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This week, we uncover a shocking new low: developing countries are paying more for debt than they receive in new money. Thankfully, we know how to fix the problem and, as finance ministers meet in Washington DC, we’re calling on them to act. Read on to find out what can be done and get up-to-speed in 6 minutes.

Top news BREAKING: Who’s funding who: New shocking analysis from ONE released today shows that developing countries are now net contributors to the global economy. They are spending more to pay their debts than they receive in foreign aid and new loans. This ratio of “net flows” is at its lowest point since the Global Financial Crisis. In 2022, 26 countries had negative net flows. Unless we see major money moves, that number will rise to 44 countries in 2025, paying US$102 billion in negative net flows. Click here to dig into the numbers behind this shocking finding. Catch-22: Developing countries are caught between ballooning debt costs and declining aid and investment. The pandemic, war in Ukraine, and rising interest rates have made debt more costly. Meanwhile, China’s lending to Africa has fallen by 70% in recent years and the EU, France, Germany, and US have announced 2024 aid cuts totalling nearly US$9 billion. And private lending to developing countries has dropped by half. These hard realities are putting many countries in a bind: do they provide for their people or pay their debts? Naija dilemma: Take Nigeria, which plans to spend five times more on debt than on health and three times more than it spends on education. Nigeria spends <1% of its GDP on health, which is amongst the lowest rates in the world, and one in three children are out-of-school. How bad is its debt problem? Consider this: the country extracts 1.5 million barrels of petroleum a day as Africa's largest producer. Yet in 2024, all of those revenues (and more) will go to pay debt. That’s hardly a recipe for success. Foreign aid: There’s another reason why money to developing countries is drying up: many donor countries are redirecting foreign aid to pay expenses at home. Donors can count hosting refugees – and other administrative costs – as aid. Last year, 19% of foreign aid never left donor countries. The UK spent nearly one-third of its... ahem, foreign aid budget in 2023... in the UK.* Hosting refugees is a good thing. Taking money from vulnerable countries to do it isn’t. Solution-oriented: So what can be done to help vulnerable countries address this crisis? We’re glad we asked. Reform the MDBs: Some multilateral development banks – like the World Bank – have increased their lending capacity. But given the financing needs, G20 finance ministers should ask them to do more. That includes squeezing more from existing capital to triple financing by 2030. A new World Bank analysis finding the likelihood of a call on capital “extremely remote” ought to make that easier. Meanwhile, the IMF Executive Board should approve the use of Special Drawing Rights as hybrid capital for channelling through multilateral development banks. The clock is ticking. ⏱️ Invest in low-income countries: The World Bank’s International Development Association (IDA) is the world’s largest source of low or no cost finance for the world’s poorest countries. It has provided more than US$500 billion in grants and loans since 1960 – a lifeline for countries lacking access to other finance. Donors should heed the call by African finance ministers to triple IDA by 2030, in part by increasing their contributions by at least 25% (to US$30 billion) in this year’s replenishment. 📈 Speed up debt relief: The G20’s Common Framework has proved too costly and slow for countries in debt distress, dissuading countries from seeking relief. Creditors should provide an immediate debt standstill for countries upon application, expand eligibility to middle-income countries, and reform the Debt Sustainability Framework to be fit for purpose. That would better reflect the urgency of today’s financing needs. 🏃🏼 Congratulations and...: Last week the IMF’s Executive Board approved a second 5-year term for Kristalina Georgieva as Managing Director. Putting aside the somewhat archaic recruitment process in which European governments choose the leader of this globally important institution, we welcome the decision. Kristalina did a good job of responding to the massive demands of COVID-19. To help her prioritise, ONE and 76 former presidents, prime ministers, and leaders from academia, think tanks and civil society published a 10-Point Plan for how the IMF can respond to these extraordinary times. Look out for it in today’s Financial Times and click here to share the letter. From the ONE Team Ndidi Okonkwo Nwuneli joined 133 former heads-of-state, business leaders, artists, and activists calling on G20 leaders to reform global financial institutions. Ndidi will join Semafor’s World Economy Summit to discuss restructuring global financial institutions. Click here to watch online Thursday at 11:30 am ET / 15:30 GMT. ONE on what leaders can do to reverse the dangerous trend in financial flows. ONE on why UK investment in IDA will deliver transformative results. David McNair on IDA’s incredible impact. The numbers US$1.7 billion: The Netherlands’ new pledge of Special Drawing Rights to the IMF’s Resilience and Sustainability Trust. Ireland pledged an additional €800 million in SDRs. And the UK pledged £100 million in hybrid capital to the World Bank. 🥳 26.5% of people in the 75 IDA countries were living in extreme poverty in 2023. That’s over eight times the proportion in the rest of the world. US$50 billion will flow out of developing countries in 2024 as debt payments exceed new aid and loans.

Quote of the week "'Billions to trillions,' the catchphrase for the World Bank’s plan to mobilise private-sector money for development, has become ‘millions in, billions out.’" –Lawrence H. Summers, former US Secretary of the Treasury, and N.K. Singh, President of the Institute of Economic Growth

What you should read, watch, and listen to: Development funds dash for donor cash at World Bank and IMF meetings. (Financial Times) The world needs a new Special Drawing Rights issuance. (Daily Maverick) Growing debt stands in the way of climate and development goals. (CEPR) The polycrisis power players. (Glasgow Actions Team) Addressing climate change will take bold reforms. (The Rockefeller Foundation) Making progress on climate financing for Africa. (ECFR)

A look ahead 18 April: 2nd Finance Ministers and Central Bank Governors Meeting, Washington DC, US 19-21 April: 2024 World Bank / IMF Spring Meetings, Washington DC, US 22 April: Earth Day 21-22 April: First IDA Replenishment Meeting, Washington DC, US 22-25 April: United Nations Forum on Financing for Development, New York City, US 25 April: World Malaria Day

The ONE Campaign’s data.one.org provides cutting edge data and analysis on the economic, political, and social changes impacting Africa. Check it out HERE. *Correction (our first in 118 weeks): Last week, we incorrectly stated that the UK had spent over 50% of its foreign aid budget inside the UK, a number we said was £9.9 billion (US$11.9 billion). That’s true for bilateral aid. But for total aid (including funding for multilateral institutions), which totalled £15.4 billion (US$19.1 billion), it’s 32.4% or US$6.2 billion. We got that one wrong. But we remain just as concerned that the UK is spending so much of its foreign aid at home.

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