For many in the development aid world, the unthinkable has come to pass: Germany, long the world’s second-largest provider of Official Development Assistance (ODA), has now been forced to dramatically slash its foreign aid commitments. Just two years ago, Germany’s ODA spend totalled almost €33 billion ($35 billion) or 0.85% of GNI, placing it only behind the United States, but economic woes have forced the German government to slash this year’s spending by at least €2 billion.
Likely changes in this year’s development aid budget include a reduction of €940 million for Germany’s federal development agency (BMZ), €20 million in less funding for the UN’s World Food Program (WFP), a €478 million reduction in spending on peace and stability programs, and a €117 reduction in multilateral aid, and Germany has already frozen all funding commitments for “long-term” UNRWA projects due to the war in Gaza. These 2024 spending cuts follow last year’s downward trend, when Germany was forced to cut €1.7 billion from BMZ’s budget and reduce overall humanitarian funding by €430 million due to dwindling revenues.
According to some analysts, the significant reductions in Germany’s humanitarian aid commitments will result in a major disruption in the international ODA system, prevent emergency relief from reaching people in crisis, and jeopardize funding for long-term projects, including combating climate change and achieving the UN 2030 Sustainable Development Goals (SDGs).
“If a major player like Germany deprioritizes its engagement, the SDGs might seem like less of a priority for other countries, too,” said Justyna Szambelan, a senior advisor for the German charity Welthungerhilfe.
Germany’s budgetary woes and cutbacks on ODA follow a troubling trend as other major donor nations such as Britain, France, and Sweden have slashed their ODA commitments as well.
The source of the budgetary crisis
Germany’s constitution includes a “debt brake” clause that prevents the government from borrowing more than 0.35% of the national income annually. This “debt brake” was temporarily suspended from 2020-2022 in order to address the COVID-19 pandemic, which led to increased borrowing from international financial markets. In November 2023, Germany’s highest court ruled that €60 billion in unused credit from the era when the debt brake was suspended could not be redirected for combating climate change, leading to months of squabbling and raucous contention between members of Germany’s ruling coalition of three parties (Social Democrats, Green Party, and FDP) about which parts of the budget to cut.
Germany’s foreign aid generosity has long been financed by its thriving export-driven economy, but revenues are dropping as the result of rising energy costs have led to a downturn in industrial production. Furthermore, an estimated two million German citizens will retire within the next five years, which will lead to further budgetary pressures. Germany is also suffering from a lack of financing for infrastructure repairs and is currently experiencing a nationwide housing shortage.
Between 2022 and 2023, Germany spent nearly €14 billion on refugee costs, including providing housing, healthcare, and other social benefits, and the German government recently extended protection status for Ukrainian refugees living in the country until March of 2025. Approximately €6 billion has been earmarked in Germany’s 2024 budget for the over 1 million Ukrainian refugees the country is hosting.
Increasing ODA seems unlikely
The next federal elections in Germany will be held in September 2025, and there are worries that the Alternative for Germany (AfD) party, now polling at a record-high 23% partly due to the ongoing budget crisis, will significantly reduce ODA spending if they come to power. In September 2023, AfD co-leader Tino Chrupalla presented a policy paper that stated that the AfD is committed to reducing federal spending “in the areas of migration, climate, and development policy.”
Unless Germany is somehow able to reverse its shrinking economy and reduce its soaring energy costs, government revenues are expected to further drop, which will lead to continuing budgetary constraints in the near future, regardless of who wins the 2025 elections, making it unlikely that Germany will be able to increase spending on development assistance anytime soon.
