Introduction

For decades, foreign aid has lived between two competing stories. The idealist view believes that aid should flow where the need is greatest, toward the poorest countries facing the toughest development challenges. The realist view argues that donor countries are political actors who use aid as a strategic tool to serve their own interests, such as building diplomatic alliances, securing economic ties, and rewarding loyalty at the United Nations (Hoeffler & Outram, 2011; Morgenthau, 1962).

This debate is old. What is new is a practical question: even if donors use aid to pursue their own self-interest, does the strategy actually work? A recent study from the Korea University Development Futures Lab (KU DFL) tests precisely this. Using advanced data simulations, the research asks whether shifting foreign aid to gain short-term political or economic favors produces any real benefits, especially when bound by the strict rules and long-term commitments of actual government budgets. The answer is a consistent, evidence-based “no.”

Why this question matters now

The development field is at a major turning point. Sudden events, such as sweeping budget cuts to development assistance by major traditional donors, have forced a global rethinking of the actual purpose of foreign aid (Mbah et al., 2025; McDade et al., 2023; Sohel, 2025). On top of these budget shocks, the COVID-19 pandemic, global political divisions, and the rapid spread of artificial intelligence are exposing the limits of old systems built for a completely different world (Robele & Krishnan, 2022). Together, these challenges are driving a broad reimagining of how development should work.

The tension between getting quick returns and building long-term relationships sits at the heart of this reimagining. Experts have long noticed a divide between two approaches. One approach chases immediate economic benefits for donor countries, like opening new markets or expanding trade. The other approach passes up those quick wins in favor of building goodwill and lasting partnerships with recipient countries (Arvin & Baum, 1997).

The former approach fits the highly transactional, realist view of the world (Hoeffler & Outram, 2011; Morgenthau, 1962). The latter reflects a long-term investment where real value builds up slowly through trust and mutual benefit.

What this debate has been missing is a real-world test to see if the transactional approach actually delivers what it promises, especially when you factor in the strict rules and limitations that govern actual government aid budgets. This is the practical question this study takes up.

How we looked at it

To answer this question, the research uses official bilateral data from the OECD Creditor Reporting System, covering 74 recipient countries between 1990 and 2015. The methodology involves a straightforward two-step process. First, the study uses historical data from 1990 to 2005 to train the data model. This training phase teaches the computer program the complex, real-world relationships between foreign aid distribution and actual political and economic outcomes.

Second, the study uses the following years from 2006 to 2014 to run policy simulations. By treating donor budgets like strictly regulated investment funds, the simulation tests two different scenarios. The Idealist policy allocates aid based entirely on a recipient country’s development needs and historical funding patterns. The Realist policy adds a political layer, actively using United Nations voting alignment to reward political allies.

Crucially, both scenarios must obey the practical, everyday realities of public finance. Annual budget changes are capped at 15 percent, no single country can receive more than 25 percent of the total funds, and existing aid relationships cannot be abruptly cut off. By having the trained model predict the outcomes of these two simulated scenarios, the research measures exactly what returns donors actually get when they try to use aid for political leverage.

What the data shows

The overall results are remarkably consistent across the vast majority of the global aid system, across different years, and across all recipient income levels. Aid does not produce measurable political support in the following year. The exact same holds true for economic outcomes, as shifting money toward politically aligned partners generates no reliable improvement in trade balances within a single year.

Figure: Predicted differences in next year UN voting alignment between the Realist and Idealist aid policies, grouped by recipient income level

Note: This chart illustrates the net political gain or loss when a donor uses politically driven aid compared to a strictly needs-based baseline. The results are divided into four income groups, ranging from the poorest 25 percent to the wealthiest 25 percent of recipient countries. Because the shaded areas consistently overlap the zero line across all time periods and income groups, the data visually proves that the Realist policy produces no real improvements in short-term political alignment.

