What is foreign aid? 5 things you should know

January 23, 2020

A few challenges to foreign aid in 2020 include the ongoing threats of steep budget cuts, legislation around US response to humanitarian crises, and other policies that will impact the future of foreign aid and assistance. Here’s a quick explainer on foreign aid — and why it matters for our work. 

Despite making up a tiny fraction of government spending, U.S. Government foreign aid is up for another tough year, caught in the legislative/executive crossfire. At the beginning of 2020, the development news site Devex quoted one organization leader as saying “the capacity and appetite for bipartisan initiatives on any subject is thin,” and this would include a traditionally bipartisan support for US foreign aid spending. 

A few challenges to foreign aid in 2020 include the ongoing threats of steep budget cuts (despite foreign aid only accounting for 1.2% of the total federal budget), legislation around US response to humanitarian crises, and other policies that will impact the future of foreign aid and assistance. Here’s a quick explainer on foreign aid — and why it matters for humanitarian work. 

1. It’s not just money

Broadly speaking, foreign aid is anything that one country gives for the benefit of another country. This includes money, but can also be provided in the form of in-kind donations of goods or services. Some of these goods and services include:

  • Food aid and distribution
  • Education 
  • Water, sanitation, and hygiene initiatives
  • Infrastructure assistance
  • Agriculture training 
  • Climate resilience support
  • Peace-building activities
  • Health care

The goal with all of these forms of aid is to provide development assistance at a larger level in order to maintain a functioning global society. This was fundamental to the genesis of US foreign aid with the Marshall Plan, the aim of which was to support the reconstruction of Europe after World War II. Our current system of foreign aid was originally authorized under the Foreign Assistance Act of 1961. 

Smiling woman with hard hat and pick axe, standing on road beside a sign

Yasseka Veronique is helping build flood prevention ditches near Kolongo village in Central African Republic as part of Concern’s cash for work activities, funded by USAID. A mother of eight children, she says she uses the money she earns to fund small business activities. She has no other source of income.

2. It meets many kinds of needs

About two-thirds of US foreign aid is economic aid, managed by the Department of State or an implementing agency — most often USAID (the United States Agency for International Development). While we can break down US foreign aid spending by implementing agency, we can also break it down by sector — broader categories that earmark different funds for different initiatives. 

The remaining third of US foreign assistance comes from the Department of Defense and is used to strengthen the military of US allies, or to increase US national security by bolstering foreign counter-terror or anti-narcotic missions that are in our interest.

Economic aid can then be broken down into subsectors, the main categories (as sorted by USAID) are:

  • Conflict, Peace, and Security
  • Emergency Response
  • HIV/AIDS
  • Government and Civil Society
  • Operating Expenses
  • Basic Health
  • Economic Development
  • Environmental Protection
  • Basic Education 
  • Agriculture

Funding can also be multisector, unallocated, or classified as “other” to fit more unique situations.

Learn more about our work (supported in part by foreign aid)

3. It doesn’t just go to governments

Only a small portion of US foreign assistance goes directly to governments (known as bilateral aid). In 2017 (most recent complete data as of 2020), USAID reports suggest that less than 3% of all foreign aid disbursements went directly to governments. The majority of assistance instead goes to a combination of multilateral organizations (like the United Nations or World Bank), nonprofits, and other non-governmental organizations (NGOs). 

This is how organizations like Concern become channels through which foreign aid flows to communities in need. In 2017, for instance, we received 8 separate grants from USAID, including funding  to respond to those affected by ongoing conflict in South Sudan, the ongoing crisis in Syria, a natural disaster in Sudan, drought in Malawi, and provide access to quality education in Liberia.

Clean water truck in Syria

Displaced Syrian families congregate at a water truck, which Concern fills with clean water regularly.

4. It helps others — but it also helps the US

As a humanitarian organization, we at Concern believe that there is a moral imperative to alleviate human suffering wherever it happens. The more people lifted out of global poverty, the more the world benefits on the whole. Foreign assistance efforts play a huge part in this. 

But there are also many more pragmatic and immediate arguments for foreign aid. The world is more interconnected than ever, and what happens in far-flung parts of the globe can now have direct impacts in the US — and vice versa. 

5. The US gives much less than you might think

Many Americans think we spend about a quarter of the national budget on foreign aid. In reality, it’s just over 1.2% — and that includes military aid. Humanitarian and development assistance makes up less than a penny on the dollar for foreign assistance funds. So even if aid was cut completely, it would do very little to reduce the United States deficit of approximately $984 billion. 

It’s true that, in absolute dollars, the United States gives more to foreign assistance than any other country. However, when calculated as a proportion of our gross domestic product it’s only 0.18%, which places us last out of 27 countries in terms of generosity (measured on the latest Commitment to Development Index, published by the Center for Global Development). 

Rwanda smallholder farmer

Genevieve Manishimwe’s husband was killed in the genocide. Thanks to Concern & USAID she is now able to support her four children

How Concern uses foreign aid

At any one time Concern has as many as 20 programs that are funded by the US government — and many more have already been successfully completed. These projects take a variety of different forms.

  • Direct programming: This is where Concern operates a program itself, interacting with communities directly.
  • Through local partners: Where smaller, local organizations have the capacity to do their own programming, Concern will often choose to partner with them rather than directly program. Local partners have invaluable local knowledge, and can often gain access to areas we can’t reach. Concern provides support to these partners, such as technical expertise to scale up existing programs, and financial resources. 
  • In partnership with other large organizations: Sometimes Concern will work with other organizations in a consortium to run big or complex projects. For example, Concern currently leads a consortium of agencies that are improving water, sanitation, and hygiene conditions in the Democratic Republic of Congo.

We’re proud of the transformative impact we’ve been able to achieve with the help of US foreign assistance.

Explore these videos to see some of what US foreign aid makes possible:

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