The New Politics of Aid Allocation

When the Tidö Agreement was forged last year, cementing the common policy platform for the incumbent Swedish Government along with the Sweden Democrats (SD), several provisions were included that were to bring significant changes to the already shifting landscape of Swedish development assistance. Among the promised measures, the Government pledged to make certain aid conditional on recipient countries taking responsibility for returned asylum-seekers. The Government made clear in its Statement of Policy last year that aid spending would no longer be linked to gross national income (GNI), following many years of an official target of 1% of GNI to be spent on development assistance. The policy change was also to accompany how the aid budget would be spent, including redirecting funds from international organisations to civil society groups, increasing support for Ukraine specifically, and refocusing thematic priorities on humanitarian aid, poverty reduction, public health, democracy promotion, ‘streamlined’ climate assistance, and women’s and girl’s rights. As we wrote in last December’s issue of the Monthly Policy Review, the changes appeared to constitute a stark change of course in Swedish aid policy that created uncertainty for recipient countries and Swedish stakeholders alike. We also noted that it created tension in the Government with the Liberals (L) and the Christian Democrats (KD) having been traditional standard-bearers of the 1% target and relatively generous spending on development cooperation. We argued at the time that the policy, however, remained ambiguous regarding actual plans for implementation and that some of the Government’s priorities were self-contradictory. Moreover, these changes came after other changes had already been implemented by the Social Democrats (S), who had redirected much of the aid budget towards refugee resettlement – increasingly so after the 2022 Russian invasion of Ukraine, as we discussed in the May 2022 edition of the Monthly Policy Review.

The Government elaborated somewhat on its plans on aid spending in a statement released in February, describing its approach as “focused, relevant, efficient, and transparent.” Indeed, the key priorities matched those enumerated in the October Statement of Government Policy, including, for example, an increased focus on Ukraine, democracy promotion, and streamlining climate aid. Details, however, remained somewhat nebulous. For example, the Government stated that it would focus on climate adaptation finance, countering all forms of sexual and gender-related violence, and leveraging international trade and the private sector in poverty reduction programmes. But little information was provided on what these priorities would mean in practice or how exactly spending would be allocated – or indeed, which programmes would have to be cut or deprioritised to make space for new areas as the overall aid budget was slashed in both absolute and real terms.

A focus on trade and investment has been identified as a key theme in the Government’s approach to aid, although the specific policies to implement this approach are only just emerging. The Government appears to be actively courting the private sector for greater engagement in its development cooperation agenda. The Minister for International Development Cooperation and Foreign Trade, Johan Forssell (M), said in April that the Government wanted to link trade with aid to the specific benefit of Swedish business. He told Dagens industri that the Government planned for an “historic change” in development assistance spending that should lead to job creation in Sweden as well. Forssell told the Swedish Development Forum at Almedalen last month that, in the past, Sweden had maintained an antiquated distinction between trade and aid, with the former offering the chance at wealth creation and not solely poverty reduction. “Wherever I go in the world, representatives of governments say basically that ‘aid is good, but what we want above all is investment… so we can create our own future,” claimed Forssell. Forssell spoke to an audience of large Swedish firms in June, telling them that aid and trade were “two sides of the same coin” that should “also benefit Sweden.” Forssell’s key message is, according to DN, not only about creating wealth for Swedish firms and entrepreneurs, but also a focus on “synergies”, such as linking Swedish foreign direct investment with electrification in low- and middle-income countries to generate economic growth while lowering emissions and reducing poverty.

Aid in figures

Following change in policy after S lost the election last autumn, 2022 will be the last year (at least until another change in policy) that the aid budget matches 1% of GNI. Thus, the budget in 2022 was approximately SEK 57 billion, while in 2023 it was only SEK 56 billion despite economic growth and inflation. Of this sum, SEK 47.2 billion goes to international spending. SEK 4.2 billion is allocated to receiving asylum seekers domestically, and SEK 3.4 billion contributes to the European Union’s (EU) collective aid budget. The Swedish International Development Cooperation Agency (Sida) controls SEK 25.2 billion of the budget in 2022, of which SEK 1.6 billion is spent on personnel and administration. Forssell has stated that the approximately SEK 35 billion he considers to be spent on ‘development cooperation’ should be linked explicitly to trade, while the approximately SEK 9 billion classified as humanitarian aid should continue to be distributed based on need related to crisis or disaster.

