Special edition: 2025 predictions from Devex’s editor-in-chief

Picture a giant iceberg slowly disappearing into warming waters. It might conjure up an image from a climate change campaign. But this year it could be an apt metaphor for traditional foreign aid — a massive structure built over decades, now transforming before our eyes.

Think of traditional development assistance — or "Old Aid" as I call it — as that melting iceberg. It's grown enormously, with official development assistance more than quadrupling since 2000. This massive structure has achieved a lot, from childhood vaccinations to AIDS treatments. But it’s also been weighed down by risk aversion and bureaucratic handcuffs, and is increasingly out of step with the world’s needs.

Efforts to reform Old Aid have made some progress but it’s been slow and marginal. Now, the election of aid skeptics in the U.S. and Europe is quickening the change, with implications for all of us.

It’s an existential reckoning that I explore in my annual global development forecast. You can read the full article here, and Pro members have exclusive access to the article on the hourlong “ask me anything” webinar I hosted on the subject.

Read: In 2025, global development’s new era begins

Plus: The big forces that will shape global development in 2025 (Pro)

Here’s a brief overview of five of my predictions for 2025:

1. ODA has peaked

Across the U.S. and Europe, a brand of right-wing populism is ascendant. Its “my country first” worldview is miles away from more traditional conservatism. So, it’s no surprise that this political cycle is bad for aid budgets.

Already, Sweden has halved its aid budget, the Netherlands cut a third, and Germany slashed €1 billion each from development and humanitarian funding (although there’s hope some could be restored). This doesn’t even account for all the games donors such as the United Kingdom play by counting in-country refugee costs as development assistance. And in the U.S., the largest foreign assistance donor in the world, President-elect Donald Trump may now be able to secure the kinds of deep cuts he proposed in his first administration.

But it’s not just a political cycle at play. There are longer-term economic issues that won’t just go away by the next election. With record deficits, aging populations, mounting defense spending, and potential trade wars at home, foreign aid is a convenient political punching bag — slammed as a waste of money when problems are piling up at home, even though it only represents a tiny slice of budgets.

The impact of these shifting tides could be a severe blow to people around the world who rely on aid, as well as the impetus for new models. My prediction? We'll look back on this period as peak ODA from global north donors — with aid from traditional bilateral donors going down from here.

Read: A look back at European aid’s slash-and-burn year (Pro)

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2. Bilateral aid agencies will become humanitarian agencies

It’s happening to some extent already: As humanitarian needs grow, bilateral aid agencies from the global north find themselves doing more humanitarian work. As a consequence, they’re doing less long-term development.

Given the budget realities of this new era, coupled with mounting humanitarian needs in a time of conflict and climate change, this trend will accelerate. Eventually, these agencies may become chiefly humanitarian, ceding most long-term development to others.

3. MDBs and DFIs will take the lead on development

Not all aid institutions face the same fate. Multilateral development banks and development finance institutions could emerge stronger. Why? They offer something aid skeptics like: leveraging public money to bring in private sector investment and using aid to amass geopolitical influence. As a result, these institutions are increasingly taking the lead on long-term development.

4. UN agencies lose out

U.N. agencies stand to suffer the most in this new era. The political leaders ascendant in the global north are especially skeptical of the United Nations. In particular, many in President Trump’s “Make America Great Again” movement would like to see the U.S. cut back on U.N. spending, and for several U.N. agencies, the U.S. provides over 40% of their total funding.

5. Philanthropy develops a new strategy

Here's a staggering figure: $10 trillion is now held by just 500 people globally. One of them, Michael Bloomberg, already gives away more than the Danish government in aid. Like Bloomberg, there are now 16 people in the world worth over $100 billion each, but most aren’t yet donating anything close to that much.

Will philanthropy step up to fill the growing aid gap? Almost certainly not — at least not right away. The gap from government aid is simply too much for most institutional foundations to bridge, and most wealthy individuals remain hesitant to engage in large-scale philanthropy, studying from the sidelines and avoiding the limelight.

But the pullback of ODA and rising populism could change the calculus for philanthropists. For those already giving large amounts, they must develop a new strategy that’s less reliant on their current one, which uses philanthropic dollars to leverage government ODA. For those waiting in the wings, it could mean they accelerate their giving in new ways. Both trends could help usher in a starkly new era for global development.

Going deeper

This new era will take time to develop. Old Aid, with its project-focused, risk-averse culture, is like a melting iceberg, and icebergs melt slowly. But 2025 will accelerate these trends.

We already see:

• Social entrepreneurs reaching real scale, such as the One Acre Fund, which now serves 15% of Africa’s smallholder farmers.

• MDBs such as the Inter-American Development Bank reforming their business models to crowd in more private investment.

• Pay-for-results models taking off, such as the Education Outcomes Fund.

• Some progress on funding local organizations, bolstered in the U.S. by rare bipartisan political support.

As the iceberg of traditional aid melts, new structures are forming. The question isn't whether development assistance will continue — it will and it could be even larger than before. The question is what shape it will take and who will lead it.

Check out my full 2025 look-ahead piece for much more.

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