The global aid landscape is undergoing a significant transformation as traditional donors sharply reduce their contributions. In response to American demands for increased defence spending, many European countries are reallocating funds from development to defence.
The United Kingdom, historically a leader in international aid, has announced a 40 per cent cut to its development budget to bolster defence capabilities. Similarly, France has reduced its aid spending by more than a third due to budget constraints, and Germany has also begun to curtail its development assistance. These cutbacks, while arising independently, align with a broader global trend of diminishing commitment from traditional donors to international development.
The most drastic measure comes from the Trump Administration's decision to dismantle the United States Agency for International Development (USAID), citing inefficiency and ideological excesses. While inefficiencies in global development partnerships cannot be entirely dismissed, this move carries huge implications.
According to a recent analysis by the Centre for Global Development (CGD), the termination of USAID is expected to have severe global consequences, particularly in the public health sector. American aid constitutes more than 10 per cent of total health expenditures in 37 countries and exceeds half in ten of them. For instance, in Afghanistan, US health aid amounts to nearly 350 per cent of the government's own health spending, indicating extreme vulnerability to funding cuts. The abrupt cessation of these funds risks reversing decades of public health gains and leaves millions globally at risk of disease resurgence and humanitarian distress.
The withdrawal of US aid has already started to disrupt essential services worldwide. According to the CGD's findings, budget cuts have interrupted critical health services, including antiretroviral therapy for HIV patients, maternal and newborn care, and disease tracking programmes. Even in relatively wealthy Asian countries with minimal direct dependence, the withdrawal of USAID-supported initiatives such as the Demographic and Health Surveys could severely impair policy-making capabilities in healthcare and social services.
The CGD identifies 26 particularly vulnerable nations, including Afghanistan, Haiti and several African countries, due to their dependence on American aid, low income levels and limited fiscal resilience. In Afghanistan, nearly half of the population relies on international assistance for survival. Sudden cuts to aid could potentially reverse decades of socioeconomic progress, worsening instability in fragile regions.
In contrast, Pakistan's reliance on US health aid is comparatively minimal. According to the CGD, American health aid constitutes less than 5.0 per cent of Pakistan's government health spending. This limited dependency stems from a history of fluctuating diplomatic relations between Pakistan and the US, leading Islamabad to diversify its development partnerships and funding sources.
Historical data from the Pakistan Economic Survey reveals that US aid has fluctuated dramatically over the decades, often linked closely to geopolitical imperatives rather than consistent developmental goals. In other words, Pakistan's social sector development has never been overly dependent on American generosity. Despite popular perceptions, US aid has typically been earmarked for strategic and security purposes rather than broad-based social development.
During peak periods of strategic alignment -- such as the Afghan conflict in the 1980s and post-9/11 operations – aid from America surged. Conversely, in times of diplomatic tensions, notably following the Abbottabad raid in 2011 and during the early years of the Trump administration, US aid abruptly contracted.
Crucially, Pakistan's key social programmes, like the Benazir Income Support Program (BISP) and various provincial health and education interventions, have historically relied more heavily on domestic financing, World Bank assistance, and increasingly, on partnerships with emerging donors such as China, Saudi Arabia and the UAE. According to the Planning Commission of Pakistan, even at the peak of US assistance, American contributions accounted for a modest portion of the country’s total social sector budget.
The frequent suspension of US aid in the past served as a catalyst for Pakistan to diversify its development partnerships. Since 2014, Pakistan has expanded ties with China under the China-Pakistan Economic Corridor (CPEC), enhanced cooperation with Middle Eastern countries, and boosted public-private partnerships within the country. These efforts have reduced Pakistan's vulnerability to fluctuations in U.S. aid to some extent.
However, the current suspension of USAID funding is not without consequences. While direct dependency on American assistance may be low, indirect effects could still pose challenges, particularly through disruptions in multilateral funding arrangements where the US holds considerable influence. Institutions such as the World Bank, IMF and regional development banks, heavily influenced by Washington, might adopt tighter fiscal policies affecting Pakistan’s access to favourable loans and development grants. Likewise, the IMF executive board where the US has a 16 per cent voting share may give a tough time to Pakistan during its periodic reviews of the current IMF programme.
The drastic reduction in aid by traditional Western donors, culminating in USAID's abrupt termination, poses immediate challenges for developing countries, including Pakistan. However, this crisis can become a catalyst for reform and greater economic independence. Enhancing fiscal discipline and domestic resource mobilisation by strengthening tax administration and expanding revenue collection can reduce external dependency and sustainably finance domestic development.
Diversifying international partnerships by expanding diplomatic and economic engagement with multiple partners, including multilateral institutions and regional economies, mitigates geopolitical risks. Investing strategically in human capital and governance by prioritising education, healthcare, vocational training and governance reform builds resilience and insulates Pakistan from external financial volatility.
The writer heads the Sustainable Development Policy Institute (SDPI) and is a member of the advisory board of the Asian Development Bank Institute.
He tweets/posts abidsuleri