US suspends all foreign aid: Implications for global development and Nepal

KATHMANDU: The United States has recently announced a suspension of all foreign aid for a period of 90 days as part of President Donald Trump’s “America First” policy. This decision, driven by a comprehensive review of U.S. foreign policy, has raised concerns worldwide. The U.S. State Department has clarified that after the 90-day review, a final decision will be made on whether to resume or permanently halt aid programs.

Strategic Shift in U.S. Foreign Policy

President Trump’s executive order, issued shortly after his inauguration on January 20, directed federal agencies to reassess foreign assistance programs. Under this directive, all foreign development grants have been temporarily halted. This marks a significant shift in U.S. foreign policy, emphasizing a reevaluation of expenditures on international development projects.

Historically, the United States has been a leader in global aid, funding projects that support health, education, and infrastructure development in low-income and developing countries. However, this suspension threatens to disrupt such initiatives, leaving many ongoing projects in limbo.

Global Impact of the Aid Suspension

The suspension has the potential to affect several regions and key areas of development. Health programs, which receive a significant portion of U.S. foreign aid, are expected to face major setbacks. Vaccination campaigns and health initiatives in impoverished countries may be disrupted, affecting millions of vulnerable individuals.

Education and disaster response programs, which rely heavily on U.S. funding, may also be curtailed. These sectors have long been a focus of American aid agencies like USAID. Additionally, the decision could impact countries like Ukraine, which received over $17.2 billion in U.S. aid in 2023, primarily to counter Russian aggression.

Despite the widespread suspension, international media reports indicate that military aid and food programs for Israel and Egypt will remain unaffected, reflecting the strategic importance of these nations in U.S. foreign policy.

Nepal’s Vulnerability to Aid Cuts

Nepal, a recipient of substantial U.S. development assistance, is expected to face significant challenges due to this aid suspension. According to government statistics, the U.S. is the largest global provider of foreign aid, distributing $68 billion in international assistance in 2023.

The aid provided by the U.S. to Nepal spans critical sectors such as agriculture, governance, disaster management, infrastructure development, health, and sanitation. Much of this support has been facilitated through USAID, which plays a pivotal role in implementing development projects in the country.

One of the major U.S.-funded initiatives in Nepal is the Millennium Challenge Corporation (MCC) project, which focuses on developing road and electricity infrastructure. The MCC initiative has already begun implementing projects aimed at bolstering Nepal’s connectivity and energy sectors. However, the aid suspension raises concerns about the continuity of these programs, potentially delaying their progress.

Broader Implications for Nepal

The suspension of U.S. aid comes at a critical time for Nepal, as the country grapples with economic recovery, infrastructure development, and social challenges. The impact on sectors like health and education could be particularly severe, given Nepal’s reliance on foreign grants to support these areas.

In the health sector, U.S. aid has funded programs addressing maternal and child health, infectious diseases, and vaccination campaigns. Any disruption in funding could hinder progress in these critical areas, especially for marginalized communities in rural regions.

Similarly, U.S.-funded educational programs aimed at improving literacy rates and access to quality education may face setbacks. This could further widen the gap in educational opportunities for disadvantaged groups.

Additionally, projects under the US Millennium Challenge Corporation (MCC) focusing on road and electricity infrastructure in Nepal may also face setbacks.

The suspension also underscores the vulnerability of countries like Nepal, which heavily depend on foreign aid for development and crisis management. It highlights the need for Nepal to diversify its funding sources and strengthen domestic revenue generation mechanisms to reduce reliance on external assistance.

As the global community watches the 90-day review period unfold, the uncertainty surrounding U.S. aid underscores the importance of sustainable and diversified funding strategies for developing countries like Nepal. While the future of U.S. foreign assistance remains uncertain, the impact of this suspension will likely serve as a wake-up call for recipient nations to re-evaluate their development strategies and funding dependencies.