US foreign aid freeze is upending global aid and the work of contractors

The extent of the impacts of the Trump administration’s sudden 90-day freeze of almost all foreign aid is still unclear almost a week on, as officials and aid workers overseas try to make sense of which activities must be suspended.

The suspension of foreign aid was outlined in a diplomatic cable from Secretary of State Marco Rubio last Friday.

Contractors working with USAID – many of them US-based companies and small businesses – often front the money for aid work, then submit invoices and get reimbursed later.

Now, some are not being paid for millions of dollars’ worth of services already rendered, the aid industry source said. That means there will be significant furloughs of staff at many aid contractors and subcontractors.

“We were told to lay off all of our staff,” said Annie Feighery, the CEO of mWater, a US company that provides a free digital platform to governments and organizations around the world to help improve access to water. She said that as a subcontractor, the firm is “carrying a debt load of our projects” and has not yet been paid for work done in January.

The USAID stop-work order has taken out 80% of her company’s budget, she said.

“It’s going to put a lot of small businesses out of work,” Feighery said, noting that mWater staff in Indonesia, Haiti, Kenya, Uganda and the US are impacted. “If we’re allowed in May to go back to work, we will have to do the work in May and get paid in June… It’s horrific, you know, to imagine any company going two quarters without their funding.”

She added that companies working in the technology aid space are also concerned about other nations, like China, stepping in to fill the void during the 90-day pause on foreign aid. Foreign governments using data systems that are US-based, like those of mWater, is better than having them run on Chinese technology, she argued.

Widespread confusion over waiver for ‘humanitarian aid’

The State Department said in a media note on Wednesday that the freeze does not include humanitarian aid, “which is defined as ‘life-saving medicine, medical services, food, shelter, and subsistence assistance, as well as supplies and reasonable administrative costs as necessary to deliver such assistance.’”

The note also claimed that “critical national security waivers have been granted, including to ensure the protection of US personnel overseas, facilitate the repatriation of illegal aliens, enforce non-proliferation obligations, and much more.”

The State Department claimed it had “provided straightforward guidance” about waivers to the freeze last Friday.

The official said that even though the waiver gives an exemption for ‘life-saving humanitarian aid,’ it’s not clear if that includes funding for staffers who carry out the work. Their organization has been unable to withdraw US funds at all, and is exploring whether to put staff on furlough, because it doesn’t have cash reserves to pay people.

USAID funds foreign aid projects in more than 100 countries around the world. Other agencies like the State Department, Department of Health and Human Services, Defense Department, Treasury and the Peace Corps also control portions of the US foreign aid budget.

Foreign assistance has been the target of ire from Republicans in Congress and Trump administration officials, but the funding accounts for very little of the overall US budget, at about 1% of federal budget obligations.

“The administration is asking a lot of the right questions, but they’re asking them the wrong way, and in far too of an abrupt fashion that’s far more disruptive to the lives and livelihoods of human beings around the world than it could be,” said John Oldfield, the chief executive of Accelerate Global, which advises nonprofits and companies working in global development.

“The sick are getting poorer and the poor getting sicker,” Oldfield said of the developing world. “People are losing their jobs. People are losing their livelihoods. This is happening right now, even within the first 48 or 72 hours after these decisions by the White House.”

Concerns about development aid

A source working in the US foreign aid industry stressed that the humanitarian aid waiver does not include most development aid, which also saves lives, for example through improving water security, food security, sanitation and hygiene.

“Development aid is longer-term work and that is still on pause,” said the source, who asked not to be named for fear of reprisals.

In many cases, the stop-work orders stemming from the US State Department aid freeze have suspended projects that are done in support of US security and global security interests, according to aid workers.

The World Council of Credit Unions, headquartered in Wisconsin, said in a statement Wednesday that following the stop-work orders, it had suspended a USAID project in Peru and Ecuador that helps Venezuelan refugees with credit lending, savings, and with obtaining “documentation that allows them to integrate into their local economies, thereby stemming their migration to the US.”

The international credit organization also said it had suspended work on its USAID GROW Project in Ukraine, which “supports agricultural production and food security, an area Ukraine is central to in supporting the global food chain.”

Funding halt to HIV programs

“A funding halt for HIV programmes can put people living with HIV at immediate increased risk of illness and death and undermine efforts to prevent transmission in communities and countries. Such measures, if prolonged, could lead to rises in new infections and deaths, reversing decades of progress and potentially taking the world back to the 1980s and 1990s when millions died of HIV every year globally, including many in the United States of America,” the WHO said in a statement.

“We call on the United States government to enable additional exemptions to ensure the delivery of lifesaving HIV treatment and care.”

The chief executive of the Gates Foundation, Mark Suzman, said in a statement: “US assistance programs, such as PEPFAR, deliver life-saving medicine, medical care, and combat hunger and starvation. These programs protect the health of Americans, bolster US national security, and build stronger economies.”

The foundation is committed to working with the administration on these issues, he added, “and encourage them to ensure this critical funding continues immediately while their reviews are underway.”