On January 20, 2025, the day following Donald Trump’s second inauguration, the President issued Executive Order 14169, reevaluating and realigning united states foreign aid. This directive aims for a 90 day suspension of all foreign aid obligations and new foreign aid disbursements except emergency food assistance and specific military aid and to assess the alignment of foreign aid with US interests. In a statement, the order lambasts the current foreign aid framework as not only in dissonance with traditional U.S. values but also possibly dangerous to the global peace.

The shockwaves were immediate across Asia, Africa and Latin America where development projects came to a halt, health programmes were foundering, and economies heading to the edge were thrown deeper into trouble. From NGOs struggling to keep HIV treatment programs afloat in Uganda and education efforts in Northeastern Nigeria to governments trying to fill holes in funding for rural roads in Cambodia¹, the cuts were very swift, and brutal as well. Foreign aid has undoubtedly had an enormous bearing on alleviating humanitarian crises, raising the range of health outcomes, and increasing the volume of educational opportunities. A concerted effort towards combating HIV/AIDS has been made by programs such as the President’s Emergency Plan for AIDS Relief (PEPFAR) which have saved millions of lives². In addition, organizations like UNICEF have initiated such initiatives that provided rapid and effective responses in case of emergency and ensured the children in crisis zones are not abandoned.

As a result, the critics say Trump’s decision is reckless, and that it is an abandonment of America’s soft power responsibilities. They are not wrong. The aid reduction puts millions in a state of uncertainty. Behind the current outrage about this issue, a more difficult question emerges: Why should the entire economies of nations depend upon decisions from one nation alone?

A Crisis, but Also a Moment of Reckoning

For a long time, the Global South has been dependent upon Western aid both as a safety net and a political lever as well. Billions of dollars flow annually from the U.S. government to finance different programs which range from food security initiatives to military support³. A financial dependence on foreign aid exists due to unavoidable conditions since many nations do not possess sufficient local tax revenue to maintain healthcare systems along with educational and infrastructure development. However, Trump’s decision shows an uncomfortable truth: Aid is not a guarantee and countries reliant on it put themselves in danger of large external shocks.

Trump’s move is not an isolated event. The mood of world opinion is changing, with Western donors making aid conditional on their strategic interests. In rethinking their development assistance model, the European Union is moving towards high priority of migration control and security cooperation rather than traditional poverty reduction⁴. Beijing is now reassessing its Belt and Road Initiative as China’s economic slowdown forces it to cut back on the flood of infrastructure loans that many African and Asian governments have come to count on⁵. In this new age, the Global South should be asking itself a very important question: Is now the right time to break away from aid dependency?

The Pitfalls of Perpetual Dependency

Foreign aid, while most of the times framed as benevolence, has a mixed legacy. In the best cases, it enables economic transformation, as it was the case with South Korea after the war when U.S. aid helped to form the basis for industrialization^6,7. Nevertheless, almost everywhere in the developing world, aid has actually served as a band aid, not a springboard. When external financing can fill the budget gap, many governments have such a little incentive to expand their domestic revenue base. In other versions, foreign aid undermines governance in ways that reduces leaders’ accountability towards their own people and instead makes them respond to foreign donors^8,9. The popular phenomenon known as the ‘resource curse’, which is very commonly ascribed to oil and minerals, also applies more widely to aid where easy money can foster, not just stifle, complacency¹⁰. Much more troubling however, is that dependence upon aid renders countries at the mercy of political changes in donor capitals.  The Trump cuts demonstrate this vulnerability vividly. Often times, decisions are made in Washington for a variety of reasons that have little or even nothing to do with development at all, and suddenly social programs thousands of miles away are upended.

Breaking Free: Alternative Economic Strategies for the Global South

To cut reliance on aid, Governments in the Global South have to rethink their economic strategies. That begins with trade. The African Continental Free Trade Area (AfCFTA) is a step in the right direction as it aimed at unlocking doorways to intra-African trade, and also scale back the reliance on Western markets. Similarly, the economies of Southeast Asia mirror this pattern to show that ASEAN type nation integration can be a strong economic development and growth force¹¹.

Taxation is another very crucial pillar. Many of the developing countries suffer from chronically low tax collection rates on account of inefficient systems, corruption and excessive reliance on extractive industries. Rwanda offers a very good example of strengthening taxation to achieve growth. Within the last two decades, the country has methodically increased tax compliance, grown its domestic revenue base, and reduced its strong reliance on foreign aids as well¹². Then there is investment. The focus should be on attracting private capital, both domestic and international. Regulatory stability and the generation of a business friendly environment along with the creation of necessary infrastructure are all of very much importance to ensure the industrialisation to take place. To a large extent, Vietnam’s swift transition from an aid dependent economy to a manufacturing juggernaut has been conditioned by its aggressive efforts to attract foreign investment, coupled with structural reforms¹³.

South-South Cooperation: A Partial Alternative

The reduction of American international aid in recent times has prompted stronger efforts towards South-South cooperation initiatives. China, India and Gulf states have enlarged their development finance programs by offering alternative financial partnerships to Western donor funding. Although South-South partnerships create new funding options, they are not a panacea. The infrastructure investment spree conducted by China for example, created increasing debt problems for many of its receiving countries. The loss of Hambantota Port control by Sri Lanka stands out as an important warning to other nations. India develops its position as a development partner but lacks the financial capacity to dismantle Western aid programs with a similar magnitude¹⁴. The lesson is clear: Diversification represents the primary strategy for achieving economic stability rather than making simple changes between donors.

From Crisis to Opportunity

The Trump aid cuts are an undeniable crisis for many. Nonetheless, these times represents a critical turning point. Governments which use this disruptive period as a driver for restructuring their systems about tax collection, regional trade and diversification, will convert short-term pain into long-term gain and lasting prosperity. None of this will be easy. A successful transition out of aid dependency depends on political determination and economic planning together with readiness to make very tough policy decisions. Evidence through previous achievements demonstrates these objectives can be achieved.

For the Global South, the concern should not be with surviving this latest aid shock only as it was before, it should be that when the next crisis comes, whether triggered by a Western political shift, a financial downturn, or another pandemic, it will not be left scrambling for survival. With the world becoming more and more uncertain, self-reliance is no longer a future aspiration. It is an immediate necessity! Will the Global South Countries utilize this situation for long-term economic sustainability or will they continue to remain dependent on future aid crises?