On January 24, US President Donald Trump announced a significant shift in U.S. foreign aid policy, stating that his administration would pause all U.S. bilateral foreign aid administered through the U.S. Agency for International Development (USAID). This move follows an executive order that called for a 90-day pause in the disbursement of foreign aid. In addition, the US State Department issued a stop-work order for existing grants and contracts, effectively freezing all new foreign aid spending.

It is unclear at this time if US development aid will continue and in what form. Most likely, any development aid going forward will be managed by the US State Department. Organizations dependent on US development funding need to move fast, adapt, and pivot to address this existential crisis – and not all will be able to do so. In short, at this time we just don’t know how far the current US government will go in dismantling its support to developing countries.

Impact on the Development Sector

In 2023, USAID provided $68 billion in assistance, making the United States the largest single donor globally. These funds played a crucial role in supporting a wide range of development programs, including public health initiatives, poverty reduction, education, and infrastructure development. 

The suspension of USAID funding will have an enormous effect across the development sector.

• • • NGOs and Humanitarian Organizations: Many organizations depend on USAID to fund their programs. The immediate halt in funding will result in layoffs, project delays, and a reduction in vital services for communities in need. Some organizations will have to close down.
    • Multilateral Development Institutions: US funding plays a significant role in multilateral organizations such as the United Nations, the World Bank, and the World Health Organization. The stop in US development funding will weaken global cooperative efforts and make it more difficult to address shared challenges like climate change, health crises, and conflict resolution.
    • Increased Global Competition for Aid: As the US pauses (and perhaps suspends) its foreign aid there will be increased competition for aid from other countries and organizations.
    • Loss of Expertise: USAID funding often supports capacity-building efforts in developing countries, helping to train local experts in areas like governance, public health, and agriculture. Without this funding, the loss of expertise and knowledge transfer will slow development progress.
    • Shifting Focus in Global Aid: Other countries and organizations will step in to fill the gap left by the US, and the priorities of international aid might shift. New donors may have different agendas, potentially redirecting funds toward projects that align with their own political or economic interests.
    • Project Delays and Cancellations: Many development projects will face delays or cancellations as a result of the funding freeze. Projects that are already underway may come to a halt, affecting the communities that depend on them.

  Looking Ahead: What Can You Do?

  • • 1. Undertake a rapid assessment of the impact on your organization. Will it create a funding gap and if so, how much? Will you be able to continue to operate? Keep in mind that securing alternative funding takes significant time and not all organizations will be able to cover the gap.
      2. Continue to monitor the situation. What do the latest reports tell us? Is funding likely to come back online or will it cease completely? Research press releases and statements from the US government and media. But realize things can change quickly. You can try to connect with your US Government contacts to find out more, but even if successful in connecting, most will not be able to provide any guidance.
      3. Create a plan for immediate cost savings and funding alternatives. At the same time pivot to fill funding gaps. Reorient available staff and resources to fundraising – in effect creating fundraising surge capacity. For some the plan will provide a roadmap for winding down operations while transferring capacity to other organizations. 
      4. Research and map additional funding opportunities. Including increasing support from existing donors and tapping into new donors. Engage and network with these identified donors without delay. Start with high-opportunity donors for some quick wins.
      5. Create communications materials, both online (including social media) and offline to showcase your organization’s impact and the harm of underfunding.
      6. Review your organization’s long-term strategy based on a potential new reality. Build resilience and focus on a diversified funding base.
      7. Diversify your funding sources to build long-term resilience. Create contingency plans for future disruptions and stay agile, ready to respond when potential US development funding comes back online in one form or another.

  Next Steps

  The current crisis shows that it has never been more important for organizations to diversify their funding mix. There are hundreds of bilateral donor sources. The US has well over 150,000 foundations providing over $103 billion in support. Europe has an estimated 180,000 foundations contributing a similar amount. Across the wider world there are thousands more. Scores of companies have CSR programs providing support. Individual giving around the world has never been stronger. While the crisis is real, there is vast potential out there to help you weather the storm.  

  As organizations navigate the challenges of shifting funding landscapes, Philantropia offers valuable resources, including the Philantropia Fundraising Institute. Our comprehensive courses are designed to equip you with the skills to identify diverse funding opportunities, craft compelling proposals, and develop strategic approaches to secure grants from a wide range of donors. With access to an extensive donor database, customizable templates, resource guides, and expertise, Philantropia is here to support you.