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Global aid cuts impact the world
The United States Agency for International Development (USAID), has undergone drastic cuts in the past seven months under the Trump administration, some of which are being challenged in court. But outside of the legal battles, the cataclysmic tremors caused by these cuts are already being felt by the rest of the world.
On September 9, 2025, Dr. Abhijit Banerjee addressed a briefing organized by the American Community Media, in partnership with the South Asian Literary Association, to discuss the impacts of President Trump’s cuts to the Global Aid system.
Dr. Abhijit Banerjee is the recipient of the 2019 Nobel Prize for Economics and the Ford Foundation International Professor of Economics at the Massachusetts Institute of Technology. He was awarded the Nobel, along with Dr. Esther Duflo and Dr. Michael Kremer, for championing the use of data and metrics-based developmental policies in order to accurately identify the causes of poverty and alleviate it.
“It is an understatement to say that this is a rather critical moment for the world,” began Dr. Banerjee. “We have seen a total repositioning of the US contributions to World Aid, but even more consequentially, the US is insisting that other Western countries also cut back on aid, and instead increase their defense budgets.”
USAID saved lives
According to a study published by the Lancet evaluating the impact of two decades of USAID, although the USA has been the largest donor in absolute terms—providing more than US $55 billion in official development assistance (ODA) in 2023 and accounting for approximately 30% of total Development Assistance Committee (DAC) countries’ ODA— it ranked only 25th out of 30 DAC members in terms of ODA relative to national income, allocating just 0·24% of its gross national income. By contrast, countries such as Norway (1·09%) and Luxembourg (1·00%) exceeded the 0·7% target of the UN, reflecting a substantially higher proportional commitment to international development.
The study findings also show that USAID-supported efforts have helped to prevent more than 91 million deaths across all age groups, including 30 million deaths among children.
Dr. Banerjee stressed the importance of these wins in the fight against Global Poverty more than once. He highlighted how far the world has come within a short period from 2001 – 2019. “Extreme poverty went down substantially, maternal mortality has vastly reduced, infant mortality halved, and education of children has gone up.”
The world was going in a very positive direction in terms of development and poverty reduction, he added. These cuts, however, may reverse the decades of progress.
Dr. Banerjee stated that for countries like China, India or Nigeria, aid is a small part of their budgeting needs. They can weather these shocks. But for smaller countries, like Lesotho where aid may contribute to a larger part of their budget, these cuts will leave deep scars. Added to this, the tariffs imposed on these small ultra-poor countries are going to further hurt their economies and lead to millions of preventable deaths.
According to forecasting models by the Lancet study, the current steep funding cuts— along with the potential dissolution of the agency— could lead to more than 14 million additional deaths by 2030, averaging more than 2·4 million deaths per year. These deaths include 4·5 million among children younger than 5 years, or more than 700 000 deaths annually.
“Is this the time to rethink ‘Global’ Aid?”
Will India & China step up?
In response to reporters from immigrant communities on how to tackle the crisis with grass-roots solutions that move away from Western-led systems of aid, Dr. Banerjee said, “This is the time for other middle-income countries to step up. China has already begun to do targeted aid projects, in a bid to increase their “soft power” and plug in some of the developmental gaps. India, too, can use this as an opportunity to increase its global influence and standing.”
He stressed the importance of moving away from narratives, often touted by the far-right, that depict the poor as lazy and undeserving (which they are not) to understanding the root causes of poverty, which are more likely tied to capitalistic expansion, land degradation, and several other factors, including climate change.
“Though USAID was said to be ineffective and corrupt, there has been no evidence of those claims. Even Mr. Musk’s DOGE couldn’t find any evidence of the same. It’s time to move on to what can be done in the future. Some countries, like Norway and Spain, have already stepped up their aid contributions. The solutions already exist. What we need now is global political will and money.”
Dr. Banerjee called for a rehaul of global aid. “If you take just 1% of the wealth of the top 3000 people in the world, that is around 140 billion dollars, you can do a good job of replacing some of the lost funding. It isn’t an impossible thing to do, but rather a matter of will.”
This article was written with support from the American Community Media Fellowship Program.