Foreign Aid Freeze Results in Mass Layoffs That Could ‘Crash’ the Industry

Thousands of U.S. workers in the foreign development field are being furloughed or laid off, as the industry coffers run dry.

People protest against a funding freeze of federal grants and loans following a push from President Donald Trump to pause federal funding.

“I can’t even begin to describe how cataclysmic it is, everyone is furloughing or laying off staff,” said one person. “It’s almost 5,000 people, and it’s just starting.” | Ben Curtis/AP

By Maggie Miller and Carmen Paun

02/04/2025 01:59 PM EST

The Trump administration’s halt on foreign aid is starting to hollow out international development groups and private federal contractors that carry out aid missions abroad — and threatens to cause long-lasting damage to U.S. engagement around the world.

Last month, the State Department ordered an immediate pause on U.S. foreign aid for 90 days and issued “stop-work orders” on nearly all existing foreign assistance awards. This swift decision has effectively left many government contractors and global aid providers — including groups that supply HIV/AIDS care, provide child health services, set up education programs, fight food insecurity and counter disinformation in developing nations — struggling to operate or pay their workers.

Eight U.S.-based individuals who work in the foreign aid sector, all granted anonymity due to concerns about retaliation from the administration, told POLITICO that the foreign aid freeze had undermined their ability to carry out global aid efforts. Some predict that thousands of foreign aid professionals across the industry may soon be out of work.

“I can’t even begin to describe how cataclysmic it is, everyone is furloughing or laying off staff,” said one person. “It’s almost 5,000 people, and it’s just starting.”

The U.S. is the largest provider of humanitarian assistance globally, deploying billions of dollars through multiple agencies, including the U.S. Agency for International Development. The majority of USAID’s funds are awarded competitively through contracts, grants or cooperative agreements with international development groups and private federal contractors.

These organizations often pay out of pocket to support their missions abroad and are reimbursed by the federal government. But a break in federal funding for these critical programs has left many organizations in crisis mode.

It may take months or years for some of these federal contractors and NGOs to recover, while others do not have enough funding to survive the 90-day freeze.

“We’re currently looking at the possibility of many hundreds of seasoned professionals in the humanitarian and development and human rights field going completely out of business,” said a senior executive for an aid group.

One person who spoke to POLITICO said their group had not received federal funding for more than a month. Another individual said they expected multiple non-governmental organizations to declare bankruptcy this week. A third blamed what they said was the “30-day world” of development, where the organizations are paid out by the federal government month to month. If that lapses, funds run out fast, making the situation urgent.

“Every company has lost so much now as a result of offering these furloughs,” one person who works in the industry said. “Even if they start back up say two months from now, there’s likely going to be very few implementations … they will have no more staff.”

Another person who works for a USAID contractor said that looking at their projects and budgets, there was no way to sustain themselves for “even a fraction” of the 90-day pause period. “It’s not a pause if there are no pieces to be picked up when you want to resume. It would be like pausing feeding your dog for 90 days.”

Secretary of State Marco Rubio has issued a waiver allowing “life-saving humanitarian assistance” to continue, though the definition of that assistance remains vague. One person who spoke with POLITICO said the funds from that waiver program had not yet begun to flow, and the stop work order was still in place.

A State Department spokesperson said via email that some salaries and administrative expenses, including travel for U.S. direct-hire staff conducting ongoing programs, will be allowed to continue under waivers. “Staff have been given a template for waiver requests,” the spokesperson said.

The spokesperson underlined the purpose of the aid freeze was to ensure it’s aligned with the America First foreign policy agenda. “For far too long, the United States foreign aid industry and bureaucracy have not been aligned with American interests, and in many cases, antithetical to American values,” the spokesperson wrote. “They serve to destabilize world peace by promoting ideas in foreign countries that are directly inverse to harmonious and stable relations internal to and among countries.”

USAID did not respond to a request for comment.

A State Department official clarified in a memo Saturday which parts of the President’s Emergency Plan for AIDS Relief — which delivers HIV treatment for millions of people, mostly in Africa — were covered. But Sen. Bill Cassidy (R-La.), the chair of the Senate Committee on Health, Education, Labor and Pensions, wrote Monday on the social platform X that he was told “drugs are still being held at clinics in Africa.” Cassidy asked for that to be reversed.

