Doing more with less: Why foreign aid should prioritise foundational learning now

The role of Overseas Development Assistance (ODA) is being contested worldwide, including in the US and the UK, among other countries. Two key questions have emerged: First, is foreign aid worth the cost? Second, what role should foreign aid play given shrinking budgets?

We argue that foreign aid has a continued and critical role to play and highlight a few specific and highly leveraged roles for foreign aid.

First, foreign aid should prioritise high-return sectors, such as education, with a focus on foundational literacy and numeracy skills. We argue, based on new modelling, that the returns to investing in one year of foundational learning programmes are large – up to $164 billion in future earnings. These returns have mutual economic benefits, helping developing countries prosper while providing robust opportunities for economic trade for higher income countries. Moreover, short-term foreign aid, when invested well, reduces long-term dependency on aid in the future – a high-level goal set out by both governments receiving aid as well as development agencies. Countries become less dependent on aid when they themselves grow more economically. Since smart investments in education yield hundreds of billions in lifetime earnings, this directly reduces aid dependency in the future. Investing in education also has the advantage of being a highly inclusive path to growth. Alternative paths to improving growth often include less inclusive routes. For example, investments in natural resource industries may increase growth but not reduce aid dependency because they enrich some while exacerbating inequality, rendering the future call for aid just as strong.

Second, foreign aid should prioritise working with national governments to leverage domestic financing – always and especially now the largest source of funding for education – to invest in evidence-based approaches in education, where there is now a well-established understanding of ‘what works.’ Moreover, technical assistance to national governments to implement these approaches effectively is a highly leveraged way to generate long-lasting returns, with cascading benefits across multiple sectors.

The returns to education are large and cross-sectoral. Education, and specifically foundational numeracy and literacy skills, are a key driver of economic outcomes (Kaffenberger et al. 2025). At the national level, a one standard deviation increase in test scores is associated with a 2 percentage point increase in the GDP growth rate (Hanushek and Woessmann 2012). At the individual level, a one standard deviation increase in test scores has been linked to 15% increases in earnings (Chua 2017).

Learning also contributes to other important outcomes, such as youth unemployment (Lee and Newhouse 2011) and improved health outcomes. Child mortality declines with education: women who complete primary school and learn to read are 67% less likely to experience the death of a child (Kaffenberger and Pritchett 2021).

How foreign aid cuts to foundational learning programmes will dramatically impact earnings

We estimate the potential lost earnings from education investments drawing on a recent and concrete example: the closure of USAID foundational learning programmes. USAID was a key funder of global education programmes, particularly those focused on foundational learning. USAID funded groundbreaking work on early grade reading programmes as well literacy and numeracy assessments. These programmes, often referred to as ‘structured pedagogy’ programmes, are among the most effective and evidence-backed means for improving learning in low- and middle-income countries (Angrist et al. 2023). With the sudden closure of nearly all USAID programmes, including foundational learning programmes, much stands to be lost.

To estimate potential losses from USAID education spending cuts, we use data on actual USAID spending in 2024. USAID spending on all primary education programmes in 2024 was $680 million. We assume 50% of that went to structured pedagogy programmes, which a recent review found produce 3 learning-adjusted years of schooling per $100 on average (Angrist et al., 2023). This implies a total loss of approximately 10,200,000 learning adjusted years of schooling from one year of lost USAID spend.

We assume one learning adjusted year of schooling is associated with a 10% wage return based on the returns to education literature. Using average income for low- and middle-income countries of $2,831, we arrive at an annual estimate of $2.9 billion lost from impacted children’s future earnings. Multiplied by children’s likely working years over their adult lifetime of 45 years, that estimate increases to over $130 billion in lost earnings.

To estimate a lower bound, we run the estimates again with a more conservative figure for learning produced when looking at a broader range of USAID programmes (Sandefur et al. 2023). These estimates suggest a total loss of 9,187,500 learning adjusted years of schooling from USAID cuts to structured pedagogy programmes. That results in $2.6 billion lost per year in future earnings, and $117 billion in lost lifetime earnings from one cohort of affected children. These potential losses are enormous. As a reference point, Uganda’s GDP in 2024 totaled $64 billion and Liberia’s totaled $5.2 billion.

While the USAID cuts are currently the most severe among funders, they come at a time when many major funders are cutting back. The UK government recently announced a 40% reduction in ODA by 2027. France and the Netherlands are also reducing development aid. New estimates from UNICEF suggest that over $856 million for primary education of ODA is at stake by 2026 across several donor countries (UNICEF 2025). Applying the same model, we estimate the potential lost lifetime earnings from this broader set of ODA cuts to education at $164 billion. For each year that ODA does not fund effective education programmes, these lost earnings will be repeated for a new cohort of children who would have benefited.

Not all hope is lost – the way forward

What should be done in the face of funding cuts and potential lost impact? We offer four actions.

First, with the development assistance that remains, funding for education, and particularly for foundational learning, should be a priority given the enormous potential short-term and long-run returns. This also means prioritising and partnering with countries where domestic budget decisions focus on foundational learning, and where other key actors, such as the World Bank and the Global Partnership for Education are prioritising foundational learning. These investments can result in large gains in earnings and economic growth, as shown by our estimates. Because education has positive implications for health and employment outcomes, investing in education also contributes to other parts of society and multiple national development goals. And smart investments now in foundational learning can boost long-run incomes in low and middle-income countries, reducing aid dependency in the future.

Second, there should be a focus on funding evidence-based approaches that we know can improve learning. Structured pedagogy programmes, like those we model here, have been shown to have large impacts on children’s foundational learning. Remedial approaches like teaching at the right level are another proven way to help children catch up on skills they didn’t learn in the early primary school years. A menu of cost-effective, evidence-backed approaches has been set out by the Global Education Evidence Advisory Panel.

Third, there is need for more research and innovation on quality implementation. By increasing programmes’ fidelity of implementation, when teachers are trained in a new approach more of them carry it through into their classroom instruction. This increases the returns for a given level of education investment. Better implementation also includes identifying low-cost ways to provide needed materials, teacher training, and ongoing support.  The What Works Hub for Global Education is curating a set of resources on research in this area and welcoming more contributions.

Fourth, and most crucially, we must leverage and double down on support to local governments and actors. While ODA has reduced, the remaining ODA that is left should be used to support governments who are and have always been the largest funders of education. Remaining ODA can be used to provide technical assistance to governments to prioritise and implement known effective approaches to foundational learning. Embedding evidence-backed, well-implemented approaches deeply in government systems is a recipe for sustainable improvements to education systems.

These are more than just ideas – multiple governments are taking action, focusing on foundational learning, evidence-based programs, implementation fidelity, and harnessing domestic finance. In India a national mission (‘NIPUN Bharat’) prioritises foundational learning. Efforts to scale-up evidence-based structured pedagogy programmes by the government in Uttar Pradesh, with leveraged technical assistance from partners, have shown historic state-wide learning gains. In Pakistan, the government in Khyber Pakhtunkhwa province recently announced a scale up of an evidence-based targeted instruction programme to over 100,000 teachers. In sub-Saharan Africa, several countries have launched ‘End Learning Poverty’ campaigns and government-led scale-ups of targeted instruction and structured pedagogy programmes are underway, supported by light and leveraged technical partnerships, in Botswana, Cote D’Ivoire, Ghana, Malawi, Madagascar, Namibia, Niger, Nigeria, Senegal, South Africa, and Zambia, among other countries. These efforts are the way of the future. Foreign aid has a leveraged role to play – a little, when spent well, really can go a long way.

This article is also available on VoxDev.