Introduction and background
President Donald Trump was sworn in on 20th
January 2025 as the United States (US)’s 47th President in
Washington D.C. This was the second time he was sworn into this office. He was
the 45th US President. He is a republican. He took over the
presidency from the 46th President, Joe Biden, a democratic. He signed off several executive orders immediately
after he was sworn in. One of the most consequential on the international
development sector is the executive order on foreign aid. Given the change of
administration most expected changes in domestic and international policies
after the inauguration. This has been the tradition for years whenever there is
a transition of power from the democrats to republicans and vice versa. The
executive order on foreign aid triggered the US Agency for International
Development (USAID) “Stop-Work- Order” notice. The notice was issued by the US
State Department on Friday 24 January 2025. Is the pause in funding a project killer
assumption? But, who would have known that guessed this would affect come US
funded projects and programmes all over the world? I am sure many people and
organisations have been taken by surprise.
Killer assumptions
Making assumptions is a key element of project cycle
management. Assumptions are made on the external factors likely to affect
implementation. This is a crucial aspect of strategic planning. The practice is
repeated at key stages once a project has been approved by a funder i.e.,
during project inception (start-up), implementation, phase-out and completion.
Some assumptions are called killer assumptions. These assumptions make implementation
of a project activity impossible.
The business proposal development team redesigns the project
if they encounter a killer assumption. One of the most common killer
assumptions is “no funding”. If this is detected at the design phase the decision
is often to discontinue the business proposal. Once the project has been
approved by the funder and the agreement/contract signed, the ‘no funding’ killer
assumption may still exist but is very highly unlikely to happen, unless there
are serious financial compliance issues e.g., fraud by the implementing agency
or their sub-awardees.
Stop Work Directive on US Foreign Aid
The “Stop-Work- Order” issued by the US State Department on
Friday 24 January 2025 is unprecedented and has rocked the international
development community. The order has triggered a 90 days pause in US foreign
aid flows. The directive immediately froze US foreign aid worldwide with
exemptions on emergency food programmes and military aid to Israel and Egypt. A subsequent temporary waiver was announced
for humanitarian programmes providing life-saving medicine, medical services,
food, and shelter and subsistence assistance on Tuesday 28 January 2025. The
pause will allow USAID to review and align the US foreign assistance priorities
with the new administration’s priorities.
The disruption in funding will affect thousands of
humanitarian, development and security programmes funded by the US. The US is
the world’s biggest providers of official development aid (ODA). According to
Associated Press US provides approximately 40 out of 100 dollars donated in ODA,
annually. Reuters, quoting UN figures,
estimates US donations to humanitarian aid at $72 billion dollars, in 2023.
Consequences closer to home: Zambia
No doubt this “Stop-Work-Order” has immediate and long term
effects for Zambia. USAID is one of Zambia’s largest sources of ODA, especially
in the health sector. The waiver on humanitarian programmes providing
life-saving medicine and medical services is a welcome relief. But, the country
needs to prepare for the outcome of the 90 day review.
The impact of this order will be greatly felt in the non-
Governmental Organisation (NGO) community in Zambia. These include
International NGOs, local NGOs and their sub-awardees (most community based
organisations). According to the USAID ‘Stop-Work-Order’ affected implementing
partners are required to take ‘reasonable steps to minimize the incurrence of
costs allocable to the work covered by this notice during the period of work
stoppage’. This will allow for payment of salaries and indirect costs for full
time employees in certain documented cases. However, downstream project
implementers especially community volunteers may not be eligible to get
stipends in some cases. This will greatly impact their disposable income. Moreover,
suppliers (vendors) and contractors providing services to USAID projects (e.g.,
conferencing packages) are immediately affected. The domino effect on their
turnover is obvious.
Key lessons and considerations
- Donor fatigue: There is no doubt that nation states are becoming more focused on internal rather than global policy agendas. Not so long ago (post 2020) the United Kingdom (UK) Government withdrew a significant amount of bilateral aid from several middle income countries. This was done as part of phasing out (abolishing) the Department of International Development (DFID). Several DFID funded projects and programmes in Zambia were scaled down or phased out. The Embassy of Denmark (and DANIDA), the Embassy of Norway (and NORAD) and the Embassy of the Kingdom of the Netherlands (EKN) phased out of Zambia and out of bilateral assistance to several local NGOs in the period 2006 to 2016.