While final figures for 2023 are not yet available, Sida reports on the amount spent by thematic area per year. Looking at the most recent report from 2022, it was already clear under the previous Government that priorities were shifting as funding was reallocated between thematic areas amidst overall cuts to international spending and redirection of funds towards, e.g., asylum-seeker reception. Human rights, democracy, and rule of law spending declined from SEK 6.2 billion and 24% of Sida’s overall budget in 2020 to SEK 5,347 million and 22% of Sida’s budget in 2022. Humanitarian aid, however, increased from SEK 4.5 billion at 17% in 2020 to SEK 5 billion and 21% in 2022. Climate spending also steadily increased, while spending on research, migration, education, gender equality, and public health remained relatively steady in terms of the percentage of the overall budget, even as research declined by several hundred million SEK over the period.

Aid allocation and academia

Now that the Kristersson administration has held power for close to a year, aid policy is becoming clearer and more concrete following the spring amendment budget’s adoption in June. Two significant developments have taken place in the past month that illustrate the Government’s shifting priorities: cuts in general, especially to research funding, and increased spending on Ukraine. On the first point came a surprise announcement in late June that the Government was withdrawing the entirety of the Swedish Research Council’s (Sw. Vetenskapsrådet) funding for development studies research focused on poverty alleviation and sustainable development in low-income countries. The decision affected not only forthcoming funding calls, but also a call that had recently closed and for which applications were already being reviewed by expert panels. Researchers who had submitted applications prior to the deadline received emails announcing that all pending applications were annulled with no further explanation. The decision was apparently made the day before Midsummer Eve, the most significant national holiday in the Swedish calendar, when the vast majority of the country is not working or, indeed, following news updates. The decision was signed by the Minister for Foreign Affairs, Tobias Billström (M), and did not elaborate on the reasons why all research funding for development studies was to be cut, including the ongoing call. The Swedish Research Council had financed grants specifically designated for development research since 2013 (thus initiated under a previous Moderate (M) Government) with funds coming from the aid budget. It previously received an annual budget of SEK 180 million to allocate for development research, and approximately 250 researchers were affected by the decision to cancel the review of existing applications. According to emails seen by DN, even Swedish Research Council staff did not receive detailed information and did not know about the decision in advance.

Speaking from Almedalen, Forssell provided an explanation for the cuts to research funding by saying: “The background is that we have a war in Europe with enormous humanitarian needs in Ukraine and great need to also rebuild Ukraine, which we will be doing for many years. So, we have to change aid.” Forssell stated that the Government “absolutely does not” object to research on poverty alleviation and sustainable development in general, but that the money for such research should not come from the aid budget, especially considering almost SEK 500 million remains in Sida’s separate research budget. Forssell also denied that the reverse in policy was a concession to SD, saying that it was part of M’s strategy to make aid spending “more efficient” for the Swedish taxpayer. Although researchers were told their applications were cancelled after spending, in many cases, months working on them without any notice or explanation, Forssell stated that the Government was not acting abruptly and was “phasing this out in a responsible way” as part of a broad reform agenda. He further denied that the scrapping of spending on development studies research was a political affront to academic freedom, saying that he had not steered the direction of research but, “On the other hand, politicians have a responsibility to prioritise which areas to focus on the most.” The Ministry for Foreign Affairs later responded to an inquiry from Global Bar Magazine stating that the decision to cut funding was “necessary” as they were required to make “difficult trade-offs.” The MFA also noted that researchers in development studies were welcome to submit funding applications under general research funding calls that were not specifically ring fenced for development research.

