Chart of the Week: Uncertainty about US foreign aid policy

Amidst the barrage of new policies announced in President Trump’s second week in office was the decision to suspend foreign aid payments pending a 90-day review, and place the majority of the United States Agency for International Development (USAID)’s 10,000 strong workforce on leave. A federal court has since issued a ruling intended to block the latter measure, but the future of USAID remains uncertain. The US’s share of global foreign aid flows, as tracked by the OECD’s Development Assistance Committee (DAC), has come down since the USAID’s inception in 1961, but the US still stood for around 30% of total DAC donor aid receipts in 2022. The US Secretary of State Marco Rubio has stated that the government will continue to provide foreign aid.  The suspension of funds is however likely to have an immediate and negative impact on recipient countries — in particular those benefiting from humanitarian and health efforts, such as the US-led HIV prevention programmes. For the donor country, foreign aid can be an important extension of soft power.  Fathom’s Geopolitical Alignment Tracker has shown how stronger ties between a powerful hub country like the US and other countries, via increased official flows amongst other things, raises the likelihood of those countries siding with the hub in a future geopolitical dispute. Depending on what happens with US foreign aid policy, there could be an aid gap which another hub might step in to fill.

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The views expressed in this article are the views of the author, not necessarily those of LSEG.

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