This crisis is likely to intensify as the Trump administration makes moves to fold USAID into the State Department, which could further complicate how funding for these groups is decided and distributed.

Some influential Republicans support the idea of folding USAID into the State Department and welcome a mass restructuring across the industry. Rep. Brian Mast (R-Fla.), who chairs the House Foreign Affairs Committee, told CBS’ Face the Nation on Sunday that he wasn’t concerned about the layoffs “because of the grift that has been working on to the American taxpayer, the American worker.”

Mast said only between 10 to 30 percent of the money USAID handled was ultimately going to aid and that he’s working with Rubio “to make sure there’s the appropriate command-and-control of these agencies.” Researchers dispute the claim that such a low percentage of USAID funding reaches its intended beneficiaries.

Some of these anticipated layoffs have already begun. According to an email obtained by POLITICO, early last week development group Credence Management Solutions sent formal emails to contractors in its global health bureau laying off around 400 employees.

The CEO of DT Global, one of the world’s leading development contractors, reportedly told employees last week that 2,000 to 3,000 positions would likely be eliminated in the sector the first week of February. Both Credence Management Solutions and DT Global did not immediately respond to a request for comment.

A director at a leading USAID contractor who spoke with POLITICO said that more than two-thirds of their company would be furloughed by the end of the week, describing the future of the sector as “bleak at best.”

“This is starting to look like an industry crash,” a different person in the aid sector said.

In addition to companies facing crisis, individuals who work in foreign aid in Washington say the job market is about to be oversaturated with thousands of newly unemployed people with no clear path forward. One person who spoke with POLITICO had been due to begin a job in the foreign aid space but had their offer rescinded because the job no longer exists.

“We’re all flooding the next-door neighbor sectors, which cannot possibly absorb all of us,” the person said. “Even though we know we’re each other’s competitors, there is still a community that I hope we’ll maintain.”

In an interview for “The Megyn Kelly Show” last week, Rubio said that the aid pause was meant to provide the federal government with time to review existing contracts. He noted that the funds should “be a tool that we use to advance the national interest,” and asserted that the U.S. government “is not a charity.”

One individual who had worked in the foreign aid space through multiple administrations stressed that while it was typical for there to be a review of contracts at the start of a new administration, the blunt approach the Trump administration is taking goes well beyond what has been done in previous years.

“Each administration has their own priorities, they take a pause, they reflect, they review, they adjust,” the person said. “What is damaging is the fact that it was so abrupt and unequivocal.”

“It’s very challenging to have a reform conversation when you’re in the middle of shutting everything down,” another person added.

The groups affected are those across the spectrum, including the International Republican Institute, which counts Republican senators on its board and carries out pro-democracy work abroad. IRI President Daniel Twining said in a statement to POLITICO that he believes a review of foreign aid funding is “quite in order,” but that “we can only hope that the review happens expeditiously, because our adversaries aren’t pausing, and they would relish in seeing [foreign assistance] go away.”

As the U.S. waffles on foreign assistance, other nations may be waiting to fill the voids created. Specifically, the Chinese government has pursued its “Belt and Road Initiative” for the past decade to build infrastructure in developing nations around the world — particularly in Latin America and Africa — and exert political influence.

Some lawmakers are also particularly worried about this prospect. The top Democrats on the House and Senate committees with oversight of the State Department and of USAID on Friday sent a letter to the agency making clear their strong concerns around the funding pause.

“Not only will lives be lost, but we are also ceding ground to China, damaging our standing in the world at a time of heightened geopolitical competition,” the lawmakers wrote.

Sen. Chris Murphy (D-Conn.), a member of the Senate Foreign Relations Committee, tweeted Saturday that “China will fill the void” in developing nations, which will “ONLY be able to rely on China for help.”

Beyond giving Beijing and other adversarial nations an opening, the funding freeze also risks undermining the U.S.’ standing around the world as a reliable development partner. The withdrawal of U.S. funding, often a key way that the nation builds trust and relationships abroad, could knock the nation’s public diplomacy efforts.

In some cases, this involves direct assistance to other governments, helping to secure the U.S. by maintaining allies in times of peace. That method looks set to disappear.

“We have spent more than 50 years building up goodwill around the world, because it’s the right thing to do, and it protects our national security,” a person in the foreign aid sector said. “It costs a whole lot less to feed someone than it does to kill someone.”

Holly Otterbein contributed to this report.