Beyond fragmentation: Building self-reliance in a shifting aid landscape

The global development landscape is undergoing seismic shifts. Foreign aid, a critical lifeline for billions, is shrinking, after becoming fragmented at an alarming rate over the last two decades. At the same time, more than half of low-income countries are deep into or teetering on the brink of debt distress, with median public debt soaring from 20 percent of gross domestic product in 2010 to 60 percent today. 

This combination squeezes vital spending on health, education, and other such services when it’s needed most.  Countries like Ethiopia, for instance, now juggle relationships with over 200 different aid agencies, which is an administrative nightmare that diverts scarce resources from actual development. Worse, national budgets now account for only 20 percent of official financing flows by the number of transactions and less than half by volume, undermining country ownership and systems.  

The World Bank Group is helping developing countries tide over such a challenging environment—not just as a financier, but as a defragmenter, a multiplier, and a steadfast partner committed to self-reliance.  

Our mission demands efficiency and scale. Since 2002, we’ve delivered over $1.2 trillion in financing and $87 billion in guarantees. Now we’re becoming even faster and more impact-driven in our work: Project approval times are down 25 percent in just two years.   

How do we defy these fragmentation and proliferation trends and multiply our impact in the face of such challenges? Here are six approaches we’re taking.

1. Unparalleled efficiency and leverage: Our AAA credit rating allows us to stretch every donor dollar. For instance, the International Development Association (IDA), our fund for low-income countries, transforms each $1 donated into $4 of financing on the ground. On a dollar-in/dollar-out basis, our model outperforms others significantly.  

2. Championing country ownership: We build capacity, not dependence. Over 90 percent of IDA funding flows through national budgets, putting the countries in the driver’s seat, as called for in the Paris Declaration on Aid Effectiveness two decades ago. Our Program for Results links funding directly to achieved outcomes using countries' own systems. Crucially, we avoid earmarking, giving governments vital flexibility to respond to shocks, as seen by our unprecedented $204 billion COVID-19 response.  

3. Convening global power and defragmenting aid: Working with 189 member countries, our footprint and convening power are unmatched. We partner with donors across country income levels globally and operate where others hesitate to go, including fragile states. The new Global Collaborative Co-financing Platform, which was launched 2024 with other multilateral development banks, is also a game-changer. The digital marketplace connects about $120 billion in project needs with financiers. Having multiple partners cofinance the same project together, rather than financing different parts separately, defragments aid, enables the financing of larger projects, and reduces the administrative burden on recipient countries. So far, 10 projects worth $14.5 billion have already moved forward through cofinancing.   

4. Catalyzing private capital: Public resources alone are not enough to reach countries’ development goals, we also need the private sector. Unlocking the vast pool of private capital requires reforms, including better governance, stable regulation, and reduced red tape. We support governments in making these tough decisions, provide guarantees, and de-risk private investments through IDA’s Private Sector Window. Special Economic Zones in places like Ethiopia and Bangladesh show how this approach can attract investment and creates jobs.  

5. Building resilience and managing debt: We help countries prepare for and deal effectively with crises. Partly this is done by strengthening debt management through the Debt Management Facility, which we run with the International Monetary Fund, and tools like Debt for Development Swaps for countries supported through our International Bank for Reconstruction and Development. Meanwhile, IDA provides grants with incurring no debt and highly concessional financing to countries at high risk of debt distress and incentivizes sound debt management via the Sustainable Development Finance Policy. Our Crisis Preparedness and Response Toolkit, including its Climate Resilience Debt Clause, IDA’s Crisis Response Window and Deferred Drawdown Option, offers vital safety nets for vulnerable nations hit by disasters.    

6. Incentivizing global goods: Our Framework for Financial Incentives rewards investments tackling cross-border challenges like pandemics and food insecurity. It offers funding with larger volume, longer terms or concessionality for projects boosting clean energy or water management.  

The path forward demands bold choices on all fronts. Governments must strengthen revenue collection, control spending, and manage debt sustainably. Donors must prioritize efficiency and country systems. The private sector needs to lead on economic growth and the generation of jobs.   

Amidst this global turbulence, the World Bank Group is supporting this work and proving that multilateralism works. We are defragmenting aid, multiplying resources, and empowering countries to build resilience and self-reliance. We are not just financing development; we are building the foundations for a future free of poverty on a livable planet—together.