After a decade of technical reforms meant to modernize foreign aid, a new report from the European Network on Debt and Development, or Eurodad, warns that official development assistance is drifting off course — away from the world’s poorest countries and toward the political and commercial priorities of wealthy donors.

The report, released today, argues that changes to how aid is counted have hollowed out the original purpose of official development assistance, or ODA, which is to support poverty reduction and reduce inequality in the global south. Instead, aid is increasingly delivered as loans rather than grants, spent within donor countries themselves, or used to de-risk private investment — often with little evidence of development impact.

“Rich [countries] have reshaped what counts as ODA to advance their own domestic priorities, with minimal input from the Global South,” the report says. “This has led to far-reaching consequences for how and where aid is delivered, meaning that those who are most in need are being left behind.”

At the heart of the critique is the Organisation for Economic Co-operation and Development’s ODA modernization process, launched in 2012 to update decades-old accounting rules. While some reforms improved statistical accuracy — such as better measuring the subsidy element of loans — the report finds they also created perverse incentives. It points to grant equivalence, where donors get ODA credit for the subsidy element of a loan, and allowing certain nonconcessional private sector instruments, such as guarantees, equity, and blended finance, to count as aid. Donors are now more likely to favor loans over grants, even as many low-income countries face mounting debt distress.

In 2024, least developed countries spent more on debt repayments than they received in aid, the report notes — a stark reversal for a system meant to provide concessional support.

The analysis also highlights the surge in in-donor refugee costs — aid that never leaves wealthy countries but is counted as ODA when governments host asylum-seekers. Geographically, aid has also shifted away from the least-developed countries toward middle-income countries, often where donors have strategic, commercial, or migration-related interests. That trend predates Russia’s invasion of Ukraine but accelerated sharply after 2022, the report finds regarding development aid's priorities.

Read the full article about the priorities of global aid by Jesse Chase-Lubitz at Devex.