Giving aid is not purely an act of kindness or responsible duty. It has seen and unseen motives. This rule also applies to most of the foreign aid. This does not mean that all aid is self-interested. There are also good donors, who donate selflessly. However, in most of the cases, foreign aid is also a tool to promote national interests. With the arrival of Donald Trump to power, a US official recently categorically stated that “the US should only spend abroad if it makes America ‘stronger’, ‘safer’ or ‘more prosperous’.” The world needs more redistribution if it has to overcome poverty and inequality, and thereby make the world a safer place for all.

US global leadership and its grant aid are critically inter-linked.

Following this statement, the US State Department has issued a halt to nearly all existing foreign assistance (grants) and paused new aid. This instruction was given through an internal memo sent to officials and US embassies around the world. The new US president seems to view foreign aid as a waste of resources, so he has announced a thorough review and a cut. The leaked memo follows President Trump's executive order issued on the very first day in power on January 20 for a 90-day pause in foreign development assistance. He wants to take this time for critical review of existing US aid policy and align it with his own vision. If he keeps the election vows, many countries will no longer receive aid from the US.

The US is the world's biggest international aid donor. It spent nearly $68bn on about 15,000 activities in 204 countries in 2023 alone. For 2024 it was $39bn, 8,000 activities and 189 countries. This is nearly three times the annual budget of Nepal for the fiscal year 2023-24. While the US spent nearly $50bn on average in the last decade, the spending for the last year was already substantially reduced by about 26 percent for unknown reasons. This is a 47 percent reduction compared to the 2023 spending. The new memo is likely to result in further reduction in everything from development assistance to military aid. Media have reported that the memo makes exceptions only for emergency food aid in few troubled places and for military funding for Israel and Egypt. Ukraine alone received $17bn in 2023 alone for the US.

Ths is going to affect several developing countries as any US aid is now subject to new approval. This means that ongoing US-supported development projects may have to be closed down around the world in nearly 200 countries. Some staff of the US aid agency, USAID, will also lose their jobs as they will lose funding. Both the project staff and beneficiaries will be affected. Many will lose their jobs and others will not get the benefits from as many as 8,000 projects. The effect seems to be massive if all projects are terminated and other agencies, such as the United Nations organizations or national governments, do not take them up immediately.

Experts argue that the move could affect a wide range of critical development projects globally, including water, health, sanitation and shelter. Some of the ongoing developmental projects will be terminated without completion. It should be noted here that most of the US aid goes on water, sanitation and shelter sectors of the developing countries such as Nepal. Critical vaccination might also have to be disrupted. Countries such as Ukraine will have to end their internal and external wars of various kinds for various purposes.

The proposed budget freeze is likely to undermine the global leadership of the US as the richest and the most powerful country on Earth. Some have justified the freeze stating that it was impossible for the new administration to assess whether existing foreign aid commitments “are duplicated, effective and consistent with President Trump’s foreign policy promises.” Others view that as the richest country, the US should not stop giving to the needy as it is the duty of the rich to share some of its resources with others. Most faiths of the world believe and uphold this conviction. They even believe that God gives only to those who give others selflessly. From this logic, President Trump should not stop giving, rather he should increase the aid and reduce narrow self-interests. This is how America will garner respect from around the globe. This respect will empower it to further lead the world in science, technology, economy and all-round development.

The US cut on foreign aid will affect Nepal also. It has been noted that there are three themes at the core of USAID’s work which are critical for Nepal’s development: supporting federalism, promoting inclusion and strengthening institutions and resilience. Under these core areas, the US provides support to Nepal for agriculture, good governance, disaster resilience, physical infrastructure, education, health and sanitation via its aid agency, the USAID. As the oldest and biggest bilateral donor of Nepal, USAID has pledged $659m or around Rs 81bn for 2020-2025 (about Rs 16bn annually, which is less than one percent of our annual budget) as stated in its Country Development Cooperation Strategy.

The USAID channelizes most of the aid money through local Non-Governmental Organizations (NGO) in Nepal, and thereby most of its budget is off-budget. As the agency traditionally prefers a community development approach, local NGOs implement most of the US projects in Nepal. These NGOs and their staff are likely to be directly affected by the aid cut. Considering Nepal as critical to regional stability and connectivity, the US has also been providing support through Millennium Challenge Account (MCA) for the power and road sectors as well as the annual budgetary system of the government. It also partners with the private sector in Nepal to foster US profit-oriented investments.

To conclude, the US grants aid to the world and Nepal is very vital. While the potential US aid freeze and likely cut is not at all a good news as it may undermine critical developmental and humanitarian needs of the developing countries and thereby the achievement of the SDG targets by 2030, it is also likely to affect the existing global leadership of the US, opening this space for emerging donors such as China. Indeed, the rich empower themselves by giving, and the unequal and poverty-stricken world needs more redistribution. Poverty anywhere is a threat to prosperity everywhere. The US can be safer, stronger and more prosperous only in a poverty and inequality-free world.  Grant aid, a very small fraction of the overall US annual budget (about 0.7 percent), also opens the door to other business and strategic interests. While Nepal aims to graduate from the grouping of Least Developed Countries by 2026, the US, as the oldest development partner and a trusted friend, should not stop its grant aid to Nepal abruptly before Nepal ends its dependence on foreign aid.