In January 2025, the United States issued an unprecedented freeze on U.S. international development and humanitarian assistance. This decision affected all financial support disbursed by the United States Agency for International Development (USAID). Around seven weeks later, the U.S. government announced the cancellation of more than 80 percent of all USAID programs globally and shortly after signaled that the agency would be disbanded.
These moves, as well as similar decisions to reduce aid by other OECD nations, have generated unprecedented global alarm and a devastating human impact, sparking commentary from some that this is an existential moment for the international development and humanitarian sector. At the same time U.S. tariffs are set to devastate developing countries and potentially spark a global recession – if not a great depression – even if levels remain at the current 10 percent rate.
The rapid and disruptive actions of Washington mean that existing gaps in funding for humanitarian, development, and governance-related programming across the globe have grown even larger. Fundamentally, this will result in an increasingly compounding cycle of unmet humanitarian and development needs.
In addition to direct funding, the United States was also a significant funder to multilateral institutions that conduct work in the Pacific, including the Asian Development Bank, the World Bank and the United Nations Population Fund (UNFPA). The U.S. historically has also been the largest lender to the World Bank’s lending arm, the International Development Association.
Bilateral funding arrangements, identified by research from the Center for Global Development, show significant drawdowns in development and humanitarian assistance, including 100 percent of prior USAID funding cut for Papua New Guinea, Timor-Leste, Vanuatu, Palau, Fiji, and Solomon Islands. This represents a notable drop in development assistance to these countries, especially when humanitarian needs are rising and the impacts of climate change are getting even worse.
During this unprecedented shift, the Australian government and NGOs should look at increasing support to local NGOs and civil society organizations. The Australian government’s promised Civil Society Fund could be positioned as a valuable tool at this time, but certainly more can and should be done.
As the Australian NGO peak body, unsurprisingly, we at the Australian Council for International Development have heard from our members that the impact on NGOs following the U.S. funding freeze and cuts has been extremely challenging. But what has been overlooked in much of the media coverage is the massive impact on local civil society organizations.
Local partners are an essential part of the development process. They are typically deeply embedded within communities, with their relationships often spanning several decades or even centuries. Funding freezes are impacting local NGOs across the region, with organizations at risk of losing local staff and even facing insolvency.
This uncertainty not only challenges the viability of projects and greatly impacts the people it serves, but it is a step backwards for the humanitarian and development sector, which is working towards the goal of being more locally led. This commitment to local partners is also noted as a priority in the Australian government’s commitments to locally led development within the International Development Policy.
A recent survey from the International Council of Voluntary Agencies (ICVA) painted a stark picture for CSOs. The question facing governments like Australia will be whether to take intentional steps to step up its commitment localization efforts given the challenges facing local communities.
The ICVA survey also identified immense impacts at the country level, including Papua New Guinea, where 86,000 people in high-risk disaster areas will lose access to assistance in recovering from earthquakes, tsunamis, volcanic eruptions, flooding, and landslides. That means disaster response initiatives, like the one that followed the tragic landslides in Enga Province last year, would be further weakened.
In Myanmar, the impacts of the funding freeze have also been devastating. Between 2019-2024, the United States provided around 25-40 percent of all humanitarian funding to the country. Over one-third – 37 percent – of the country’s 54 million people are projected to require assistance in 2025. The funding freeze impacted programs that previously received waivers. The most-impacted sector is health, with cuts to malaria, tuberculosis, HIV treatment and prevention, and sexual and reproductive healthcare. This has devasted the lives of millions, particularly those living along the Thai-Myanmar border.
As many Global South thought leaders and movements have highlighted over the recent weeks, this global funding crisis provides an opportunity to reimagine the entire aid ecosystem in ways that truly embrace the commitment to shifting power and locally led development.
As local organizations and the communities they serve shoulder the greatest risks from donor retreat, it is critical that donor governments’ and NGO’s support to local partners evolves in a time of retreat. As donors withdraw from the region, Australia and the NGO sector can play a role in supporting local civil society and ensure that greater core funding is utilized to ensure projects can be implemented. Australia should seek to fill the gap, work with like-minded coalitions and leverage areas of development and humanitarian expertise.