The Future of US Foreign Assistance: How Low Can They Go?

by Karen Mathiasen and Nico Martinez

The dramatic and unexpected cessation of US foreign aid could change the trajectory of development assistance for years to come. The sudden stop in funding is reverberating globally, destabilizing the aid community and cutting off access to hundreds of lifesaving programs affecting millions of people. The question is not whether there will be measurable impacts on poverty, mortality, health, and hunger, but how severe they will be.

Despite jarring evidence of the negative impact of the aid freeze and bipartisan appeals to restore funding, the administration has doubled down, canceling 90 percent of USAID contracts and defying a federal court order to resume funding.

This turn of events is provoking widespread anxiety about whether the Trump administration will honor legacy pledges to multilateral organizations not affected by the spending pause, as well as how it will approach major upcoming replenishments including the Global Fund, Gavi, and the African Development Fund (AfDF).

In this note, we take a closer look at the stakes for multilateral development banks (MDBs) and major vertical funds related to health, food, and climate. We argue that:

• Among the most vulnerable institutions are the International Development Association (IDA), the African Development Fund (AfDf), the Asian Development Fund (AsDf), the World Food Program (WFP), the Global Fund, and Gavi, the Vaccine Alliance.
• The financial capacity of MDB hard loan windows should not suffer if the US reneges on its pledges, which are relatively small, but there is a risk that rating agencies could respond negatively.
• Even without US funding, there should still be ample MDB resources for climate mitigation, especially for middle-income countries. But resources for adaptation—which poor countries especially need—are already woefully inadequate and may be further diminished.
• The US will use its leverage to advance issues within these institutions that are likely to be unpopular with other shareholders, including dismantling diversity, equity, and inclusion (DEI) programs (which have become conflated with gender policies), imposing restrictions on programs related to reproductive health, and reversing climate commitments.