Keeping in line with the campaign promise of “America First,” the Trump administration has prioritized domestic interests while slashing the United States’ global financial commitments. Pakistan, like many other countries, has also had its foreign aid axed; however, Islamabad is not a stranger to these fluctuations, having seen U.S. financial aid ebb and flow significantly over the last 60 years.
New U.S. President Donald Trump’s latest cuts have suspended $845 million in funding for projects in Pakistan. As a result the country faces yet another phase of uncertainty. This raises questions about its economic stability, security, and diplomatic ties, potentially straining future Pakistan-U.S. relations.
Historical Context of U.S. Aid to Pakistan
U.S. aid to Pakistan has always been more than just financial assistance – it’s been a tool of influence, a strategic handshake, and at times, a bargaining chip. From Cold War alliances to post-9/11 counterterrorism funding, the aid relationship has followed a pattern: When Washington and Islamabad’s interests align, the money flows; when they don’t, the tap is turned off.
Back in the 1950s and ‘60s, the United States saw Pakistan as a crucial ally against Soviet influence in South Asia. The two became close under military pacts like the Southeast Asia Treaty Organization (SEATO) and Central Treaty Organization (CENTO), and in return, Pakistan received military and economic aid to modernize its forces and economy.
According to data compiled by The Guardian, between 1954 and 1965, U.S. economic assistance to Pakistan totaled in the billions (with $2.3 billion in 1962), with significant drops in military aid after India-Pakistan wars in 1965 and 1971. This aid was instrumental in modernizing Pakistan’s military capabilities and supporting its economic development during that period.
The relationship deepened in the 1980s during the Soviet-Afghan War. Washington poured $32.5 billion into Pakistan’s military and civil services to support the Afghan mujahideen fighting Soviet troops. This was Pakistan’s golden era of U.S. aid – money, weapons, and political backing flowed in freely.
But the Pakistan-U.S. relationship soured in the 1990s. Once the Soviet Union collapsed, Washington lost interest in Afghanistan, and suddenly, Pakistan’s nuclear ambitions became a problem.
In 1990, under the 1985 Pressler Amendment, the United States cut off $564 million in military aid to Pakistan for the fiscal year 1991, citing concerns that it was developing nuclear weapons. The message was clear: Aid was conditional, and if Pakistan didn’t fall in line with U.S. interests, the dollars would stop coming.
Then came 9/11, and the dynamic flipped again. The U.S. needed Pakistan as a frontline ally in its War on Terror, so the aid floodgates reopened. Billions were funneled in – both military and economic aid – to help Pakistan fight extremist groups along its border with Afghanistan.
Washington relied heavily on Pakistan for intelligence, drone operations, and counterterrorism efforts. But over time, the U.S. government grew skeptical of Pakistan’s commitment, especially as reports surfaced about militants allegedly finding refuge on Pakistani soil. This led to $300 million cuts in aid, with tensions growing over security concerns.
As this brief history shows, U.S. aid has never been free money; it has always come with strings attached. Whether it was pressuring Islamabad to curb its nuclear program, or tying aid to counterterrorism efforts, Washington has used financial assistance as a means to shape Pakistan’s policies.
Even in 2024, shortly before Trump took office, the pattern continued. On December 19, U.S. Principal Deputy National Security Adviser Jonathan Finer raised alarms about Pakistan developing long-range ballistic missile capabilities, suggesting these missiles could potentially reach targets far beyond South Asia – even the United States. In response, Washington imposed sanctions on four Pakistani entities – including the National Development Complex (NDC) – involved in the missile program, once again using financial and diplomatic pressure to influence Islamabad’s defense policies.
Now, with Trump’s decision to cut aid once again, history seems to be repeating itself.
The Trump Administration’s Approach to Foreign Aid
From the moment Trump stepped into the Oval Office, his message was loud and clear: America First. That meant cutting back on what he saw as unnecessary spending abroad – including foreign aid to countries previously benefitting from the assistance of the United States. To Trump, U.S. tax dollars should not be used funding development projects in other countries when the United States has its own problems to fix. His administration thus slashed foreign aid across the board, except for military aid to a few select allies like Israel and Egypt, who remained in Washington’s good graces.
Just days after Trump ordered a 90-day funding freeze and review to ensure U.S. aid aligns with his foreign policy goals, Pakistan was already feeling the impact. Funding for 11 governance programs, as well as projects under the Ambassadors Fund for Cultural Preservation (AFCP), has been put on hold.
The decision came on the heels of a “stop-work” order issued by the U.S. State Department on January 26, effectively freezing all existing foreign assistance and putting a pause on new aid. According to a cable seen by Reuters, this directive was drafted by the State Department’s foreign assistance office and signed off by Secretary of State Marco Rubio. While the cable confirmed that military financing for Israel and Egypt would continue, it made no mention of aid exemptions for any other nations.
Meanwhile, State Department spokesperson Tammy Bruce released a statement addressing the decision but avoided naming any specific countries. “Consistent with President Trump’s Executive Order on Reevaluating and Realigning United States Foreign Aid, Secretary Rubio has paused all U.S. foreign assistance funded by or through the State Department and US Agency for International Development (USAID) for review,” the statement said.
“Every dollar we spend, every program we fund, and every policy we pursue must be justified with the answer to three simple questions: Does it make America safer? Does it make America stronger? Does it make America more prosperous?” Rubio was quoted as saying in the statement.
The Specific Impact on Pakistan
Trump’s latest move to suspend U.S. aid isn’t just a political statement – it’s already having a tangible impact in Pakistan, shutting down critical projects across multiple sectors. From cultural preservation to energy, agriculture, education, and healthcare, the cuts are hitting hard.
