In this 26th episode of the DevelopmentAid Dialogues podcast, host Hisham Allam interviews Stefan Dercon, Professor of Economic Policy at the University of Oxford and author of Gambling on Development, about the global consequences of recent aid cuts by major donor countries, particularly the United States. As foreign aid budgets shrink and populist politics gain traction, the discussion delved into the complex motivations driving these cuts and their far-reaching consequences for vulnerable communities.
Download the transcript of this episode.
Professor Dercon, who has advised multiple governments and development agencies, stressed that the changes underway go far beyond short-term budget adjustments.
“This is not just about saving money,” he said. “It’s a sign of weakness. A sign that countries are no longer confident about their place in the world.”
According to Dercon, the decision to scale back aid budgets reflects a shift in political narratives across Western nations. With rising domestic pressures, leaders are choosing retreat over engagement.
“Cutting foreign aid may win headlines,” he warned, “but it damages credibility, influence, and ultimately, security.”
Although certain opponents, like Elon Musk, have asserted that foreign aid is corrupt or ineffectual, Dercon argued that this viewpoint misses the subtleties. He cited life-saving interventions in Ghana, Ethiopia, and Bangladesh to support his claim that “there is plenty of aid that works.” However, he admitted that aid has frequently failed to create sustainable systems in fragile nations like the DRC or South Sudan.
“It’s insufficient to save lives,” he continued. “Aid must assist nations in becoming self-sufficient.”
Dercon called for more selective engagement, arguing that aid should be directed where local leadership shows real commitment to progress.
“You can’t fix countries from the outside,” he said. “You need local forces of change. Without them, aid becomes a crutch rather than a catalyst.”
See also: Collateral damage: How foreign aid cuts endanger global health; what must be done
The episode also tackled the immediate fallout. Programs like PEPFAR, which supplies antiretroviral medication across Africa, now face disruption.
“We’ll see it in the data—life expectancy will drop. Children will go unvaccinated. Services are collapsing in real time,” Dercon said.
Beyond the humanitarian crisis, there are geopolitical consequences. As Western aid recedes, other powers are stepping in.
“China didn’t always make wise choices with its Belt and Road initiative,” Dercon noted, “but at least they showed up. The West risks abandoning the field altogether.”
Asked what comes next, Dercon struck a cautiously optimistic tone.
“Aid, as we knew it, is gone,” he said. “But that gives us a chance to build something better—leaner, smarter, and more resilient. The goal must be to make ourselves dispensable, not indispensable.”
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