by ‘Alopi Latukefu, Director, Edmund Rice Centre for Justice and Community Education

Australia and the world are at a crossroads in the decisions we make and the approach we take to ‘international development’. A seismic shift in donor priorities and the reduction in traditional aid flows, while distressing for a few in the aid and development industry - should not be seen as an existential crisis, but as an opportunity to rethink, refocus and restructure development in a way that truly serves those it aims to assist. This means prioritizing effective aid over politicised and donor priority driven projects.

Governments, civil society, and the international community must seize this moment to champion a new era of development—one aligned, owned and led by the very people it seeks to achieve enduring impact for. Official development assistance (ODA) that achieves this is not just virtuous and altruistic, but truly transformative.

The decisions by major donors—most notably the United States and the United Kingdom—to scale back their Official Development Assistance (ODA) must spark the question of how and why we do aid. Rather than lament the loss of traditional funding streams, this moment should serve as a wake-up call to rethink development in a way that centres local leadership, sustainability, and effectiveness over donor-imposed solutions. The challenge for many donors is that may make it more about those for whom it aims to make a difference than about the strategic interests of those giving the money.

The Trump administration’s cuts to USAID have already reshaped the international development space, with multiyear USAID contracts eliminated and billions in funding withdrawn. More recently, the UK’s Prime Minister Keir Starmer announced that it will reduce its aid budget from 0.5% to 0.3% of gross national income to fund increased defence spending. Other European nations are also shifting budgeted ODA away from development initiatives toward geopolitical security concerns. These decisions herald a broader realignment of Western donor priorities to an approach that prioritizes short-term national interests and geo-political rivalries over previously celebrated long-term global development gains (think the MDGs and current SDGs).

While such moves are concerning, they also expose a deeper issue in the aid sector: the reliance of many low- and middle-income countries on external funding often driven by donor priorities rather than local needs. Such asymmetric relationships can create risks to financing and governance systems. This can result in further investment by donors to try and sort the problem partly created by the perverse incentives ODA can create.  Think of the number of ‘good governance’ programs with government’s in the Pacific including efforts to support support budgets and governance finance systems in countries receiving Australian aid funding.  The question we must ask is not just how much aid is being cut, but whether the aid that remains—and the development efforts we champion— can be truly effective? And if not what can be done to achieve it.

For decades, international development outcomes and priorities dictated by donor countries was the norm of development. Under the reform of the  OECD Development Assistance Committee  process during the Millenium Development Goals period many governments, including Australia, signed on to the Paris Declaration for Effective Aid (2005) and later the Accra Accord (2008). These efforts to commit to effective aid were an attempt to shift away from what until then had been a tradition of western aid agencies, governments, and international NGOs imposing their own priorities, metrics, and implementation strategies onto communities they sought to help. While well-intentioned it often resulted in ineffective and unsustainable or non-scalable programs that failed to account for local realities. In turn, these programs eroded the agency of local communities while introducing perverse incentives and in some cases reinforcing traditional dependencies dating back to the colonial period.

The solution was to hold donors to a higher standard – with expectation of locally led and ‘owned approaches’ aimed at achieving development outcomes in alignment with development partners in the public, private and civil sectors. The resulting shift of power away from ‘the donor’ toward local actors who understand their communities best – while a big step change – makes complete sense. Countries and communities receiving aid should be empowered to set their own priorities, design interventions that align with their cultural and socio-economic realities, and lead implementation efforts with minimal external influence or interference.

Locally led development is not just an idealistic aspiration; it is a proven approach. Research consistently shows that when local organizations and governments drive development initiatives, projects are more sustainable, cost-effective, and impactful. With a global decline in aid budgets, there is an urgent need to ensure that every dollar invested delivers tangible, long-term results in the interests of the countries and communities partnered with. This requires a shift from an aid system that rewards large-scale, expensive interventions with short-term outputs toward one that prioritizes effective, community-led solutions.

Effective aid must be:

• Flexible: Donor agencies must move away from rigid funding models that dictate how aid is spent, allowing local organizations to adapt funds to real-time needs.
• Long-term: Development cannot be achieved through short-term, project-based funding cycles. Multi-year investments in local institutions and infrastructure are essential for sustainable impact.
• Measured by impact, not spending: The success of aid programs should not be determined by how much money is allocated, but by tangible improvements in quality of life, economic opportunity, and resilience.

Australia has a unique opportunity to learn from its own history with international aid. The dissolution of AusAID in 2013 and its integration into the Department of Foreign Affairs and Trade (DFAT) was a turning point, reflecting a broader shift towards aligning aid with strategic interests as opposed to the more altruistic narrative of poverty alleviation in the interest of humanity – the goal of the MDG and SDGs. The mantra of AusAID was ‘poverty alleviation in Australia’s national interest’ which today that has been reframed as promoting  ‘Australia's national interests by contributing to sustainable economic growth and poverty reduction’.  

However, Australia’s experience also underscores the importance of effective aid and being vigilant to the dangers of a return to the ‘boomerang aid’ of the past.

The OECD and other international bodies have consistently recommended a shift toward more effective aid models, emphasizing transparency, local ownership, and sustainable impact. Australia can strengthen its aid program by:

• Prioritizing locally led development: Partnering directly with local governments, NGOs, and businesses to ensure aid is responsive to actual needs rather than donor-driven objectives.
• Reducing reliance on contractors: Moving away from expensive international consultancy firms and drawing on and investing in capacity within recipient countries.
• Enhancing accountability and evaluation: Implementing robust impact assessments to ensure aid effectiveness and reduce inefficiencies.

By embracing these lessons, Australia can position itself as a leader in effective aid, demonstrating that development assistance can be both strategic and transformative without being wasteful or politically motivated.

Recommendations for a future government to consider include:

• Protecting the aid program in legislation as an ongoing commitment with a proscribed level of contribution based on percentage of gross national income included in annual appropriations.
• Reestablishing a dedicated quasi-independent agency responsible for managing and delivering Australia’s aid program with an independent arm responsible for monitoring, evaluating and assessing aid effectiveness and reporting.
• Ensure transparency and co-design in programs to ensure local buy-in and effectiveness and built in feedback loops with development partners as well as the Australian parliament (reinstating the annual development effectiveness report drawing from the abovementioned independent monitoring and evaluation facility).
• Build instruments and architecture around the aid program to encourage dialogue and prioritisation of development priorities in the interest of locally led development programs that avoid power asymmetries that such interactions naturally create.