Southeast Asia faces over $2 billion drop in foreign aid in 2026
Foreign assistance to Southeast Asia is projected to decline by more than $2 billion next year, falling from $29 billion in 2023 to $26.5 billion in 2026, according to a report by the Sydney-based Lowy Institute. This reduction comes as Western governments, especially in Europe, the UK, and the US, redirect development funding toward increased defence spending amid global security concerns, notably due to Russia’s war in Ukraine.
Bilateral aid is expected to drop 20%, with the poorest Southeast Asian nations, such as Cambodia, Myanmar, Laos, and East Timor, most vulnerable to cuts, particularly in health, education, and civil society sectors, News.Az reports, citing foreign media.
China’s role in the region’s development finance is growing, with Chinese overseas development assistance rebounding to $4.9 billion in 2023, mainly focused on infrastructure projects. However, China’s commercial loans favor middle- and high-income countries, offering less support for the poorest.
Japan and South Korea are expanding aid beyond infrastructure into governance and social projects, yet they face similar pressures to increase defence budgets, which may limit their ability to fill the funding gaps.
Experts warn Southeast Asia risks fewer alternatives for development funding as Western aid contracts and regional powers adjust priorities toward national security.
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