Consequences and Implications for the International Development Assistance Sector from the Closure of USAID
Simon Fraser acknowledges the great contribution USAID has made in worldwide development assistance promoting health, education and good governance and combating disease and poverty. With the recent Trump administration closure of USAID and cancelling 90% of USAID contracts, the ramifications will be substantial and felt throughout the developing world. Their absence also threatens a substantial shift in geopolitical dynamics as other nations may step in to fill this vacuum and gain regional leverage.
According to the Organisation for Economic Co-operation and Development (OECD), in 2023 the United States of America, largely via the United States Agency for Development (USAID), provided 28% (US$64 billion) of the US$223 billion in official development assistance (ODA) provided by governments around the world.
Given that, the US Administration’s recent decision to dismantle USAID sent shockwaves through the international donor sector. The ramifications will be profound and affect the global development landscape, international diplomatic relations, the operational capacity of countless humanitarian and local organisations and non-government organisations (NGOs) and opens the door for other countries to fill the void.
Here, the focus is on the potential implications of the significant closure of USAID’s programs on global development efforts, humanitarian assistance and geopolitical stability.
The Role of USAID in Global Development
Development assistance personnel generally agree that international humanitarian assistance is essentially based on US benevolence. So, the sudden end of that system has triggered an existential development crisis.
It is vital that we understand the huge contribution USAID has to date made to global development. It has been a leading provider for projects combatting poverty, disease and environmental degradation. Initiatives have included disaster relief, education, economic development and health interventions such as HIV/AIDS prevention, water and sanitation and maternal health initiatives. Additionally, USAID projects have fostered democratic governance, institutional strengthening and promoted human rights.
The agency had worked in over one hundred countries with local governments, NGOs and international agencies. USAID’s funding has also been critical for multilateral institutions including the United Nations and the World Bank (although it is noted that the US is $1.5 billion in arrears to the United Nations).
The impact of these USAID funding cuts can be categorised into immediate consequences, longer term implications and impacts on NGOs and civil society.
(I) Immediate Consequences of USAID’s Closure
A. Disruption to Humanitarian Assistance Programs
One immediate consequence is the disruption to life-saving humanitarian assistance programs. USAID has been a key player in responses to famine, natural disasters and other conflicts, providing emergency food assistance, medical supplies, and infrastructure support to countries affected by war and environmental catastrophes. Some cuts have seriously disrupted USAID-funded HIV/AIDS treatment through PEPFAR (President’s Emergency Plan for AIDS Relief) which has supported over twenty million people globally. PEPFAR saved lives, prevented millions of HIV infections, and helped several countries achieve HIV epidemic control and significantly strengthen global security.
Without USAID, the capacity to respond swiftly to crises is severely diminished. Organisations like the World Food Programme (WFP) and the United Nations Children’s Fund (UNICEF) have relied heavily on USAID funding to sustain critical operations in regions like sub-Saharan Africa, the Middle East and South Asia. This massive reduction in funding will exacerbate food insecurity, health crises and humanitarian displacement, bringing increased suffering to vulnerable communities.
For example, the halt in funding for Syria’s Al-Hawl refugee camp has disrupted water and sanitation services and security, increasing health and safety risks for over 40,000 residents. In northern Thailand’s remote provinces along the Myanmar border, USAID funding channelled through the International Rescue Committee had until now supported over 100,000 Myanmar refugees in nine refugee camps in Tak, Mae Hong Son, Ratchaburi and Kanchanaburi provinces.
These cuts, then, have already had a significantly negative impact on aid and development services.
B. Funding Gaps for Development Programs
Then, the USAID closure leaves significant funding gaps in humanitarian assistance and disaster relief in Haiti. In Sub-Saharan Africa, the cuts derail projects in education including school construction; literacy and skills development training; health programs to improve HIV/AIDS, malaria and tuberculosis outcomes; maternal and child health improvements as well as water and sanitation programs. Many other recipient countries have also structured national development strategies around USAID assistance, so this sudden termination sees governments and NGOs struggling to maintain momentum.
