New Delhi: The suspension of nearly all US foreign aid, by order of President Donald Trump, is causing concern for Bangladesh’s economy and vital social programmes. Analysts ThePrint spoke to warned that the freeze is particularly worrying for US-funded projects across sectors like governance, health, and education.
The suspension of aid came after an executive order issued by the Trump administration on 20 January, which mandated a 90-day review of all US foreign assistance to ensure alignment with US foreign policy goals. While certain programmes, including emergency food aid and military assistance to Israel and Egypt, have been exempted, most others, including those under the US Agency for International Development (USAID), are affected.
Bangladesh, a key recipient of USAID funding, has relied on this aid to address global food security, improve its education sector, and manage economic challenges.
On 25 January, in response to the executive order, USAID issued a directive to its partners in Bangladesh, instructing them to immediately halt any work under their contracts.
“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 agency stated.
Work under these awards should not resume until written notification is received from the contracting/agreement officer confirming that the stop-work order has been lifted, it added.
In 2023, the US allocated $72 billion in aid, with $401 million directed to Bangladesh through USAID.
Also Read: Hasina’s Awami League calls for nationwide strike, labels Yunus govt ‘sponsors of radical militancy’
‘Very harmful effects for health sector’
Dr Ashikur Rahman, principal economist at the Policy Research Institute of Bangladesh, said the Trump administration’s decision to halt all foreign aid “is biting different sectors disproportionately and this will bear very harmful effects for our health sector if the interim government does not step in to carry on with the programmes in the absence of USAID funding”.
The freeze also affects the International Centre for Diarrhoeal Disease Research (ICCDRB), a leading health research organization in Dhaka. The ICCDRB has already issued termination notices to more than 1,000 employees involved in USAID-funded programmes, Rahman said.
Among the most at-risk programs is the Bangladesh America Maitree Project, a USAID-funded five-year initiative launched last February to strengthen civil society and promote sustainable development.
Analysts however, were unable to comment on the future of the initiative.
The interim government has sought $5 billion in financial assistance from international lenders. This is in addition to the $4.7 billion bailout the then Hasina-led government sought from the International Monetary Fund (IMF), to stabilize its shrinking foreign reserves, in 2023.
In the context of rising unemployment and economic instability in Bangladesh, this aid freeze is expected to worsen the situation. The country’s unemployment rate stood at 4.49 percent in the July-September quarter of FY2024, with approximately 240,000 new unemployed individuals, according to the Bangladesh Bureau of Statistics (BBS).
But a section of economists is also hopeful since the scale of USAID funding is relatively smaller when compared to other major development partners like Japan and China, the impact might not be ‘enormous’. “The overall impact on Bangladesh’s economy will not be enormous, given the size of the US grant,” said Dr Monzur Hossain, research director at the Bangladesh Institute of Development Studies (BIDS). “The positive aspect is that US aid for the Rohingya refugees remains unaffected by the embargo,” he added.
Yunus and Trump
The suspension comes at a particularly challenging time for Bangladesh’s Yunus-led interim government which is working to stabilize the economy and prepare for the general election after political unrest led to the ouster of former Prime Minister Sheikh Hasina.
Meanwhile, Yunus who had earlier in 2016, labelled Trump’s win as “a solar eclipse” and referred to Trump’s presidency as “black days”, in his role as the chief adviser of the interim government changed tack.
Post Trump’s inauguration, he wrote a letter to the US President, saying he was confident that under Trump’s leadership, the US “will prosper and continue to inspire nations around the world”. “Bangladesh and the US share a long history of cooperation in many fields. Our partnership has grown stronger during your first term, and I look forward to further strengthening our ties and promoting sustainable development,” he added.
Despite the broader suspension, Yunus’ press secretary, Shafiqul Alam, confirmed that US aid for Rohingya refugees in Bangladesh will continue.
Yunus, local media reports stated, was quick to thank Trump for the decision. Khalilur Rahman, special representative of the chief adviser, also visited the US Embassy in Dhaka to personally convey his appreciation.
Also Read: ‘Committed to creating a new Bangladesh, poll timeline hinges on reform process’: Yunus in Davos