The lack of results can be explained by two structural realities. First, diplomatic relationships are deeply rooted. Where a country stood politically last year is an overwhelmingly strong predictor of where it will stand next year, regardless of foreign aid flows. Second, the room for making annual budget changes is incredibly small by design. When only a tiny fraction of a budget can actually shift each year, the change in aid is simply too weak to overcome the deep-rooted habits built into both aid systems and international politics.

The simulation also reveals a worrying side effect that should concern the development community. When donors try harder to hit strategic targets, their aid naturally tilts toward relatively wealthier recipients. This shift reinforces the aid darlings and orphan dynamic, where already favored countries absorb disproportionate resources while the most vulnerable populations are pushed to the side.

So what — Implications for development actors

For policymakers, practitioners, and multilateral organizations like UNDP, these findings reframe our understanding of what foreign aid can actually achieve. The idea that official development assistance can be used for short-term tactical bargaining is a fantasy defeated. The room for strategic budget adjustment is simply too small to move the needle. Three practical implications follow:

• First, the case for cutting aid budgets to score quick political points falls apart. In an era marked by politically driven budget cuts to development assistance (Mbah et al., 2025; McDade et al., 2023; Sohel, 2025), the argument for slashing aid when it fails to deliver immediate political or economic dividends is completely undermined by the evidence. Those short-term returns were never structurally possible in the first place.
• Second, locked-in budgets are not just a bureaucratic inconvenience; they are actually a strong argument for better policy. The limits on a donor’s ability to shift money around also make the case for sustained, long-term commitments to recipient countries. Experts decades ago already knew this. The long-term goodwill logic in the literature suggests that real, durable returns from aid only emerge through sustained partnerships, rather than through shifting money around under sudden political pressure (Arvin & Baum, 1997).
• Third, as the field works toward reimagining development (Robele & Krishnan, 2022), it is time to redefine what is considered realistic. The evidence suggests that aid is long-term investment in human development and should be allocated accordingly. The easily dismissed idealist approach is not naive at all. Given the strict rules of how aid actually works in the real world, prioritizing long-term needs over short-term politics may simply be the most realistic strategy available.

This blog post draws on research conducted through the KU Development Futures Lab Student Research Residency Programme, supported by the UNDP Seoul Policy Centre. The underlying study, "Assessing the Short-Term Political and Economic Utility of Foreign Aid Allocation: A Policy Simulation Approach using Reinforcement Learning," was co-authored by research resident Jun-young Choi and DFL researcher Grace Choi.

This article represents the views of the authors and does not reflect the views of UNDP.

About the United Nations Development Programme

UNDP is the leading United Nations organization fighting to end the injustice of poverty, inequality, and climate change. Working with our broad network of experts and partners in 170 countries, we help nations to build integrated, lasting solutions for people and planet. Learn more at undp.org or follow at @UNDP.  

About UNDP Seoul Policy Centre

UNDP Seoul Policy Centre is a facilitator of innovative development cooperation to catalyse the achievement of the Sustainable Development Goals. Through its SDG Partnerships programme and other South-South and Triangular Cooperation initiatives, the Centre supports countries by sharing innovative, tested-and-proven practices and policy tools on strategic development issues globally. Learn more at undp.org/policy-centre/seoul or follow at @UNDPSPC.

References

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• Mbah, R. E., Hardgrave, C. M., Mbah, D. E., Nutt, A., & Russell, J. G. (2025). The Impact of USAID Budget Cuts on Global Development Initiatives: A Review of Challenges, Responses, and Implications. Advances in Social Sciences Research Journal, 12(04), 219–232. https://doi.org/10.14738/assrj.1204.18681
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• Robele, S., & Krishnan, A. (2022). Reimagining Development in Asia and the Pacific: A Synthesis Report. United Nations Development Programme (UNDP), Regional Bureau for Asia and the Pacific (RBAP).
• Sohel, Md. S. (2025). How USAID Budget Cuts Threaten Global Health System. DIU Journal of Allied Health Sciences, 11(02), 14–16. https://doi.org/10.36481/diujahs.v11i2.nhbvt820