Evidence-Based Policymaking in a Time of Shrinking Aid Budgets

Around the world, governments are cutting their foreign aid budgets. In the United States, the dismantling of the United States Agency for International Development (USAID) has led to the cancellation of more than 80% of its programmes. In the United Kingdom, the aid budget has been reduced from the long-standing target of 0.7% of gross national income to 0.5%, with plans to fall further to 0.3% by 2027–2028, forcing the cancellation of several programmes, including international health initiatives. The Swiss Parliament has likewise reduced its 2026 budget for international cooperation and humanitarian assistance.

Much of the political momentum behind these cuts reflects the deep unpopularity of foreign aid among the public. Surveys consistently show that people believe aid accounts for a far larger share of government spending than it actually does — Americans, for example, estimate it at around 25% of the federal budget, when in reality it is closer to 1%. While these perceptions warrant reflection on the structure and effectiveness of the aid system, they do not justify abrupt measures. Aid is also widely perceived as wasteful and inefficient. While these perceptions warrant reflection on the structure and effectiveness of the aid system, they do not justify abrupt measures. A recent article in The Lancet estimates that the dismantling of USAID alone could result in more than 14 million additional deaths by 2030, including around 4.5 million among children under five. Although the true counterfactual remains uncertain — what global health outcomes would have looked like in a world where development assistance had never existed, or if it had been gradually phased out — presented in the article hardly supports the claim that aid has been a pure waste.

Assessing the effectiveness of foreign aid is difficult because donors set multiple, sometimes conflicting objectives: saving lives, promoting long-term economic development, and advancing their geopolitical interests. Defining clear aid objectives — such as improving food security, expanding access to education, or strengthening global public goods like vaccination coverage — helps address this challenge. Indeed, this creates an important condition for measuring impact and thus for evidence-based policymaking, which offers a powerful way to make development policy more effective, efficient, and transparent. At its core, evidence-based policymaking relies on two elements: rigorous research methods to determine which interventions work, and the use of these empirical insights to direct public and private resources toward programmes and practices with demonstrated impact.

Over the past few decades, the number of rigorous impact evaluations conducted in low- and middle-income countries has grown rapidly, resulting in a substantial body of evidence. The Abdul Latif Jameel Poverty Action Lab (J-PAL), a global research centre that generates rigorous evidence on what works to reduce poverty, has, for example, launched The Evidence Effect, a collection of cost-effective, evidence-backed policy solutions that can be scaled. Important knowledge gaps remain, however, and new evidence is still needed. For instance, it is important to evaluate and help scale innovative AI solutions.

At the same time, the mere existence of evidence does not guarantee its use. An article in the American Economic Review shows that making research evidence more accessible can stimulate policy change. Yet it remains unclear how policymakers identify, interpret, and apply research findings in practice. This suggests that information frictions — such as limited access to relevant studies, difficulties in interpreting results, or uncertainty about their applicability to specific contexts — may help explain why effective policy interventions are not always adopted. Reducing these frictions by providing policymakers with clear insights from cost-effective programmes is, therefore, an important step in helping them make more informed decisions about where to allocate scarce resources.Academics can play a key role in this ecosystem by providing technical expertise and helping translate research findings into practical guidance for governments and policymakers more broadly. 

Academics can play a key role in this ecosystem by providing technical expertise and helping translate research findings into practical guidance for governments and policymakers more broadly. Beyond producing individual studies, there is also a growing need to aggregate existing evidence through meta-analyses.

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Other initiatives also aim to bring greater rigour to aid allocation. For example, Michael Kremer, co-recipient of the 2019 Nobel Prize in Economic Sciences, co-created the Development Innovation Ventures (DIV) fund, which applies a venture-capital–inspired model to development. (Kremer shared the prize with Esther Duflo and Abhijit Banerjee, who co-founded J-PAL.) Delivering cost-effective innovations in global development can generate substantial returns, yet research and development in the sector receives only a small fraction of total investment. DIV offers three tiers of grants, calibrating funding to evidence and results: support for early pilots, rigorous testing of ideas that have demonstrated success, and large-scale expansion of solutions with the potential for the greatest impact. This staged model helps reduce risk while ensuring that development resources are directed toward interventions with the greatest potential impact. Projects funded by DIV span sectors including health, education, agriculture, and climate resilience. DIV also offers technical assistance to governments, bilateral aid agencies, and multilateral organisations to help design and implement evidence-driven innovation tools.

Evaluations of DIV’s early portfolio suggest a social return of roughly USD 17 for every dollar invested, illustrating that well-designed aid programmes can be highly cost-effective. Ironically, the initiative was created at USAID and was forcefully relaunched as an independent nonprofit in 2026. In a context where aid budgets are tightening and scrutiny of their effectiveness is increasing, approaches such as this demonstrate how scarce resources can be directed toward interventions with the greatest proven impact.