Sectors like education and healthcare are especially affected. USAID has supported programs providing vaccines, maternal healthcare and clean water to millions of people. In the absence of USAID funds, and unless other donors increase support in these areas, the global south should expect a decline in public health outcomes, reversing years of progress in eradicating infectious diseases like malaria and tuberculosis.
(II) Long-Term Implications for the International Development Assistance Sector
C. Increased Burden on Other Donors
With 90% of USAID program funding cut immediately, the international development funding burden now potentially falls on other donor countries and private organisations. Multilateral agencies like the European Union and United Nations specialised bodies, along with bilateral assistance provided by countries including Denmark (DANIDA), Sweden (SIDA), Ireland (Irish Aid) and emerging donors such as China and the Gulf States may help fill the gap left by USAID. However, China may not have the same capacity or willingness to match USAID’s former substantial contributions, given current domestic Chinese economic challenges including slowing GDP and a domestic real estate debt crisis.
Agencies like the United Nations Development Programme (UNDP) and the World Bank will likely face increased pressure to cover the loss of USAID funding. This could spark an overextension of resources and declining effectiveness in donor assistance delivery. In February 2024 Wencai Zhang, a Chinese national, was appointed Managing Director and Chief Administrative Officer of the World Bank Group, tasked with transforming the Bank’s Budget, Planning and Strategy and Information Technology section. With Chinese support, the World Bank will continue reform efforts to strengthen development objectives and institutional capacity but given the severely diminished US financial support this may prove challenging.
D. Shift in Global Geopolitical Dynamics
Beyond its humanitarian and development impact, USAID has been a tool of US foreign policy, reinforcing strategic alliances and promoting American values abroad. Its closure creates a potential power vacuum in the global development assistance landscape, providing opportunity for other nations to expand their influence.
China is the obvious country to fill this power vacuum, with its history of providing development assistance through the Belt and Road Initiative, also known as One Belt One Road (OBOR). Reports also suggest China is owed more than US$1 trillion though Belt and Road projects including US$3.5 billion owed by the Maldives. By late 2021, the Laotian government’s public debt was reported to be 88% of its GDP, Chinese creditors accounting for 47% of the debt.
However, as noted, China faces a slowing economy, struggling GDP growth, a housing market downturn and high local government debts, all of which might blunt its appetite for further development assistance.
Despite that, though, and with USAID now out of the picture, China could be encouraged to intensify its development assistance efforts particularly in Africa, Latin America and the Pacific. This may well shift the geopolitical balance, weakening US influence and strengthening China’s position.
It was only extremely late in the Biden administration that US attention turned to the Pacific to counter China’s growing geopolitical strength there. In 2023, the US administration opened embassies in the Solomon Islands and Tonga, inaugurated an embassy in Vanuatu (2024) and established diplomatic relations with the Cook Islands and Niue (September 2023). Given USAID cuts, though, the fate of these embassies and already established Pacific embassies in Samoa, Papua New Guinea, Palau, Federated States of Micronesia, Marshall Islands and Fiji remains to be seen.
Given that bilateral donor assistance has shifted in recent years to reinforce strategic and geopolitical interests, USAID’s withdrawal will inevitably lead to donor-recipient countries reassessing long held bilateral alliances. The importance of Pacific regional development assistance in reinforcing and strengthening strategic alliances cannot be underestimated. But the USAID dismantling has impacted more than one hundred projects in health, climate action and sustainable energy. There is now clear pressure on other regional donors such as Australia’s Department of Foreign Affairs and Trade and New Zealand’s Ministry of Foreign Affairs and Trade to fill the space.
