Foreign aid, explained

Every year, just over 1% of the United States federal budget is earmarked for foreign aid. It’s a small but important line item, and one that is constantly threatened by cuts. 

With 2024 being an election year, it’s not clear how the next four years will look for foreign aid and development. However, with multiple countries in conflict, the ongoing effects of the COVID-19 pandemic, and increased destruction from the climate crisis, the need for foreign aid will remain high. And, despite the budget for American foreign aid being set each year, each decision made can carry impacts that last for generations. Here’s a quick explainer on how foreign aid works, and why it matters — especially for our work.

1. What is foreign aid? (Hint: It’s not just money.)

Foreign aid refers to anything that one country gives for the benefit of another. Usually, this means high-income countries providing assistance to low- and middle-income countries. 

That does include money. But foreign aid can also be in-kind donations of goods or services. Some of these goods and services include:

• Food aid
• Education supplies and support 
• Healthcare
• Water, sanitation, and hygiene initiatives
• Infrastructure assistance
• Agriculture and climate resilience support
• Peace-building activities

All of these options contribute to the same goal for foreign aid: to maintain a functioning global society. This goal goes back to the program’s roots. The United States’s formal foreign aid program began in 1948 with the Marshall Plan, which supported the reconstruction of Europe after World War II. Financial help was provided, but expertise and supplies were also key elements as countries totaled by war rebuilt themselves.

In 1961, the federal government refined and codified this work as the Foreign Assistance Act. This remains the organizing principle for America’s ongoing policy. 

2. How does foreign aid work?

In the US, there are two major types of foreign aid: About two-thirds of funds are earmarked as economic aid. These funds are managed by the Department of State or an implementing agency — most often USAID (the United States Agency for International Development). That agency awards grants to organizations like Concern for specific projects and initiatives. Economic aid covers a number of sectors and initiatives. USAID specifies the following subsectors: 

• 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. 

The remaining one-third of US foreign aid is classified as military aid, intended to strengthen the military of US allies, or to increase US national security by bolstering foreign counter-terror or anti-narcotic missions. These funds come from the Department of Defense. 

3. Who actually gets foreign aid

A common misconception is that assistance goes directly to foreign governments. This can happen — a form of aid known as bilateral aid. But only about 22% of what the US spends in foreign aid each year goes directly to governments. The majority goes to a combination of multilateral organizations (like the United Nations or World Bank), nonprofits, and other non-governmental organizations (NGOs). 

This is where Concern comes in. With foreign assistance, we can channel American funds to the countries that need it most. Last year, for example, grants from USAID helped fund Concern initiatives in many of the countries where we work, including:

• $1.5 million for an initiative designed to reduce both food and economic insecurity in Burkina Faso for over 31,000 people
• $6.4 million for a multi-sector response supporting pastoralists in Kenya affected by the recent Horn of Africa drought
• $6 million for an emergency response in Türkiye following the devastating February 2023 earthquake

4. Why foreign aid is important

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 aid plays a huge part in this. 

But there are also many more pragmatic and immediate arguments for foreign aid. It helps other countries, but it also helps the United States. The world is more interconnected than ever, and what happens on one side of the globe can now have direct impacts in the US — and vice versa. 

5. The US spends 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% — and that includes military aid. Even if foreign aid was cut completely, it would do very little to reduce the country’s $244 billion federal budget deficit. 

It’s true that, in absolute dollars, the United States gives more to foreign assistance than any other country. However, as a proportion of our gross domestic product, it’s only 0.15%. Adjusted for income, this places us at 26 out of 39 on the Center for Global Development’s Commitment to Development Index.

How Concern uses foreign aid

USAID is currently funding Concern's work in ten countries around the world. 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 humanitarian aid and development aid from the US government. Check out the project profiles below for some of those initiatives in action. Support Concern's work