More money for Ukraine

Another signal that the Government is beginning to clarify and elaborate its revamped aid policy came with the announcement on 17 July of a new aid strategy for Ukraine. As pledged, increased funding for Ukraine will be a core priority for this Government. The plan, presented by Forssell, covers the period 2023-2027 and totals SEK 6 billion – the largest bilateral aid strategy Sweden has ever announced. “Support for Ukraine is one of our most important priorities, and this strategy is a central part of it,” said Forssell at the launch. He also stated that it must contribute to the larger goal of EU integration for Ukraine. The strategy is part of Sweden’s wider package of support for Ukraine, which includes other types of assistance, and now stands alone from its previous incorporation into a broad strategy for Eastern Europe without reducing the previous funding commitment for the whole region. The funds are split between Sida, the Swedish Institute, and the Folke Bernadotte Academy. The new strategy is centred around five areas of support: construction, especially on socially important infrastructure, basic community services, and rehabilitation; the green transition and sustainable development; inclusive economic development and entrepreneurship, and trade; security and stabilisation; and human rights, democracy, and principles of the rule of law and gender equality.

Criticism and controversy

Cuts to research funding were met with some of the sharpest criticism for the Government on the question of aid spending so far – although much of this criticism pertained more specifically to the question of academic freedom and relations with the university sector. Stefan Swartling Peterson, a Professor at Karolinska Institute and Health Expert at UNICEF, called Forssell “disrespectful” of researchers and “arrogant.” Hans Adolfsson, Vice-Chancellor of Umeå University, stated that the decision ruined the foundations for established international research collaborations and came without any consultation with universities, as would normally have occurred in Swedish policymaking. The decision also attracted criticism from Hans Ellegren, the Permanent Secretary of the Royal Swedish Academy of Sciences, who stated that while the Government was legally free to decide as it wished, they were running over both their own expert authorities and the research community. Many academics went further, arguing that the decision would not only have devastating consequences for impoverished people in low-income countries who could not benefit from the research, but that it was an assault on academic freedom. “The very best way to control research from a political point of view is through funding,” said Shirin Ahlbäck Öberg, Professor of Political Science, to DN. “So it goes without saying that this is a political control of research.” Ida Östenberg, Professor of Ancient Culture and Social Life, wrote in DN that the decision reduced the entire academy’s trust in the Government, as it was a capitulation to SD, who want to “stifle Swedish involvement outside the local area,” including through research engagement. More than 600 Swedish researchers have co-signed a protest statement against the decision for what it does to development assistance, as well as to academic freedom and Sweden’s international reputation for world-leading research. The decision also led to an editorial in Flamman that argued that cutting development research was part of a broader assault on Swedish humanitarianism, making sustainable foreign policy impossible. Björn Lundberg, a historian at Lund University, wrote that it made little sense as the Government was cutting funding for precisely the area of work that contributes to understanding and augmenting the effectiveness of aid spending.

Increased support for Ukraine is generally less controversial than cutting funds for researchers. Linnea Dubois wrote in Svenska Dagbladet that the policy is sound and should be directed towards promoting Ukrainian independence in the long run. Certainly, support for Ukraine has significant support across the Government and broadly across all of the Riksdag. Three liberals writing in Expressen on the eve of the announcement of a new strategy for Ukraine wrote that EU Member States should even go further in spending frozen Russian assets on Ukrainian reconstruction. Other Swedish aid experts have cautioned, however, that overall funding for the very poorest countries is decreasing even as aid for Ukraine increases, partially because other countries are following Sweden and redirecting aid spending to refugee reception, which was not necessarily considered part of development assistance in the past. Forssell has countered these criticisms by stating only that “Sweden is still a very large aid donor.”

Both the praise and the criticism for these more visible changes in aid spending and policy framing over the past month come amidst a wider debate on the merits of the Government’s approach to aid policy. An editorial in Göteborgs-Posten argued that it made sense to decouple aid spending from GNI in part because it led to unpredictability in budget planning, with increases by several billion SEK in certain years that led to organisations struggling to find ways to spend money they did not need. They also defended the Government’s decision to frame trade and aid as intertwined. Other critics have been especially vocal in speaking out against the Government over the past month as the budget came to light and aid priorities were reshuffled and more fully fleshed out. The DN editorial board wrote in mid-July that the Government was pitting international development assistance and Swedish interests against each other. They called on L and KD to take a more active role in the Government’s negotiations over the aid goal given their prior support for the goal of spending 1% of GNI. DN writes that the Government and SD had the wrong priorities and were leading Sweden to “abandon” its international commitments. Moreover, DN called the Government’s new aid policies “unstrategic” given the increasing influence of China and Russia in developing countries and the implications for Swedish national security. They also criticised the Government for claiming to focus on aid efficiency while cutting funding for research which is primarily specialised in assessing aid efficiency. Global Bar Magazine, meanwhile, published an article from Fredrik Söderbaum, Professor of Peace and Development Research at the University of Gothenburg, claiming that Swedish aid is now “in free fall” because of overall cuts to spending and, especially, the abrupt decision to cut funding for all development research.

