Six months after the USAID cuts tilted the aid world on its axis, donors and agencies are still finding their feet. Humanitarians are emerging from last week’s Geneva meetings – with talk of ‘cruel math’ of hyper-prioritisation and of resetting the system. Meanwhile, development folk are gearing up for the Financing for Development conference in Seville, where the pressure is on for aid reform. Both will have a major bearing on the future demand for and delivery of social protection – and there are at least some promising commitments ahead of Seville. But right now, social protection programmes around the world find themselves working in the financial dark – unclear about budgets and steers. So, what do – and don’t – we know about the impacts of the cuts?
Half a year older, little wiser
Back at the start of the year, there was a flurry of questions: where would the axe fall, and how deep, and how badly would the blow be compounded by other donors?
We’d just finished writing our study on financing for social protection in protracted crises, and made the rare move of adding an epilogue. In the midst of the aid freeze, we could only note the little we knew, and flag potential implications. We decided to keep monitoring and publish an update when the situation became clearer.
But half a year on, the financial picture remains hazy. Even topline ODA figures are hard to pin down: we know there will be significant declines in 2025-2027, but details are scant. Normal financial reporting time-lags, combined with data blackouts around the US cuts and vagueness around other donor announcements, means even the current year’s figures remain a matter of statistical speculation.
Looking ahead to 2026, although we now have an idea of the outer bounds of future US aid, actual allocations will remain capricious. And broad-brush aid reductions announced by some other large donors haven’t been translated into budgets: we’re awaiting the policy and allocation detail to back up the UK’s top-line announcement of cuts, Germany’s new government has yet to pass its budget. In this limbo, it’s been fruitless to chase reliable information about the current state of financing – let alone its future: we’re in the dark on publicly available figures, and insider experts can’t tell us more, working under financial precarity and the toll of day-to-day delivery amidst restructures and political nervousness.
What we do – and don’t – know about future financing
One thing is, however, clear: the World Bank continues to hold the global purse-strings on social protection financing, including in crisis-affected countries. In countries experiencing protracted crisis (PCCs), IDA and IBRD combined accounted for nearly three quarters (73.1%) of social protection financing. So, the news in May that the US, the largest shareholder in the Bank would only be cutting a fifth of its IDA pledge (from $4billion to $3.2billion), came as welcome news for many after months of speculation. Still a significant decline for IDA, but not the catastrophic loss some had feared. It remains to be seen how the price of this continued scale of US engagement might be paid in policy shifts in the Bank’s approaches to social protection and to fragility. Outwardly at least, there is no change in the Bank’s central commitment to increasing coverage by 500 million by 2030. So protracted crises whose social protection programmes benefit from a combination of WB financing and high prioritisation by bilateral donors will likely be relatively insulated from the cuts for now – Ukraine, the country which accounted for much of the rise in financing to PCCs – being a case in point.
For other countries where bilateral donors play a more pivotal role, the financing picture is more variable. Multi-year commitments do of course provide a degree of short-term security: for example, the ‘twin-track’ Sahel Social Protection Joint Programme is currently solely funded by Germany, but core funding for its second four-year phase has at least been locked in. But in Somalia, the next phase of the Baxnaano Social Protection Programme is launching amidst uncertainty about whether bilateral donors will step up to co-finance with the World Bank. And in general because bilateral donors, unlike the World Bank, tended to favour grant funding over loans – their funding contractions are a potential threat to quality as well as quantity of funding.
Indirect effects of ODA chaos
Of course, it’s not just the direct donor cuts to specific social protection programmes that matter – it’s the knock-on effects throughout the global system. UN agencies may only implement a fraction of social protection financing – the bulk going through governments – but they play a key role in delivery in crisis-affected countries, particularly those with ‘estranged’ donor relations. With UNICEF and WFP previously dependent on the eight bilateral donors which have recently announced aid cuts for much of their funding (an estimated 34% and 68% respectively), the UN in the midst of a liquidity crisis, and future assessed contributions on the line, there are swingeing cuts on the table. While immediate cuts are still working through (WFP announced 25-30% staff cuts, UNICEF is looking at a minimum 20% budget cut in 2026) the Secretary General’s UN80 agenda suggests more radical shifts ahead. Rumours abound, but how these will play out for each agency is yet to be seen, as are organizational investments in social protection amidst all these repositionings, restructurings and resets.
From the humanitarian side, the hyper-prioritisation of shrinking aid will amplify the call on social protection to fill the needs gap. Humanitarian cash is getting a great deal of airtime in the ERC’s Humanitarian Reset – touted as delivering the twin priorities of cost-savings and people-centred aid. But as ‘life-saving’ aid prioritises out nexus-building efforts, and humanitarian coordination withdraws from lower severity countries the bridge between emergency cash and social protection may become shakier.
Bigger trends at play
Let’s remember though that overseas aid is not, and should not be, the centre of the social protection universe. Indeed, this inflection point for aid is seen by many as an opportunity to radically up-end old models and usher in a radically different era of global solidarity. Ultimately the vision is for nationally owned and funded systems and a smart, diversified financing toolkit to support it.
Achieving this vision is at the mercy of the same geopolitical and economic headwinds that are buffeting aid: global trade shocks, currency volatility, rising debt burdens, the pivot to defence spending. Arguably, the same forces that increase people’s need for social protection threaten many governments’ support for it. Those with limited fiscal and political room to manouevre see stark trade-offs around investing in social protection.
But amidst all this turmoil, the case for fresh thinking about the thorny problem of financing social protection in crisis contexts is stronger than ever. The convening of the new High Level Panel on Social Protection in Fragile and Conflict Affected Settings – now accepting submissions -presents a timely opportunity for bold thinking. Decision-making in such financial darkness is never ideal, but we’d risk missing the moment to set the agenda for social protection if we waited for certainty in these uncertain times.