One of the first casualties is the Ambassadors Fund for Cultural Preservation (AFCP) – a program that, ironically, symbolized U.S. respect for Pakistan’s heritage. Since 2001, this grant has supported the restoration of historic sites, the preservation of Indigenous languages, and the protection of traditional crafts, funding over 1,000 projects in 133 countries. As per the U.S. Embassy and Consulates in Pakistan, the fund has supported over 30 projects in Pakistan, totaling to over $8 million. Now with the suspension of aid, vital conservation efforts seem to be left in limbo.
The freeze has also halted five key energy projects, including initiatives such as Pakistan Private Sector Energy Activity, Power Sector Improvement Activity, Economic Recovery and Development Activity, and Pakistan Climate Financing Activity meant to improve power distribution and promote clean energy investments. Pakistan’s energy sector is already struggling, plagued by corruption, political instability, circular debt, excessive dependence on non-renewable and imported fossil fuels (59 percent of the total energy mix) and obsolete power distribution mechanisms. Now it will have to navigate these challenges without U.S. support.
Economic growth programs have also taken a hit, affecting investment promotion and economic recovery initiatives. The Social Protection Activity, which was supposed to continue until 2025, has been abruptly cut short, potentially leaving vulnerable communities without financial assistance.
Pakistan’s agriculture sector, which relies on external funding for development and climate adaptation, is feeling the pinch too. Several programs, aimed at enhancing water management (Water Management for Enhanced Productivity), improving food security in flood-affected regions (Flood Affected Districts of Pakistan), and boosting climate-smart farming (Climate Smart Agriculture and Recharge Pakistan) have been paused. With climate change already worsening agricultural productivity, Pakistan’s wheat harvest could drop by 50 percent by 2050, making this aid cut even more damaging.
Efforts to strengthen democratic institutions, electoral processes, and governance structures in Pakistan have also been sidelined. Programs focused on land registration, local governance, community resilience, and peacebuilding have either been halted or are now in jeopardy. For a country where political stability remains fragile, losing this support could slow down much-needed reforms.
Education programs – particularly those aimed at improving girls’ education and strengthening higher education systems in Sindh and Khyber Pakhtunkhwa – are now on hold. Among them, the Improving Girls’ Education Activity was expected to be completed in 2025. It has now been halted, along with the Higher Education System Strengthening Activity and Education Resilience Activity.
The suspension of education programs in Pakistan threatens to exacerbate existing challenges. In Khyber Pakhtunkhwa, the net literacy rate for girls is 15.37 percent to 35 percent, significantly lower than the 71 percent for boys. Sindh faces similar issues, with approximately 52 percent of boys and 58 percent of girls aged 5-9 out of school.
Similarly, in the health sector, crucial projects targeting tuberculosis prevention, maternal and child healthcare, and global health security have been paused. Pakistan is among the eight countries that account for two-thirds of all new tuberculosis cases globally, with with over 510,000 incidents annually, around 5.7 percent of global cases. As per the National TB Control Program’s 2019 report, the country also faces challenges with drug-resistant tuberculosis, with an estimated 4.2 percent of new cases and 16 percent of previously treated cases being drug-resistant.
The halting of critical aid programs could further hinder progress in education and health, disproportionately affecting Pakistan’s most vulnerable populations.
Who Pays the Price?
When governments play political chess, it’s often the most vulnerable who take the hardest hit. Take healthcare, for instance. Some 60 health facilities are likely to be hit due to the U.S. aid suspension. The Integrated Health Systems Strengthening and Service Delivery program – which worked on improving public health infrastructure – is now on hold. That means fewer resources for clinics, fewer trained healthcare workers, and ultimately, fewer people getting the care they need.
In education, programs aimed at improving girls’ schooling in underserved areas have been halted. In a country where access to quality education is already a challenge, this setback could have long-term consequences for future generations.
And let’s talk about civil society. Many nonprofits and grassroots organizations that worked on democracy, governance, and human rights depended on U.S. funding, which has now been halted. Two examples are Catholic Relief Services (CRS), which between fiscal years 2013 and 2022 received approximately $4.6 billion from USAID and International Relief and Development Inc. (now Blumont), which implemented the Sindh Community Mobilization Program, .
Then there’s the economic impact. Programs that supported small businesses, agriculture, and infrastructure – many of which created jobs and helped struggling communities – are now frozen. That will lead to slower economic growth, fewer job opportunities, and even greater financial strain on families already struggling to make ends meet.
Foreign Policy Ramifications
When the United States stops the cash flow, Pakistan doesn’t just sit around waiting – it pivots. And right now, that pivot means leaning even more toward China. The China-Pakistan Economic Corridor (CPEC), already a massive part of Pakistan’s development strategy, just became even more crucial. As of November 2023, Pakistan owed China $68.91 billion, which was 22 percent of its total external debt. With public debt at 74.3 percent of GDP, Pakistan is becoming more financially dependent on China, relying heavily on its investments and loans. But with the United States stepping back, Pakistan has little choice but to seek assistance from China.
This isn’t just about Pakistan – it’s part of the bigger picture of the China-U.S. competition in South Asia. China has been expanding its influence across the region, bringing not only Pakistan but also Afghanistan, Bangladesh, Nepal, and Sri Lanka into the Belt Road Initiative (BRI). Beyond Pakistan, China emerged as a donor during the civil war in Sri Lanka and helped build ports on the island. It has also invested $7 billion in Bangladesh.
As U.S. soft power shrinks in the wake of these aid cuts, countries in the Global South might increasingly look to China for financial backing and strategic partnerships. While U.S. policymakers might argue that foreign aid isn’t a priority, the reality is that power vacuums don’t last long.