- Donor diversification: The impact of the USAID ‘Stop-Work-Order’ is not highly significant for organisations that have a diversified donor portfolio. This stop may even work to their advantage if they are able to adapt and shift the freed staff time to resource mobilisation e.g., monitoring funding opportunities by other donors or drafting concept notes and proposals. This key organisational sustainability process is often neglected when operations are in full swing.
- Financial sustainability: This development is a wake-up call to invest in strengthening financial sustainability e.g., by creating and growing a reserve fund (or buffer funds). Reserve funds come in handy in times like this. USAID has been supporting the decentralisation of operations from international NGOs to local NGOs as part of local capacity strengthening (localisation) in Zambia. Several local NGOs have been awarded Fixed Amount Awards (FAAs) as part of this initiative. FAAs have simplified grant management requirements. Payments are based on achievement of milestones with no need for detailed cost tracking and reporting. This flexibility leads to budgetary savings. These savings could be channelled to the reserve fund (own funds).
- Corporate Social Responsibility and philanthropy: The private sector, owned by global and local corporates should be lobbied to support projects and programmes that are adversely affected by the USAID “Stop-Work-Order”. It is important for implementing partners and their sub-awardees to persuade the corporates on the added value for them to support these initiatives.
- Donor harmonisation, aid effectiveness and sector earmarking: There is need to relook at these aid delivery modalities. Assigning donors to specific sectors, e.g., health, education, social protection, water to the exclusion of other donors increases the risk to aid recipients. Imagine there is a total shift in US aid policy to Zambia after the 90 day review. This will be catastrophic for most of the health programmes that are implemented solely by funds provided by USAID. It is therefore important for the donor community to re-think and adapt the donor harmonisation practices to reduce operational vulnerability to grant recipients.
Conclusion
Killer assumptions are a project designer’s nightmare but
there is always a good option. The option is to go back to the drawing board.
The ‘no funding’ killer assumption is a project implementer’s worst nightmare
especially when there is no strategic risk management plan or an emergence
reserve or buffer fund. The Friday 24th January 2025 US State
Department “Stop-Work- Order” Notice will no doubt go down in history as one of
the memorable disruptions to US foreign aid assistance, globally. The greatest
impact in Zambia, in the short-term, will be on the field operations of USAID
single funded projects implemented by NGOs. One of the key lessons for the global
donor community is to re-think the sector wide donor alignment. This approach
makes implementing partners, especially single donor funded local NGOs, highly
vulnerable to funding shocks. On the flip side, this presents an opportunity
for philanthropists (foundations and charities) and the corporate sector to
step in and rescue the situation.
References
Ellen Knickmeyer, Samya Kulla, Farai Mutsaka, Matthew Lee, “A
US Shut down on foreign aid is hitting worldwide. Rubio adds more exemptions.”
29 January 2025. Associated Press: Washington, D.C., https://apnews.com/article/trump-foreign-assistance-freeze-684ff394662986eb38e0c84d3e73350b
Humeyra Pamuk, Maggie Michael, Lena Masri, “Trump
administration emo tells USAID to put “America First” in reviewing foreign
aid”, 26 January 2025, Reuters: Washington D.C., https://www.reuters.com/world/us/trump-administration-memo-tells-usaid-put-america-first-reviewing-foreign-aid-2025-01-26/
Katherine Gentic, “Costs Incurred under USAID Stop Work
Orders”. January 27 2025, LinkedIn https://www.linkedin.com/posts/katherine-gentic-366b285_usaid-stopworkorders-activity-7290045021037228033-MF5T/
Lowcode, M.,Dissanayake, R., 2024. The rise and fall of the
department for international development. Center for global development:
Washington D.C., and London
Norah Kalenga Mpundu, Fixed Amounts Award A tool for
sustainability”, 28 January 2025. https://www.linkedin.com/search/results/all/?keywords=Fixed%20Amount%20Awards%20Norah%20Mpundu
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