Foreign aid was slashed by 23% in 2025—cancelling debt or boosting remittances could replace it for half the countries hit.

In 2025, bilateral foreign aidbilateral foreign aidMoney that one country's government gives directly to another country's government, for things like health, education, or infrastructure. dropped by 23%, hitting more than 130 recipient countries and causing USD 26 billion in aid losses. Researchers investigated whether two alternative funding options could fill this gap: cancelling debt payments or increasing remittances, which are funds sent home by workers abroad. They used a model to simulate donor cuts and tested what it would take to balance the losses. They found that cancelling 18% of external debt service and mobilising 10% of remittance capacity could compensate half of the affected nations. However, some countries are locked out of both options. Nations with high debt relief potential lack migrant networks, while nations with strong migrant networks are structurally excluded from traditional debt markets.

Why it matters

When wealthy countries cut foreign aid by a quarter, over 130 poorer nations suddenly lose a chunk of their budget. This paper shows that for half of them, the loss could be made up by either cancelling debt payments or unlocking more money from citizens working abroad. But for the rest, neither fix works—a gap that matters for anyone who cares about how developing countries stay afloat after rich donors pull back.

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