The impact of USAID funding freeze on global development and energy transition
- 19 February 2025
- Posted by: Greg Coleman
- Category: energy transition
USAID, the United States Agency for International Development, was established in 1961 by President John F. Kennedy. Its primary objective is to promote global development, humanitarian assistance and economic growth in developing countries. The organisation’s mission is clear: to end extreme poverty and promote resilient, democratic societies.
Origins and aims of USAID
USAID operates with an annual budget of approximately $30-35 billion, providing assistance across Africa, Latin America, Asia and the Middle East. The agency supports a broad range of programmes:
- Global health: providing HIV/AIDS treatment through initiatives like PEPFAR, malaria prevention schemes and maternal and child health support.
- Food security: implementing the Feed the Future initiative to support small-scale farmers and address hunger.
- Education: enhancing literacy and improving school access for children in conflict-affected regions.
- Economic growth: offering microfinance and entrepreneurship programmes to stimulate local economies.
- Humanitarian relief: delivering emergency aid during natural disasters, conflicts and refugee crises.
Potential implications of a funding freeze
A freeze on USAID funding could have far-reaching consequences.
Immediate disruptions would include the suspension of critical health programmes, delays in food distribution to famine-stricken regions and pausing of infrastructure development and education support projects. Vulnerable communities reliant on USAID assistance could face increased food insecurity, deteriorating health services and heightened economic instability. Refugees and displaced individuals would be particularly affected as essential services are cut off.
Geopolitically, a reduction in US aid could weaken American influence in developing regions, creating opportunities for competitors like China to strengthen their presence. This shift could strain diplomatic ties between the U.S. and aid-recipient nations.
Operationally, nonprofits and partner organisations might be forced to downsize or close, resulting in job losses and the halting of critical clinical trials—potentially reversing progress in global health research.
Energy sector development at risk
USAID is a key player in supporting energy access projects in developing countries, particularly in Sub-Saharan Africa and Southeast Asia. These projects often focus on off-grid renewable energy solutions and rural electrification. A funding freeze could delay or cancel these initiatives, limiting progress toward universal energy access.
USAID-backed energy projects frequently serve as a catalyst for private sector investment. The withdrawal of this foundational support could deter future investments, slowing down development in energy-deficient regions.
Impact on energy transition and security
Developing nations depend heavily on USAID assistance to transition from biomass based power to sustainable energy sources like solar and wind. In many areas, reliance on wood, coal and biomass (eg, dung and scraps) contributes to poor air quality and health issues. A funding freeze could hinder the move towards cleaner energy, exacerbating both environmental and public health challenges. For example, USAUD has been supporting the Infectious Disease Institute(IDI) in Uganda. Infectious diseases in the region threaten stability if they are not addressed. Uganda has developed a robust health risk mitigation plan supported by the IDI, but the threat to the TotalEnergies oil development is ever present. Malaria, Ebola, Mpox and dengue come with people moving from neighbouring countries.
Furthermore, reduced support could impede climate resilience efforts in regions already vulnerable to extreme weather events, undermining both energy security and climate adaptation progress.
FEP’s work in East Africa, Namibia and Ghana has highlighted the importance of energy access in improving both environmental and economic conditions. FEP provides ESG and HSE training, as well as conducting energy audits for clients operating in these regions. These efforts help businesses transition to cleaner energy sources while ensuring safety and sustainability standards are met. A USAID funding freeze could severely impact such projects, stalling progress and limiting opportunities for local capacity development.
Geopolitical consequences in energy markets
Diminished US development aid could allow China and Russia to increase their influence in energy infrastructure projects across Africa and Asia. For example we see increasing movement of Russian military capability in Libya and Chad. This shift could reshape energy partnerships, potentially diminishing the West’s strategic foothold in these regions.
Geopolitical consequences in energy markets
Diminished U.S. development aid could allow China and Russia to increase their influence in energy infrastructure projects across Africa and Asia. For example we see increasing movement of Russian military capability in Libya and Chad. This shift could reshape energy partnerships, potentially diminishing the West’s strategic foothold in these regions.
Private sector collaboration gaps
Uncertainty surrounding funding could disrupt ongoing collaborations between USAID, private companies and local governments. This could limit opportunities for knowledge transfer, technical advisory support and capacity building—ultimately slowing the growth of local energy sectors.
Long-term innovation setback
USAID has historically played a pivotal role in supporting early-stage energy innovations, such as solar mini-grids and battery storage technologies. Funding cuts risk stalling these advancements and delaying the achievement of global energy access goals.
Future Energy Partners prospective
The USAID funding freeze poses a substantial risk to energy transition efforts in developing markets. It threatens to stall electrification projects, erode private sector confidence, weaken US geopolitical influence and delay progress towards renewable energy adoption. This could set back global energy access and climate resilience efforts by several years – particularly in Sub-Saharan Africa, where FEP’s clients operate. FEP’s work in these areas has demonstrated that sustainable energy solutions not only drive environmental benefits but also empower local communities and businesses. Without consistent funding, this progress is at risk.
Supporting your energy transition every step of the way
The transition from conventional hydrocarbons to cleaner energy is a transformative journey that requires careful planning, innovative solutions and strategic support. At Future Energy Partners, we recognise that this transition takes time, and we are here to assist at every stage – from enhancing the efficiency of existing operations to achieving full energy transformation.
Future Energy Partners is dedicated to helping clients navigate the complexities of this transition while maximising opportunities.