By Deodat Maharaj
Gebze, Türkiye
The global development compact is fraying.
At a time when the world’s poorest and most vulnerable countries face unsustainable debt burdens, climate shocks and technological exclusion, international development assistance is retreating at a historic pace. According to the OECD Development Assistance Committee (DAC), official development assistance (ODA) fell by 23.1% in 2025 in real terms compared to 2024. This is the largest annual decline ever recorded. In absolute number, total ODA dropped from USD 215.1 billion in 2024 to USD 174.3 billion in 2025, bringing aid levels back to where they stood a decade ago, when the Sustainable Development Goals were first adopted.
For the poor and vulnerable people living in the Least Developed Countries (LDCs), the consequences are even more profound. Bilateral ODA to LDCs declined by 25.8% in 2025, while aid to sub-Saharan Africa fell by more than 26%. 32 out of the world’s 44 LDCs are in Africa. Much needed financing for humanitarian assistance also sharply contracted by 35.8%. These reductions come at a time when these countries are struggling with rising fuel costs and increasing global economic uncertainty.
This is not simply a temporary budget adjustment. It reflects a broader shift in global priorities.
For decades, developed countries have repeatedly reaffirmed the long-standing United Nations target of allocating 0.7% of gross national income (GNI) to development assistance. Yet only a handful of countries consistently meet that commitment. In 2025, according to OECD data, only Denmark, Luxembourg, Norway, and Sweden met the 0.7% benchmark among DAC members.
Climate finance commitments have followed a similar pattern. Developed countries first pledged at the 2009 Copenhagen Climate Conference (COP15) to mobilize USD 100 billion annually for climate action in developing countries by 2020. The commitment was subsequently reaffirmed and embedded within the Paris Agreement framework adopted at COP21 in 2015. Although the target was not achieved by the original 2020 deadline, OECD data indicate that it was finally met in 2022 and remained above the USD 100 billion threshold thereafter. Nevertheless, concerns persist regarding the accessibility and predictability of climate finance, as well as the continued heavy reliance on loans rather than grants. Indeed, loans continue to represent most of public climate finance.
Whilst resources for development dwindle, the needs of the LDCs and vulnerable countries continue to intensify.
LDCs continue to struggle economically. While they account for around 14% of the world’s population, they contribute less than 1.5% of global GDP. Their debt vulnerabilities are also worsening. Many LDCs are either already in debt distress or at high risk of debt distress. In countries such as Zambia and Ethiopia, debt servicing has increasingly constrained fiscal space, in some cases consuming more public revenue than spending on health or education. These limitations are narrowing governments’ ability to invest in infrastructure, innovation, digital transformation and human capital.
The central question therefore becomes unavoidable: if concessional financing and aid flows continue to decline, how can LDCs finance development and structural transformation? There is no single template for success. However, the evidence shows that it must be built on boosting internal productive capacity, rapidly adopting low-cost and high-impact technology at scale, investment and domestic economic resilience.
First, the private sector — particularly technology-driven businesses — must play a far greater role in development.
Technology businesses are particularly important because they accelerate productivity across sectors. Digital infrastructure, fintech, e-commerce, artificial intelligence, renewable energy technologies and digital public services all have the potential to expand economic participation, improve governance and reduce structural inefficiencies.
Across Africa and other developing regions, innovative enterprises are already demonstrating what is possible. Mobile money platforms such as M-Pesa have transformed financial inclusion by enabling millions of previously unbanked people to access digital financial services. Meanwhile, digital health platforms such as Zipline operating in places like Rwanda are helping to extend essential health services and medical supplies to underserved communities. But these success stories remain uneven and underfunded.
Second, domestic resource mobilization must become central to development financing strategies.
Countries cannot sustainably finance development if public revenues remain chronically low. Currently, tax-to-GDP ratios in LDCs are often in the range of 10–15% of GDP, reflecting limited domestic resource mobilization capacity. In contrast, OECD developed economies typically raise around 33–34% of GDP in tax revenues on average, more than double the level observed in many LDCs. This structural gap significantly constrains fiscal space in poorer economies and increases reliance on external financing. Strengthening tax systems, improving revenue administration, formalizing economic activity and reducing illicit financial flows are essential.
Third, policy environments matter enormously.
Countries that actively promote business competitiveness, trade facilitation, innovation, and institutional reform attract investment and stimulate growth. LDCs often face regulatory and administrative bottlenecks that hinder business and investment. For example, in most LDCs, it takes on average around 20–30 days to register a business, reflecting persistent bureaucratic delays. In contrast, in countries such as Singapore, business registration can take as little as 1.5 days. Rwanda has shown that vision backed by action can deliver a reform agenda where a business can now be registered in approximately four days.
For sure, no model is universally transferable. Every country faces unique historical, institutional and geographic realities. But the broader lesson is clear: proactive and coherent policy frameworks matter.
The decline in aid should not trigger resignation. It should stimulate a new urgency. This means investing in technology and innovation; creating environments where business can flourish; and strengthening domestic institutions and public finance systems.
In summary, whilst increased ODA is absolutely needed, the mindset of LDCs must be standing on their own two feet.
Deodat Maharaj is the Managing Director of the United Nations Technology Bank for the Least Developed Countries and a national of Trinidad and Tobago. He can be reached at: deodat.maharaj@un.org