Gutting of USAID: Implications for Social Protection?

News of the US Agency for International Development (USAID) 90-day funding freeze and subsequent gutting (plus potential merging with State Department) has sent ripples around the world, with more question marks than answers at this stage. Only one thing is certain: we are all hugely concerned about what impact this will have on the lives of the most vulnerable people on the planet.??

?But among the confusion there are some very visible implications that will be extremely relevant to the social protection sector, especially in Fragile and Conflict Affected settings. We have been reflecting on a few of these with colleagues tagged below (and others not tagged as I do not as yet have permission!), acknowledging it is still early days…?and everyone's feedback/insights are most welcome.

You may not expect the direct impacts on the social protection sector to be dramatic, because of:

1. the paradox of the ridiculously small amount of international aid it currently receives as a sector, compared to e.g. health (as most recently stressed in a report by the Special Rapporteur on Extreme Poverty and Human Rights, discussing the ‘almost complete neglect of social protection in current ODA streams’); and
2. the reluctance that USAID has always had to finance and support social protection (rather than humanitarian aid).?

In fact, it is worth saying this loud and clear: social protection systems globally – including in some of the world’s most complex emergencies – WILL continue operating despite the USAID freeze. They will do this because they are (most often) government owned and led; institutionalised within government structures and capacities (not dependent on external staff); and – despite facing dramatic financing gaps and struggling to leverage domestic financing – they are designed to be resilient and sustainable. More on why this is important below.?

Having said this, the indirect impacts on the social protection sector are likely to be plentiful – and will require our full attention:?

• The UN system has high dependency on US funding: Most UN agencies – including those playing a big role in supporting social protection systems and in providing large ‘social assistance’ programmes - WILL be dramatically affected, though the full extent of this is yet to be seen (after the ‘180 day review’ announced in the new February 4 Executive Order). As summarised by the New Humanitarian, their dependance on US funding compared to other donor agencies is vast (e.g. 57% IOM, 49% UNAIDS, 42% WFP, 26% UNICEF). How this shapes agencies' programming is still to be seen, but some impact on social protection – and the medium-term systems building agenda is likely, especially with financing for ‘life-saving’ efforts under strain.

• ?Some of the most vulnerable countries will be the ones losing the highest percentage of US funding: in 2024, ‘the U.S. was the largest donor for every country-based Humanitarian Response Plan, accounting for 50.3% of total funding across 24 crisis-affected countries’ (see e.g. here). And this is in a landscape where no other traditional bilateral donors seem to be stepping in to fill the gap. We need to recognise that this is part of a longer term international trend, as many governments deprioritise international aid expenditure – see recent aid budget cuts in France, Germany? and Switzerland, while even Norway and the Swedes are shifting aid policy to pursuing national interests (more on shifting aid landscape here). The void will have immediate consequences on the capacity to provide humanitarian aid, with direct impacts on the needs (and thus caseloads) that the social protection sector will need to be picking up. This is a bad version of a zero sum game, especially as the financing gap in terms of addressing needs was already huge for both social protection and humanitarian sectors.?
• ..not to mention the criticality of this event in terms of future increases in poverty/ vulnerability (i.e. need), due to human capital losses from budget cuts across the board (health, education, water and sanitation, the list is long)..

• The US government waivers on what is 'in' and 'out' of his executive order are still unclear, including whether cash assistance has made the cut. As the Cash Learning Partnership alongside others have started advocating, cash is 'lifesaving', but what this advocacy will lead to is yet to be seen (with potential implications on cash transfers via government systems).?

• Impacts on IFIs are also still uncertain – clarity on this is needed given the big role played by the World Bank in financing social protection efforts.?