Mundus comment

Clearly, a shift in Swedish aid policy has occurred. There is no doubt that the Government has significantly cut spending and accelerated a trend of redirecting funds to areas such as refugee reception rather than international spending. Yet, not everything that is “new” about the Government’s policies is so novel in practice. While Forssell plays up the importance of synergies in sustainable development, synergies are in fact the key logic of the United Nations 2030 Agenda and Sustainable Development Goals, which have broad international support and were heavily promoted by the previous S-led Government, not least by hosting the Stockholm+50 environmental conference in 2022 focused on progress towards achieving the SDGs. The SDGs, which include targets on electrification, climate action, and poverty alleviation, are “integrated and indivisible,” a fact that has long been recognised by Sweden. Nor is increased funding for Ukraine particularly novel. While the funds will surely be welcomed by Ukraine, Sweden was already committed to spending SEK 4 billion on development assistance and SEK 17 billion on military aid – a substantial increase to SEK 6 billion on development, to be sure, but the previous commitment was hardly a paltry sum in comparison. 

What might be considered new in Forssell’s priority areas is actually his strong emphasis on the role of the private sector. But business has long played a large role in Swedish development policy – and indeed in the 2030 Agenda and related initiatives. According to the Government, the private sector now takes centre-stage in Swedish policy planning, but they have not actually laid out what this means substantively or how it will deviate from the last administration’s policy. As DN noted, “business being involved in the fight against poverty is really nothing new. The state company Swedfund and the aid agency Sida’s business network are two examples where aid and trade have gone hand in hand. But now the collaboration is meant to be taken to a new level.” A new or expanded role for the private sector could in principle be a means of reinvigorating Swedish development assistance that enhances the efficiency of aid and opens new markets to Swedish business or provides new products for Swedish consumers. But if the Government plans for those things to happen, it has yet to spell out how this initiative will differ substantively from previous efforts under past administrations. What is new, and perhaps most surprising, in the aid policy shakeup is the Government’s decision to axe funding for development research. The move may not be particularly surprising to those who have long suspected that M would cave to SD demands to cut aid overall and to SD’s perceived disdain for academia. But it is highly unusual for any government to cut funding for an application cycle already in progress, as tax money has already been spent on the salaries of researchers who spent long hours writing up those applications that will now not be read or considered. At the very least, we might have expected the Government to give the Swedish Research Council a greater notice period that did not cancel an ongoing award process. Furthermore, it is indeed notable that the Government claims to prioritise efficiency when it has now removed all funding for a key source of information on how development assistance can be rendered more efficient. At the same time, the impact of such research on administrative practices is not so easy to assess. The impact on development outcomes will be similarly difficult to assess, but there is likely to be significant harm to the trust between the academic community and the incumbent government for some time to come.

So far, the obvious political cleavages within the Government do not seem to be split open by cuts or changes in aid spending. L has long focused on funding university research more lavishly than many parties – so in addition to being a proponent of aid spending generally, L could be expected to be particularly provoked by cuts to development research funding. KD is also a former champion of the 1% goal and ought to be disappointed by the realisation of the decoupling of income and spending. At the same time, both parties were well aware of what they were signing up to when they joined in the Tidö Agreement last autumn. The cuts to aid spending cannot be a source of significant surprise for them at this point, although the areas that bear the brunt of cuts may be more provocative. In the long run, we would expect L to push for a restoration of funding for development research, but we do not expect this to evolve into significant internal conflict within the Government precisely because so little has been made of the issue to date. On the other side of the aisle, the entire matter could provide fodder for the opposition’s campaign cannons. S can now credibly claim that the Government has damaged the academic community, which surely helps S with its growing, university-educated middle class base, as it is a party more traditionally associated with working class voters. At the same time, S may need to show that it too supports high spending on Ukraine, which is popular with the Swedish public.