gap, currently estimated at US$ 4 trillion annually. Nor does it indicate whether any progress is being made in narrowing this gap – or whether the situation is in fact sliding backwards. The pretty bleak data on ODA unfortunately point to the latter. 

The UN Financing for Development Forum, which takes place in New York from 20-25 April 2026, is the next opportunity to assess the level of commitment of the international community to delivering more and better development finance.