USAID further instructed partners to take “all reasonable steps to minimise the incurrence of costs allocable to their awards” and clarified that work would not resume until formal notification was received from the contracting officer.

The United States Agency for International Development (USAID) has abruptly suspended all ongoing projects in Bangladesh after President Donald Trump signed an executive order imposing a 90-day hold on all foreign aid. The order, which aims to “reevaluate and realign” global foreign assistance with American interests, was signed on January 20 and has sent shockwaves through the international development community.

On Saturday, USAID issued a formal directive to all its partners in Bangladesh, instructing them to immediately cease work. This directive follows a broader “stop-work” order from the US State Department on Friday, which halted all existing foreign assistance and paused new aid initiatives. Only military aid to Israel and Egypt has been exempted from the freeze.

According to NPR, a memo signed by Secretary of State Marco Rubio outlines that a comprehensive review of all foreign assistance programs will be completed within 85 days. A report based on this review will be submitted to the Secretary of State for further consideration and recommendations to the President.

Immediate Suspension

In a statement to its implementing partners, USAID emphasised the urgency of the halt, citing the executive order as the primary reason.

“This letter serves as a directive to all USAID/Bangladesh implementing partners to immediately stop, cease, and/or suspend any work performed under your respective USAID/Bangladesh contract, task order, grant, cooperative agreement, or other acquisition or assistance instrument,” the statement read.

USAID further instructed partners to take “all reasonable steps to minimise the incurrence of costs allocable to their awards” and clarified that work would not resume until formal notification was received from the contracting officer.

The suspension poses significant challenges for Bangladesh, particularly for the interim government led by Nobel laureate Muhammad Yunus. USAID’s programs in the country are among the largest in Asia and encompass crucial initiatives in food security, health, democracy, education, and environmental sustainability. The US is also the leading donor to Bangladesh’s humanitarian response, including efforts to support the Rohingya refugee crisis.

Blow to Economy, Stability

International funding has been a critical lifeline for Bangladesh, helping the country manage economic turmoil, address the Rohingya refugee crisis, and support its textile industry—one of the pillars of its economy.

Last year, the Yunus administration sought $5 billion in financial assistance from international lenders to stabilise dwindling foreign exchange reserves and had secured a $4.7 billion bailout from the International Monetary Fund (IMF). The US had committed $202 million in aid to Bangladesh in 2024, as part of a broader $954 million pledge spanning from 2021 to 2026, of which $425 million had already been disbursed.

In September 2024, US Aid signed an agreement with Bangladesh’s interim government to provide the country aid to the tune of US$ 202.25 million grant to Bangladesh for three sectors, namely good governance; social, human and economic opportunity; and resilience.

Then, the USAID had, in a post on X said that the aid was to “advance development, empower youth, strengthen democracy and governance, improve health, and expand trade and economic opportunities to people across the country.”

Trump’s Justification

President Trump’s executive order argues that US foreign aid programs have been “misaligned” with American values and interests. The White House statement noted:

“The United States foreign aid industry and bureaucracy are not aligned with American interests and in many cases are antithetical to American values. They serve to destabilise world peace by promoting ideas in foreign countries that are directly inverse to harmonious and stable relations internal to and among countries.”

The executive order further stipulates that “no further United States foreign assistance shall be disbursed in a manner that is not fully aligned with the foreign policy of the President of the United States.”

Implications of Aid Freeze

The implications of the aid freeze are significant, with USAID’s suspension leaving many ongoing projects in limbo. The organisation has been a key player in supporting Bangladesh’s development agenda, and the sudden halt could exacerbate existing economic and social challenges.

Observers note that the freeze could potentially cut billions of dollars in assistance, as the US remains the world’s largest donor of international aid, having allocated approximately $72 billion in 2023 alone.

The halt also comes at a crucial time for Bangladesh, which has been working to stabilise its economy after a tumultuous year marked by political unrest and economic strain. The suspension of aid could further impact the country’s efforts to address poverty, public health challenges, and climate-related issues.

Uncertainty Looms

Stakeholders in Bangladesh and beyond are now grappling with uncertainty as they await further directives from the US government. Development experts fear that prolonged disruptions could undermine progress achieved in critical areas such as healthcare, education, and infrastructure development.

The Yunus-led interim government has yet to issue an official response, but sources within the administration have expressed concern over the potential ripple effects of the funding suspension. “We are in discussions with our international partners to assess the next steps and mitigate any immediate impact on ongoing projects,” a senior government official said.

Meanwhile, US-based non-governmental organisations operating in Bangladesh are seeking clarity on the situation and are hopeful that exemptions or alternative funding mechanisms may be explored to continue essential work.

With the Trump administration’s review of foreign aid policies underway, the future of US-funded programs in Bangladesh remains uncertain. The outcome of the 90-day evaluation period will likely determine whether the aid freeze will be lifted or if further long-term changes to US foreign assistance strategy will be implemented.

For now, Bangladesh faces a challenging road ahead, navigating the economic and humanitarian consequences of this sudden and sweeping policy shift.