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NZAid's payments have become "handouts" and the National Government will look at changing the way it gives out money, Foreign Minister Murray McCully said.
The agency's $480 million budget will not change but Mr McCully has ordered two reviews into NZAid, the New Zealand Herald reported.
He said payments had become a "handout rather than a hand up" and the agency's mandate of "poverty elimination" was too broad.
"You could ride around in a helicopter pushing hundred-dollar notes out the door and call that poverty elimination."
It was too early to say what changes would take place but it may include re-integrating NZAid with the Ministry of Foreign Affairs and Trade, Mr McCully said.
Labour separated the two organisations in 2002.
New Zealand's aid policy would focus more on economic development in the Pacific, in line with other Government policy, Mr McCully said.
Oxfam New Zealand executive director Barry Coates said the move put NZAid at risk of becoming a political tool.
"There are many examples of aid being spent for political purposes rather than the benefit of the country concerned.
"NZAid used to be within the Ministry of Foreign Affairs and Trade and there was a scathing report on the system at that time that was deemed to have considerable failings for the delivery of aid."