Blended finance and the illusion of development: Lessons from the EFSD+ for the next EU budget
This report by ActionAid, CONCORD and Eurodad warns that proposals for the next Global Europe Instrument in the MFF (2028–2034) risk weakening the EU’s development mandate by prioritising investment-led approaches over poverty reduction and inequalities. Drawing on lessons from the current EFSD+, it calls on the European Parliament and Council to safeguard grant-based funding, strengthen oversight of blended finance and guarantees, and uphold the EU’s development effectiveness commitments.
Proposals for the Global Europe Instrument (GEI) – the European Union (EU)’s main vehicle for external action under the 2028–2034 Multiannual Financial Framework (MFF) – carry grave implications for international development.
Rather than reinforcing its mandate to reduce poverty and tackle inequalities, the proposed framework risks accelerating a shift towards investment-driven approaches and prioritising the EU’s geopolitical and economic self-interest.
Over recent decades, the EU has gradually shifted away from delivering Official Development Assistance (ODA, or aid) in the form of grants and budget support to partner countries in the Global South – approaches that have historically delivered significant development impact. In their place, the EU has increasingly relied on financial instruments designed to attract private investments by transferring part of the risk onto public budgets, such as blended finance and budgetary guarantees.
This report examines the performance of the European Fund for Sustainable Development Plus (EFSD+) – the current budget’s investment framework. Drawing lessons from the EFSD+ is critical when it comes to informing discussions about the next EU budget as well as shaping regulation of the GEI.
The findings highlight the limited evidence that an increasing reliance on private finance actually delivers meaningful outcomes for sustainable development. The report urges EU politicians and officials to reconsider their current trajectory in light of evidence about what actually works.
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