Rethinking development cooperation: The case for a 'balance sheet' approach

Many conversations about development for focus on aid: how much, from whom, and for how long. But aid has never been more than a small part of what pays for a country's development, and in 2025 it fell by 23.1%. 

The need to rethink our attitude to development has inspired the Future of Development Cooperation Coalition (FDCC). In this week's episode, Alexia Latortue and Radha Rajkotia of FDCC talk to Tim Phillips about its first report,. The report assesses the development challenges of LMICs using a balance sheet approach, with assets on one side and liabilities on the other. Tax revenue, remittances, pension and sovereign wealth funds, trade, natural resources and the skills of the population sit on the asset side. Unsustainable debt, illicit financial flows, poor credit ratings, weak institutions, climate exposure and conflict sit on the other.

The idea? Each country focuses on the policies to develop their most important assets, and minimise their most problematic liabilities. They argue that governments and donors alike should stop thinking of developing countries as recipients of aid, and start thinking of them as partners in economic development.

The research behind this episode:

Future of Development Cooperation Coalition. 2026. "The Development Balance Sheet: Rethinking Development Cooperation from the Ground Up." Published 20 May 2026. Research team: Radha Rajkotia, John Norris and Mma Amara Ekeruche.

To cite this episode:

Phillips, Tim, Alexia Latortue, and Radha Rajkotia. 2026. "Rethinking development cooperation: The case for a 'balance sheet' approach." VoxDev Talks (podcast). 

About the guests

Alexia Latortue is Head of Secretariat of the Future of Development Cooperation Coalition and a Distinguished Non-Resident Fellow at the Center for Global Development. She served as Assistant Secretary for International Trade and Development at the US Treasury, where she led work on reforming the multilateral development banks and on using public finance to pull private capital into emerging markets. She was previously Deputy CEO and Managing Director for Corporate Strategy at the Millennium Challenge Corporation, sat on the Executive Committee of the European Bank for Reconstruction and Development, and spent ten years at the World Bank working on financial inclusion, ending as Deputy CEO of CGAP.

Radha Rajkotia is Director of Research at the Future of Development Cooperation Coalition and lead researcher on this report. She was Chief Executive Officer of Building Markets and, before that, Chief Research and Policy Officer at Innovations for Poverty Action, running its strategy across 22 countries. She spent eleven years leading the economic recovery and development unit at the International Rescue Committee, on work spanning cash-based relief and job creation in conflict settings. She holds a PhD in Refugee Studies from the University of Sussex, is a Senior Policy Fellow at the Henry Leir Institute at Tufts University, and teaches at Georgetown.

Research cited in this episode

The balance sheet approach. The report sets out assets and liabilities but argues that neither is a checklist. Some entries are country-specific, such as natural resource endowments or exposure to climate risk. Others are structural, such as a sovereign credit rating, which constrains or enables progress regardless of what a government does at home. The point of the exercise is situational awareness before prioritisation, not a universal to-do list.

The 30 national development strategies. The research team reviewed the current development strategies of 30 countries across Africa, Asia and Latin America. All 30 prioritise economic transformation and human capital. Governance appears as a stand-alone pillar in two-thirds of them. Inequality is a defining element in almost every Latin American strategy and largely absent as an explicit constraint in Africa and Asia. Most countries frame technology as digital economy rather than as AI governance or chip access, which the report reads as a widening sophistication gap.

Nigeria and Ethiopia. The report's worked comparison. Ethiopia attracts more than three times Nigeria's foreign direct investment despite being roughly 100 million people smaller. Nigeria has strong tax revenues, considerable pension fund assets, a heavy debt servicing burden and large losses to illicit financial flows. Ethiopia has a narrow tax base and weak compliance, suffers far less from illicit flows, carries a lighter debt service burden and is nonetheless in debt distress.

Debt as both asset and liability. Low-income countries spend 18% of government revenue on average servicing foreign debt. Angola, Laos, Bhutan, Pakistan, Egypt, Sudan, the Bahamas, Tunisia, Zambia, Benin and Senegal each spent more than 30% of tax revenues on debt servicing in 2024. As of 2026, 27 countries face a high risk of debt distress and nine are already in it, the majority of them in Africa. Latortue argues that the problem is the price, tenor and currency of debt rather than debt itself, and that restructuring machinery built around the Paris Club has not kept up with a creditor base that now includes China, Gulf states and a large body of commercial lenders.

Credit ratings. Only eight countries across Latin America and Africa hold an investment-grade rating from Moody's, Fitch or S&P. They are Chile, Mexico, Panama, Paraguay, Peru, Uruguay, Botswana and Mauritius. A UNDP analysis cited in the report estimates that flawed ratings have cost African countries as much as $74.5 billion in excess interest and foregone investment, more than the continent's entire net receipt of official development assistance. The African Union is launching its own credit rating agency in 2026.

South-South trade. UNCTAD figures in the report put South-South merchandise exports at about $0.5 trillion in 1995 and $6.8 trillion in 2025. Some 57% of developing-country exports now go to other developing markets. Rajkotia points to the Africa Continental Free Trade Area and to Mercosur as existing infrastructure that could support production integration rather than trade agreements alone.

Demographics. Africa's working-age population is expected to double by 2050, which the report treats as an asset conditional on policy. By 2050 only 26% of the world's population is projected to live in Europe, North America and China, falling to 18% by 2100.

Domestic capital in Africa. Latortue cites more than $4 trillion of assets held across the African continent, a figure that combines central bank reserves, commercial bank assets, institutional investors, sovereign wealth funds, pensions and insurance. Her argument is that moving even a small share of it into productive investment would outweigh anything aid can now do. The report notes that Ghana mandated 5% of its pension fund for venture capital in 2025 and that Mexico legislated for an allowance of up to 30%.

Conflict. The one item Latortue places firmly on one side of the ledger. She counts at least 60 live conflicts worldwide. The Peace Research Institute Oslo recorded more conflicts in 2024 than at any point since the Second World War, and more than half of all conflict-affected states now face at least two separate internal conflicts. Development work has a role in keeping the real economy going, she says, but the solutions are political.

More VoxDev Talks episodes

The end of aid dependency. W. Gyude Moore argues that the contraction in aid is structural and that governments should use growth diagnostics to decide which offers of assistance to accept and which to turn down. The closest companion piece to this episode.

Ethiopia's economy: Mamo Mihretu on economic reform and the macroeconomic foundations of growth. The other half of the report's Nigeria and Ethiopia comparison, told by the person who ran the reforms.

Why civil service reform fails and what actually works. Martin Williams on the execution gap that this report identifies as a liability in its own right.

Related reading on VoxDev

Taxation in LMICs, a VoxDevLit edited by Anders Jensen, Anne Brockmeyer and Lucie Gadenne, reviews the evidence on why governments in low- and middle-income countries collect so much less of national income than their richer counterparts.