Where development funding is most needed after USAID cuts

In the wake of significant USAID funding reductions, the global development community faces difficult decisions about resource allocation. Several organizations have valuably analyzed the immediate project-level and non-profit sector impacts (e.g. CGD, Project Resource Optimization, Global Aid Freeze). To complement that, IDinsight has looked beyond the present moment to forecast which countries will face the greatest vulnerabilities in the coming years.

Recent analyses by organizations like the Center for Global Development have provided valuable initial insights by calculating Aid-to-GDP ratios for affected countries. Our analysis builds on this by including additional metrics to understand resilience to these cuts. Our approach examines three key factors that collectively determine a country’s vulnerability:

1. Scale of US cuts relative to GDP – Which countries previously received the most substantial US aid relative to their economic size?
2. Likelihood of aid restoration – Our assessment of which countries are least likely to see aid restored based on US national interests and relationships with other major donors?
3. National response capacity – Our assessment of to what extent governments can mobilize their own fiscal resources to fill funding gaps, and whether they have the institutional infrastructure to effectively deliver services without external support? Some low-income countries are much better equipped to do so than others.

By combining these indicators, we identified countries facing a “perfect storm” of challenges: significant aid reductions, limited prospects for restoration, and minimal capacity to respond independently.

Our Methodology:

To identify the most vulnerable countries, we developed combined multiple indicators:

1. Scale of Cuts:

• Countries were identified as highly impacted if they ranked in the top quartile for US foreign assistance as a proportion of GNI.
• For 7 countries with missing GNI data, we used US aid per capita as a proxy measure.

2. Likelihood of Restoration:

• We created a US national interests index based on major non-NATO ally status, conflict presence (using ACLED data), proximity to China, natural resource significance (oil and critical minerals), and migration patterns. 
• We also ruled out countries which the US State Department views as playing host to terrorist organisations.
• We analyzed relationships with the eight largest donors besides the US (Germany, France, UK, Japan, China, India, UAE, and EU) to assess alternative funding sources.
• Countries scoring low on both these measures are least likely to see significant aid restoration.

3. National Response Capacity:

• Fiscal capacity was assessed using a combination of tax revenue (below 15% of GDP indicates limited capacity) and debt levels (above 90% of GDP indicates vulnerability), and an indicator for whether the country is a low-income country.
• Institutional capacity was measured using Public Financial Management (PEFA)¹ scores and the WHO Universal Health Coverage service coverage index.²

Ten countries where funding now may have high impact

Our analysis spotlights ten highly vulnerable countries. Dedicated leaders, civil servants, and civil society across these countries are fighting for thriving futures for their people – the international development community should work alongside them as supportive partners.

• Tier 1 (Most Vulnerable): Central African Republic, Ethiopia, Madagascar, South Sudan, Tanzania
• Tier 2 (Highly Vulnerable): Democratic Republic of Congo, Guinea-Bissau, Malawi, Sierra Leone, Uganda

We can take the example of the Central African Republic: this nation is unusually aid dependent relative to GNI (aid is 4.2%, scoring at the 99th percentile of aid dependence across all countries). While there is an ongoing low-level conflict there, there is little else that catches the interest of powerful US senators – CAR does not export critical minerals or oil, few migrants reach America, and it plays little role in the US face-off with China. Nor is it a top priority for any of the other major donors. Despite pressing human needs, the donor community has found CAR too easy to ignore. Meanwhile, domestic capacity is limited. The WHO Universal Health Coverage index rates their health system at just 32/100, compared to a global average of 68/100. The PEFA Public Financial Management index gives an average score of just 1.75 out of 4 – equivalent to the index’s lowest letter grade, ‘D’. Little in the way of domestic resources are mobilised, and there is not much scope for the country to borrow more to fund their response to aid cuts.

Implications for Funders

For philanthropic and development organizations adjusting strategies in response to USAID cuts, our analysis offers several implications:

1. Target support strategically: Limited resources might create greater impact by focusing on the most vulnerable countries identified here.
2. Look beyond immediate impacts: While addressing immediate funding gaps is important, planning for longer-term vulnerability requires considering multiple factors beyond raw aid levels.
3. Support government capacity: Countries with limited fiscal and institutional capacity need not just program funding but support in developing sustainable domestic systems. The leading provider of technical assistance to reform programs is now missing in action.

Limitations and Caveats

Our analysis provides a data-informed starting point for decision-making, but several limitations should be acknowledged.

We believe aid should be generous and support should extend to many countries beyond this short list. We put these ten forward as particularly likely to be neglected. Given the quality of available data, we do not recommend using this as a firm ranking of countries, or a strict cut-off – all ten need help, as do many more.

Our methodology necessarily simplifies complex political and economic realities that vary significantly across contexts. Data limitations mean some indicators rely on proxies, and heuristics were used to reduce potential bias caused by missing values for certain countries. As with any forecast, rapidly changing geopolitical circumstances could alter these projections – like for instance recent tariffs, which will harm many low-income countries. Country-level analysis may obscure significant within-country variations in vulnerability.

Moreover, identifying vulnerable countries is just the first step. Effective response requires understanding sector-specific impacts, program effectiveness, and local priorities within each context.

As the development community navigates this challenging funding landscape, we hope this analysis provides a useful framework for prioritizing limited resources. At IDinsight, we remain committed to helping decision-makers maximize social impact through targeted, evidence-based approaches. We welcome feedback and discussion as we collectively work to support the most vulnerable communities during this transition.

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Replication materials

Full dataset

Methods note