• The impact of Trump's (and the Government that supports him) wider agenda on social protection is likely to be considerable. Not least:? a) His crusade against ‘diversity’, ‘equity’ and 'inclusion’ in every shape or form, which will have devastating effects on the gender and disability inclusion agendas, including in the social protection sector, among others; b) The US exit from the Paris Agreement, which will likely have implications for global climate financing, at a time when social protection was preparing to tap into this source e.g. via inclusion into Nationally Determined Contributions (NDCs)...?c) His position on migrants and refugees, which will have massive social protection implications, e.g. in scenarios where there are likely to be scores of IDPs and refugees with no more access to internationally-provided services from one day to the next (old analysis from us on the issue here - needs updating of course, but the political issues come to the forefront).?
• Indirect effects are also there, for example the US walking out on the UN Tax Convention negotiation.

?The number of questions arising for the social protection sector is vast – and requires some strategic framing. As many of us in the sector have been saying for years, truly considering future sustainability (a world where foreign assistance is only needed in extreme situations) should fundamentally change the way we globally prioritise work on social protection (embedded in the Universal Declaration on Human Rights and far beyond) – and this holds true for humanitarian actors who are often de-facto providers of social assistance and even social services. Some scattered reflections from us on this:?

• We've known for a long time that an international aid system that is highly dependent on a few sources of finance is a fragile system. Why were we unable to act on our own analysis (e.g. here) and get ahead with building a more diversified, robust and just aid system? And as we anticipate shockwaves on other major social protection and humanitarian donors - World Bank and other bilaterals, what do we need to be doing to move towards deep system reform of the international financial architecture?? The UN Rapporteur’s report cited above on Financing Social Protection Floors is another great starting point – this is the real nut worth cracking.?Including getting the basics right (good old Public Financial Management) and zoning into domestic financing and building up the tax base.
• Let's also remember this is not the first time that disruption to the aid system that has come from a major government donor (though the size of the shock here is unparalleled). A resilient system is diversified, localised, inclusive, and deemed fair. Social protection can tick all of these if it is designed to do so, and can also be in place in advance of – rather than response to – any crisis, far more than any humanitarian solution. Wouldn’t increased funding to support national systems and workforce (alongside efforts to increase coherence across silos) not only be the right, sustainable, but also the more cost efficient and effective, thing to do (offering value for money, including in conflict settings)??

• What is the appetite of other/more donors to get involved and step up to the plate so that aid overall can be less US dependent (e.g. regional, country based, IFIs, philanthropy, private sector)? What about debt relief? Is this a chance for a significant shift in how aid is delivered: to really focus on national systems and local (including state!) actors before defaulting to international organisations? How can we prevent international organisations from acting in a way that keeps them employed and preserves the status quo??

• How can each and every one of us, in our own capacities, help to shift the dial – honouring our joint pursuit of collective outcomes across sectors (as in the Grand Bargain call)? For example, what research is needed and country-level support required to ensure the social protection taps are not switched off and systems-building work pursued so far is not lost, but reinforced??

Ultimately, as the scramble to protect what's strictly 'life-saving' plays out in the wake of the aid freeze, let's not forget about the critical role of social protection – as we've seen through pandemics, conflicts and disasters, this is the ultimate protection to catch the people exposed to the greatest shocks on the planet while nurturing them to withstand future shocks and addressing their lifecycle risks and essential needs (we take this for granted in high income countries! Imagine not having a pension). If we forget that and discount social protection as neither core-humanitarian nor growth-development enough, we risk deepening dangerous holes that will be hard to fill in future. Of course, this is not really about the sectors impacted, but the people whose vulnerabilities and needs will be dramatically affected..

?What do colleagues from across the globe feel vis-à-vis this gloomy yet hopeful analysis? How would you frame this moment so as to advocate for much-needed shifts? What are we getting right and wrong in this very rough analysis, beyond not having delved sufficiently into the politics??

???Written alongside Sophie Pongracz Carla Lacerda Anna McCord sophia swithern Edward Archibald Ric Goodman Courtenay Cabot Venton Rebecca Holmes Paul Harvey with support from others too!

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