(III) The Impact on NGOs and Civil Society Organisations
E. Reduction in Funding for NGOs
USAID has been a major source of funding for international and local NGOs, so this closure will force them to seek alternative funding sources. Smaller NGOs will struggle to sustain their operations without USAID support. This could lead to the downsizing or closure of many organisations, reducing donor sector capacity to address issues such as poverty, climate change and support for human rights. For example, Blumont, which manages and coordinates development assistance in Syria’s Al-Hawl and Roj refugee camps, faces immediate operational difficulties following the suspension of funds supporting water and sanitation supplies and security. Staff layoffs and a cessation of program activities is likely. Johns Hopkins University’s School of Public Health has reduced numerous global health initiatives formerly supported by USAID funding.
F. Challenges for Civil Society and Governance Programs
USAID support has long been crucial in supporting civil society organisations and governance programs promoting democracy, transparency, and human rights. USAID’s closure immediately weakens efforts to combat corruption, strengthen judicial systems, and support free media in developing countries. It is worth noting here the Trump administration’s mid-March 2025 closure of Voice of America, Radio Free Asia and Radio Free Europe, deeming them as ‘unnecessary’.
In nations with fragile democratic institutions, USAID’s withdrawal might well embolden authoritarian regimes and weaken pro-democracy movements, inevitably undermining progress towards improved human rights and good governance. For example, over US$10 million in cuts to programs supported and run by Mexican NGOs and government agencies, including some working on forced disappearances, have caused staff layoffs and project suspension. These programs were crucial to improving social order and governance in severely troubled regions like Chihuahua, Tamaulipas, Guerrero and Michoacan. Then, educational initiatives for Afghan women and an independent journalism program providing support in El Salvador were also among the initiatives halted by the cessation of USAID activities.
Again, these are serious setbacks in the global development assistance system.
Conclusion
The closure of USAID marks the end of an era in US foreign development assistance at a time when the need for it remains as urgent as ever. The global community must find innovative solutions to ensure vulnerable populations receive the support they need to thrive in an increasingly complex world. Development practitioners, managing contractors, and donor recipients all now face a new reality in a restructured donor assistance landscape. There are far-reaching consequences for humanitarian assistance, development programs and global geopolitical dynamics. There has been an immediate impact with disrupted and cancelled donor assistance programs, particularly those underway but now halted without notice.
Without time to plan and deliver alternative funding and implementation arrangements, projects like these face intensifying competition from other projects in the same position. This makes the entire system more frenzied, competitive, and fragmented. In the long term, the global donor assistance landscape may become more disparate and disorganised, leading to severely attenuated development outcomes.
To mitigate such negative effects, alternative funding mechanisms must be explored. An unlikely scenario would be for the US government to consider reallocating donor responsibilities to other agencies, or increasing support for multilateral institutions such as the World Bank Group or United Nations agencies directly involved in the development sector. Additionally, philanthropic organisations and private sector actors may need or likely be pressured to step up contributions to sustain critical development programs.
At this point, we would do well to be reminded of the words of Hilde Johnson, Norway’s former Minister for International Development whereby she implores for action to be taken in the development space:
“Poverty is the scourge of our time. It means human suffering, untimely
deaths and disease. It implies an enormous waste of human lives — a cost
we cannot accept in the 21st century. Who are we — if we don’t do anything to change the map of global poverty.”[1]
Simon Fraser teaches Development Studies at the University of Adelaide and is completing a doctoral thesis on donor funding of education programs in the Pacific. He has over 30 years’ experience in the development sector, having lived and worked in long term positions in India, Malaysia, Laos, Vietnam, Kiribati, Vanuatu, Mongolia and The Philippines. He has held Team Leader and economist/education specialist consulting positions on programs funded by the World Bank (Guyana), United Nations Office on Drugs and Crime (Laos PDR) Asian Development Bank (Nepal, Mongolia, Tajikistan, Sri Lanka, The Philippines, Kiribati and Indonesia) and Australia’s Department of Foreign Affairs and Trade (Kiribati, Vanuatu, Mongolia).
The author acknowledges and thanks Emeritus Professor Brian Stoddart and Amber Hall for comments on earlier drafts.
[1] Johnson, HF (2005). Poverty and Global Justice: Some Challenges Ahead, in Real World Justice, Springer Netherlands, Dordrecht, pp. 21–26.
