The fallout of US foreign aid cuts on the Arab World and South Asia
On January 20, 2025, US President Donald Trump issued an executive order suspending all USAID and State Department-funded projects, amounting to $60 billion, for 90 days. The decision aimed to reassess the effectiveness of foreign aid and align it with the administration’s strategic priorities. As a result, nearly 10,000 foreign aid grants and contracts have been abruptly terminated, sending economic and humanitarian shockwaves across countries that have long relied on American assistance. This move has particularly affected nations in the Middle East, North Africa (MENA), and South Asia, raising concerns over regional stability, economic sustainability, and geopolitical realignments.
The United States has historically been a key financial supporter of many MENA countries, providing aid to sustain fragile economies, strengthen security frameworks, and fund humanitarian projects. In 2023 alone, Jordan and Egypt ranked among the top beneficiaries, receiving $1.6 billion and $1.5 billion, respectively. However, with the sudden reduction in US aid, these nations are now scrambling to find alternative economic partners.
Jordan, considered one of the most politically stable countries in the region, heavily relies on US assistance to support its economy and refugee programs. With over 1.3 million Syrian refugees residing in the country, American aid has been essential in funding healthcare, education, and employment initiatives. The aid suspension has put these programs at risk, forcing Jordan to seek emergency assistance from Gulf nations and international lenders.
Egypt has long been a major recipient of US military and economic assistance. American aid has funded critical infrastructure projects and helped maintain the country’s defense capabilities. With Washington’s funding in limbo, Cairo has turned to China and the Gulf states to fill the financial gap. However, Gulf nations, facing their own economic challenges, may not be able to provide indefinite support, making Egypt’s economic future uncertain.
The aid cuts have had an immediate and devastating impact on Lebanon, where UNICEF has been forced to scale back programs, exacerbating an already dire food crisis. Over half of children under two years old in eastern Lebanon are now experiencing severe food insecurity. Similarly, in Sudan, where ongoing conflicts have displaced millions, aid agencies report that at least 2 million people have lost access to life-saving assistance due to the abrupt funding halt.
South Asian nations, already grappling with economic difficulties and humanitarian challenges, have been hit hard by the aid suspension. Countries such as Bangladesh, Pakistan, and Nepal, which have historically depended on US support for healthcare, education, and economic development, are now struggling to maintain essential services.
Bangladesh received $490 million in US aid in 2023, with a significant portion allocated to healthcare and refugee support, particularly for the Rohingya population in Cox’s Bazar. The aid suspension has forced the International Centre for Diarrhoeal Disease Research, Bangladesh (icddr,b) to lay off over 1,000 employees. Additionally, more than 300 non-profits dependent on USAID funding have been forced to close operations, leaving thousands unemployed. Healthcare services for Rohingya refugees have ground to a halt, creating a humanitarian crisis in the world’s largest refugee settlement.
Pakistan has also felt the brunt of the aid cuts. The US had committed $845 million in aid for 39 key projects covering energy, economic growth, agriculture, governance, and health. The funding freeze has led to the imminent closure of over 60 UNFPA-run health facilities, cutting off 1.7 million people, including 1.2 million Afghan refugees, from essential reproductive healthcare services. This reduction in aid not only impacts public health and economic growth but also weakens US influence in Pakistan, a country that has historically been a key strategic ally in South Asia.
Nepal, which had signed a five-year $659 million development deal with the US in 2022, is also suffering the consequences of Washington’s decision. The suspension has created a funding gap for more than 300 NGOs and non-profits, particularly those working on gender equality, healthcare, and education. The effects are being felt acutely in the Terai region, where early-grade learning programs in 39 schools have been halted, jeopardizing literacy and child development efforts. Neonatal healthcare services have also been affected, with the dismissal of 36 staff nurses in federal and provincial hospitals worsening Nepal’s already high infant mortality rate.
India, which received a relatively modest $150 million in US aid in 2024, is not as severely impacted as its neighbors. However, the aid suspension presents an opportunity for India to expand its regional influence. Over the past decade, India has increased its development assistance to countries like Nepal, Bhutan, and Bangladesh, particularly in infrastructure and trade. In the wake of the US aid cuts, India could step in to support these nations, strengthening its role as a regional leader.
The abrupt withdrawal of US foreign aid has accelerated geopolitical shifts in both the Arab world and South Asia. Countries that have long relied on American funding are now diversifying their economic partnerships.
China’s Belt and Road Initiative (BRI) has already made inroads into many MENA and South Asian countries. With US aid drying up, nations like Jordan, Egypt, and Pakistan are increasingly turning to Beijing for infrastructure investment and financial support. While China’s economic assistance comes with fewer political strings attached, it often leads to debt dependency, as seen in Sri Lanka and Zambia.
Russia has also sought to fill the void left by the US. Moscow has deepened security and energy partnerships with Middle Eastern nations, including Egypt and Syria, while also strengthening ties with Pakistan. However, Russia’s ability to provide large-scale economic aid is limited due to its own financial constraints amid Western sanctions.
Gulf nations, particularly Saudi Arabia and the UAE, have stepped up as financial lifelines for struggling Arab economies. However, their assistance is largely focused on strategic investments rather than long-term economic sustainability. Countries that fail to develop self-sufficient economies may find themselves vulnerable to shifting Gulf priorities in the future.
The US decision to freeze foreign aid has created immediate humanitarian crises and forced affected nations to rethink their economic dependencies. While some countries view this as a financial catastrophe, others see it as an opportunity to build self-sufficient economies and diversify global partnerships.
For Arab nations, the challenge lies in reducing reliance on foreign aid by strengthening domestic industries and regional economic cooperation. South Asian countries like Bangladesh, Nepal, and Pakistan must develop sustainable development models, seeking alternative funding sources while enhancing internal economic resilience. India’s role in regional assistance is likely to expand, but it alone cannot replace the scale of US aid.
Ultimately, the US aid cuts mark a turning point in global economic relations, compelling nations to reassess their partnerships and forge new paths toward sustainable growth and stability.
Tajul Islam is a Special Correspondent of Blitz.
