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.
Jeremy Konyndyk (MSFS’03) urges the humanitarian sector to use this drastic funding shortage to do less with less by focusing on localization, rethinking the humanitarian financial architecture and mustering the political will to let go of traditional habits and turf battles. Konyndyk is a 2003 graduate of the Master of Science in Foreign Service (MSFS) program and the president of Refugees International.
The humanitarian sector is at a very perilous point, facing a “brutal paradox” of shrinking budgets in the face of rising needs. Global humanitarian need is at historically high levels and yet it appears that the decades-long global political consensus around the importance of humanitarian aid investments is collapsing.
In terms of the global economy, the needs are small: UN Emergency Relief Coordinator Tom Fletcher has noted, the $29 billion in highest-priority needs identified by the UN equate to just one percent of what the world spends on defense budgets. Yet midway through 2025, donor funding is down sharply. U.S. funding has imploded and many European countries have also sharply decreased their support as they reorient their budgets toward defense priorities. There is no scenario and no reform agenda that could begin to offset the human damage these cuts will entail. For the foreseeable future, humanitarians will have something to the order of one-third to one-half less funding to deal with than we have traditionally had. That leaves the humanitarian sector with no choice but to do less, with less.
Through the first half of 2025, the sector was primarily focused on rapid cost-cutting to adjust to the new austerity. But it must now look forward with a pivot from cost-cutting towards restructuring and optimizing—taking a hard and unsentimental look at the financial models that underpin the sector. Humanitarian institutions must be willing to challenge their familiar habits and unlock efficiencies to stretch the most good out of the funds that remain.
Localization
In this new world of austerity, first, humanitarians must genuinely commit to localization. Local leaders are better attuned to their communities’ needs and can typically address them more cost-efficiently than international organizations. Both the ethical and the financial case for shifting to greater local leadership have long since been made. But to get real about putting this into action, we have to state clearly that it will mean large international institutions stepping back, doing less, and getting smaller in order to shift power and resources to local counterparts.
Rewire the humanitarian financial architecture
Which leads to the second major shift: the imperative to fundamentally rewire and rethink the humanitarian financial architecture. UN agencies have long served as the main financial intermediaries for the system at large, but they do so inefficiently and are poorly suited to act as intermediary donors. A new approach to pooled funding is clearly part of the answer. In the global health sector, models like Gavi and the Global Fund for HIV, TB, and Malaria have been highly effective, highly efficient models for pooling funding at a global level and allocating it efficiently and effectively at a country level. There is no equivalent to that sort of model in the humanitarian system right now, and humanitarians could borrow some of those lessons in humanitarian action. We also need to finally unlock truly unified multi-purpose humanitarian cash programming, which could be the single most effective and efficient intervention we have. Like localization, the case for multi-purpose cash has been made for years. But here too, institutional politics between the big agencies have prevented progress. It is time we finally crack the nut.
Political will
That in turn surfaces the third and final point: political will. Humanitarians need to let go of the traditional habits and turf battles that have blocked real reforms in the past. Donors need to step up with commitments to fund differently, and aid agencies must be open and flexible to fundamental change, even if it challenges their institutional prerogatives. We should not try to muddle through the present funding crisis by simply reverting to a 50% smaller version of the status quo.
This is a “never waste a crisis” moment for the humanitarian sector, and all players must adapt to ensure we collectively save as many lives as possible with whatever resources remain.