Experts have warned that the fight against global poverty has taken a backward step after the publication of new figures showing foreign aid has fallen for a second successive year.

Aid levels dropped last year by 2.7% from 2017, with the poorest countries worst hit, according to figures published by the Organisation for Economic Cooperation and Development (OECD).

Bilateral aid – direct, country-to-country assistance – to the least developed countries fell by 3% in 2018, with support to the African continent down 4% and humanitarian assistance dropping by 8%.

Money from donors, the private sector and foundations, defined by the OECD as external finance, accounts for more than two-thirds of the funding for the world’s least developed countries and so offers a crucial lifeline.

Toni Pearce, Oxfam’s head of advocacy, said: “The overall fall in aid globally is a worrying trend that risks exacerbating poverty and inequality worldwide. Cutting aid to the poorest and most vulnerable countries is a step backwards in the fight to end extreme poverty.

“With refugee numbers at their highest since the second world war, disasters like Cyclone Idai devastating lives, and food crises looming in Yemen and elsewhere, the fall in humanitarian aid is particularly alarming. Vulnerable people across the world rely on this essential lifeline when disaster hits.”

Angel Gurría, the OECD secretary general, also expressed concern: “This picture of stagnating public aid is particularly worrying as it follows data showing that private development flows are also declining. Donor countries are not living up to their 2015 pledge to ramp up development finance, and this bodes badly for us being able to achieve the 2030 sustainable development goals.”

Only five of the 30 development assistance committee (DAC) members met or exceeded the longstanding aid target of 0.7% of gross national income target: Denmark, Luxembourg, Norway, Sweden and the UK. Contributions from donors not currently members of the DAC group were also noted, but not counted within these figures. Turkey and the UAE donated 1.10% and 0.95% of their gross national income.

This year’s numbers reflect new rules and methodology.

Funds spent on processing and hosting refugees no longer count as official development assistance, or ODA, beyond the first year after their arrival. The altered practice has been criticised by groups like Concord, the European confederation of relief and development NGOs, which produces an annual AidWatch report. Aid flows fell in a dozen countries, partly due to fewer refugees arriving. Austria, Finland, Greece, Italy, Japan and Portugal reported the biggest drops.

The figures were previously calculated on a cash flow basis that permitted donors to report loans for their full amount. Only the grant portion of loans will now count.

Susanna Moorehead, the DAC chair, said the revised rules have created “a more accurate and transparent way of measuring donor effort”.

The new rules do not currently apply to donor subsidies to the private sector.

Jan Van de Poel, policy and advocacy manager on aid effectiveness at the European Network on Debt and Development, urged donor countries to agree on robust rules for the private sector to avoid incentivising these subsidies over other types of aid, like grants, which often reap more sustainable results for the poorest and most vulnerable.

Van de Poel said: “Rich countries increasingly use development aid to support the private sector through contentious private sector instruments. Investments through these instruments often prioritise commercial objectives in middle-income countries, leaving behind low-income countries and public service sectors which are not easily turned into profit-making business, like education or healthcare in remote rural areas”.

Claire Godfrey, head of policy and campaigns for Bond, the UK network for NGOs, said: “It’s a travesty that in 2019, so many world leaders are turning their backs on the people stuck at the bottom, leaving them without a way to even escape poverty. Thankfully, the UK isn’t one of those countries, but today’s message is clear – poverty, inequality, climate change and injustice are all set to increase globally unless other political leaders step up to the plate and deliver poverty-focused official development assistance.”

Sara Harcourt, director of development finance policy for the One campaign, said: “Now is the time we should be stepping up, not walking away. We will be watching to see what leaders do at the G7 Summit and the Global Fund replenishment later this year. A first step to righting this course is for leaders to make bold pledges at these meetings.”