On July 1, 2025, the U.S. Agency for International Development (USAID) officially ceased to exist, with its few remaining programs and staff absorbed into the U.S. State Department. With its closure, U.S. foreign assistance funding dropped to $13 billion, a substantial decrease from the average $51.4 billion that the United States spent annually between 1946 and 2023. Historically, the United States has been the largest funder of development and humanitarian assistance worldwide and a global leader in the sector. In the future of foreign aid series, SFS faculty and alumni weigh in on the impact of these changes and the opportunities that they may present.
Professor Shareen Joshi, associate professor in the School of Foreign Service, highlights the difference in models that comes with alternative development funding from China, the Gulf states or regional development banks. As an applied micro-economist, Joshi combines traditional economic tools with cutting-edge artificial intelligence to understand how development actually happens on the ground. She has served as a consultant for the World Bank, the United Nations, the Hewlett Foundation, the Government of India, the Government of Rajasthan and several nonprofit organizations; she previously worked as a consultant at McKinsey and Company in Washington, DC.
The 2025 dismantling of USAID through Executive Order 14169 represents an unprecedented shock to the global development system. As the world’s largest single donor providing 38% of humanitarian aid, the U.S. withdrawal exacerbates immediate humanitarian crises across the world.
The scale of cuts varies dramatically—the Center for Global Development found Yemen faces 19% funding reductions while Somalia faces 39%—differences driven by donor politics rather than need. The consequences were immediate and severe. The UN World Food Programme closed its southern Africa office, placing 27 million people at risk of hunger during the region’s worst drought in decades. A Lancet analysis found TB programs alone recorded 10,566 additional deaths within weeks, with projections of 8-19 million additional deaths annually by 2030 without replacement funding.
Alternative donors have stepped up. China immediately provided $4.4 million for a de-mining project in Cambodia and, with South Korea, sent $4 million to the Africa CDC. Gulf Cooperation Countries and the European Union have increased aid commitments. The African Development Bank pledged to pivot toward regional investment and lower dependency on the United States.
These emerging alternatives have, however, not filled the void. They also operate with fundamentally different models than traditional USAID programs. Where USAID worked with local partners on health, education, governance, and emergency response, China’s development finance emphasizes large-scale infrastructure and natural resource partnerships. Gulf states prioritize rapid deployment with fewer conditionalities to secure regional security. Regional development banks emphasize market-based solutions and public-private partnerships.
It is now clear that the immediate void left by USAID cannot be filled. Countries and international institutions must scramble to mobilize internal resources and reconfigure existing programs. This adjustment period will inevitably leave humanitarian gaps, raising the critical question: will this abrupt restructuring of global development finance ultimately strengthen the system and individual countries, or will the human toll of such a sudden transition prove too devastating to justify any long-term gains?