Why the Red Cross’ crisis is causing aid groups to rethink their financing

March 30 was a dark day for the ICRC. It was the day that the governing board in Geneva approved the “difficult decision” to implement a €440 million savings package in a bid to save the 160-year-old aid group’s finances.

“Several end-of-year pledges did not come through at the level we had anticipated,” it said in a statement, adding also that its costs “were higher than anticipated partly because of inflation”. 

Two months later, the details of the cost cuts were made public, and they were nothing short of brutal: the ICRC would slash 1,800 of 20,000 jobs worldwide, and either close or scale down operations in 26 of its 350 locations, including in Mauritania, Malaysia and Greece.

The ICRC’s new president Mirjana Spoljaric, who took office in October, explained that the cuts were necessary because of the group’s expectations that donations will continue to decrease next year.

Internally, the cutbacks were met with outrage, prompting 2,500 staff to sign a letter blasting former ICRC leaders for a “budgetary drift” over the past decade. They accused managers of having tried to make the ICRC grow too fast, pumping massive amounts of money into humanitarian assistance operations to the detriment of its core activity of providing life-saving relief and protection to people living through armed conflict.

Struggling to fill the gap

But the ICRC is hardly the only global aid group that has suffered a drop in donations lately. Last year, the United Nations recorded an unprecedented deficit in its humanitarian operations, having raised just $24 billion out of the $52 billion needed.

Jens Laerke, spokesman for the UN’s Humanitarian Coordinating Agency (OCHA), said that although 2022 had actually been a record year for donations, it was also a record year for funding shortfalls.

“So, the problem is the following: that the needs in the world are rising much, much faster than the donor funding is coming in,” he said.

In France, the trend is much the same. A study by the NGO collective Coordination Sud showed that French funding for international aid groups had soared 43 percent between 2016 and 2020, driven by a 63 percent growth in public donations and a 22 percent rise in private donations. But despite the increase, the donations still come nowhere near to meeting the demand.

“On the one hand, we have ambitious goals for which we are very mobilised, but on the other hand, the crises are multiplying, to which the climate challenge can be added and which is generating enormous needs,” said Valérie Huguenin, deputy head of the civil society organisations unit at the French Development Agency (AFD).

Covid-19 and war in Europe

The world’s aid groups have also been hit hard by two major crises in the past few years and which have crippled them financially: the Covid-19 pandemic and Russia’s invasion of Ukraine.

The war in Ukraine immediately garnered massive western support for Kyiv, but it also made it harder for aid groups to collect funds for other humanitarian crises in the rest of the world, despite their urgency. This has particularly been the case for so-called “long-lasting” crises such as that in Afghanistan, Yemen, Democratic Republic of Congo, Venezuela or Haiti.

“This phenomenon is certainly not new, but it is particularly visible with the war in Ukraine,” said Pierre Micheletti, president of the French NGO Action Against Hunger (ACF). “This conflict on our doorstep is generating a great deal of local solidarity, but it is also taking away some of the generosity shown towards crises further away.”

Politicising donations

In a bid to bridge this gap, many international aid groups rely on donations that are not earmarked for a specific crisis, but which allow the NGOs to respond to what they judge to be the most urgent humanitarian situations.

But according to the ICRC, these kind of funds are becoming more and more difficult to raise.

“The International Committee of the Red Cross is unique in that it is only financed by voluntary contributions from governments,” Frédéric Joli, ICRC’s spokesman in France, explained. “But most governments prefer to allocate their funds directly. This is an issue that is the subject of constant negotiation.”

ACF’s Micheletti said that more than 80 percent of government aid, “which is our main source of funding”, is earmarked before it is used – and it’s becoming a real problem.

“By choosing the causes they want to give to, governments politicise humanitarian action, and encourage a compassion with variable geometry,” he said. “We try to compensate for this with the unrestricted private donations we receive, but we don’t have enough resources.”

A more dangerous world

The war in Ukraine, and the soaring inflation that has come with it, has hit NGOs particularly hard – not only have their own food and energy costs risen, but those of the donors have too, resulting in fewer donations. In 2022, French donations grew just 1 percent, compared with 4 percent in 2021 – not nearly enough to keep up with the costs linked to rising global inflation, which stood at 8.7 percent last year.

The fact that the world has also become a more dangerous place for humanitarian workers in the past few years has also affected aid groups, forcing them to spend more and more to keep their staff safe on the ground.

In 2021, more than 140 humanitarian aid workers were killed in attacks – the highest number in eight years.

An outdated model?

Worried that the current situation of spiralling costs and growing humanitarian needs might continue, the aid group sector is trying to reinvent itself. The political situation in the United States, which is the world’s biggest donor, is a particular cause for concern – as is the potential for a recession due to a stalemate in the war in Ukraine.

For the ICRC, whose donation forecasts for the next two years remain bleak, there was no other choice than to return to its operational basics – “To protect civilians in conflicts and the fate of captured fighters, in accordance with international humanitarian law,” as spokesperson Joli said.

In a bid to avoid the trap that the ICRC fell into, many NGOs are now trying to reduce their dependence on governments and better diversify their funding sources.

Huguenin said the French Development Agency is currently staging an awareness campaign targeting the private sector, particularly French foundations.

“Ninety percent of their humanitarian investments are focused on France,” she said. “This is of course very useful, but we are calling on them to step up their actions outside our borders too.”

ACF’s Micheletti, who has written a book on the need for wealthy countries to finance international humanitarian aid, is also in favour of NGOs reducing their dependence on governments – but he wants a strict framework put in place.

“The problem today is that 80 percent of public funding comes from 10 or so donor countries, with some large countries like China, India and Brazil investing very little,” he said. “To reduce our dependence on these large donors, we need to increase their numbers through compulsory contributions. If the 90 richest countries invested 0.03 percent of their gross national income in humanitarian aid, the gap between the donations and the need would finally be closed.”

“Let’s face it, the humanitarian funding model as we know it today has become almost obsolete,” he said. “The financial crisis currently affecting the ICRC is yet another example of this. We need to rethink the very framework of the system.”

This article has been adapted from the original in French.