As USAID Is Crushed, There Are Prospects—But Major Limits—For Private-Sector Action

The Irreplaceable Role of USAID in Global Development

The United States Agency for International Development (USAID) has long been the cornerstone of global development, providing critical funding, expertise, and infrastructure to address some of the world’s most pressing challenges. From clinical trials and demining efforts to anti-trafficking initiatives and violence prevention programs, USAID’s contributions are unparalleled. However, the Trump administration’s decision to dismantle this vital institution has sent shockwaves through the international development community. The abrupt halt to USAID’s operations is not only disrupting lifesaving programs but also undermining decades of progress in global health, education, and economic development. The private sector, while capable of contributing to development efforts, cannot replace the scale, expertise, and reach of USAID. As Aunnie Patton Power, an associate fellow at the University of Oxford, emphasizes, there is simply too much risk for private entities to take on the role of governments in the most vulnerable contexts.

The Trump Administration’s Assault on Foreign Aid

The Heritage Foundation, a conservative think tank, has long advocated for reshaping U.S. foreign aid to prioritize private-sector economics. This vision has gained traction under the Trump administration, which has sought to dismantle USAID and redirect its funding to other agencies like the Millennium Challenge Corporation (MCC) and the Development Finance Corporation (DFC). However, the current administration’s approach is far more radical than its predecessors. The DFC, once touted as a lender of last resort for countries without private capital markets, is now facing massive job cuts and a complete overhaul of its mission. This sudden shift has left many in the development community bewildered and concerned. Patton Power describes the situation as a “power play” with no clear strategy or coherence, noting that the people most affected are not American voters but vulnerable populations around the world.

The Devastating Consequences of U.S. Aid Cuts

The impact of the Trump administration’s aid cuts is being felt acutely in countries like Nigeria, where USAID has been a critical source of funding for HIV, malaria, and vaccine programs. While the Nigerian government has stepped in to provide emergency funds, these efforts are insufficient to offset the loss of U.S. support. The abrupt shutdown of aid programs has left many organizations scrambling to survive, with little option but to halt their operations entirely. Joia Mukherjee, chief medical officer of Partners In Health, warns that the consequences of these cuts will be dire. “People will die,” she says, as programs for tuberculosis, malaria, and other diseases are forced to shut down. The situation is further complicated by the lack of emergency funds and the challenges of mobilizing private capital in crisis situations.

Can Private Capital Fill the Void?

In response to the crisis, some organizations are turning to private capital as a lifeline. The Open Road Alliance, for example, provides bridge loans to nonprofit organizations and businesses in emerging markets to help them weather financial emergencies. These loans are designed to be repaid once other funding sources are restored, but they come with significant risks. Caroline Bressan, CEO of Open Road, acknowledges that one out of ten projects may fail to repay the loans, but she believes this is a necessary risk in the current climate. While private capital can play a role in sustaining critical programs, it is not a silver bullet. As Bressan notes, “we can’t build the market ourselves,” and there are limits to what private investors can achieve in the poorest and most vulnerable countries.

The Need for Diversified Funding Sources

The United States is not the only country shifting its approach to development finance. The U.K. and European Union are also increasingly focusing on private-sector investments to address poverty and climate change. However, this approach raises important questions about accountability, transparency, and the distribution of risk. Emma Mawdsley, a geography professor at the University of Cambridge, cautions that private actors are often less accountable than governments and may prioritize market-oriented solutions over human needs. At the same time, low- and middle-income countries are exploring new ways to cooperate on development initiatives, such as Colombia’s partnership with Haiti. While these efforts are promising, they highlight the need for a more strategic and diversified approach to funding.

The Limits of Private Development Finance

While private capital can play a role in addressing global development challenges, it is not a replacement for public funding. Many low-income countries are already struggling under the weight of foreign debt, and the shift toward private finance risks deepening inequality and vulnerability. Mukherjee warns that private investors are often focused on short-term returns rather than long-term human outcomes, such as the health and well-being of children or the resilience of local communities. The current aid model is on life support, and the international community must come together to protect the most vulnerable. This requires a renewed commitment to public funding, greater transparency and accountability in private investments, and a more balanced approach to development finance that prioritizes people over profits.