Iceland’s official development assistance (ODA) comprises a small proportion of DAC members’ total bilateral development co-operation funding. Yet Iceland stands out for its high share of ODA allocated to the world’s poorest countries, much of which is spent in fragile states. In the wake of its severe economic and banking system crisis, Iceland has abandoned ambitions to dramatically scale-up its development co-operation, with ODA levels now expected to stabilise at around 0.26% of gross national income over the next five years. However, the government’s new five-year budget framework for development co-operation can help to support a gradual and sustained increase of Iceland’s ODA in line with its future economic growth, as well as to improve predictability for its partners.