BLOG POST

Decoupling “Stop Work” Orders from “Stop Basic Care”: How New Aid Models Can Protect Countries from Unreliable External Financing

The Trump administration’s stop-work order highlights precisely why we need a new model for health aid—one in which domestic financing supports the highest priority, core health services.

On 20 January, the US State Department ordered an immediate pause on nearly all foreign aid spending (as we go to press it seems that USAID may be shut down altogether) . The “stop work” of US foreign assistance has immediate implications on the provision of life-saving programmes around the world; potentially affecting 1400 activities across 133 countries and regions. Under the President’s Malaria Initiative, 37 million insecticide treated bed nets were delivered in 2023. For now, it appears that selected activities considered “lifesaving support” have now been given a waiver, including PEPFAR, though many services remain subject to the freeze.

Even if the immediate crisis resolves, the episode reinforces that the status quo is vulnerable—and countries whose basic health services are aid-funded are at risk in the future to the political winds in high-income countries. Aid-recipient countries need to protect themselves from this vulnerability—and development partners need to help them do so. CGD’s New Compact for financing health services offers a potential solution—it would move countries to a new paradigm where domestic governments fund essential services, while donors shift to covering supplementary areas. This would protect the most essential services from aid shocks, which look set to be more frequent in the years to come.

Health aid was always volatile

The United States is the largest global health funder, and any shift in its priorities has ripple effects across the world—disrupting funding flows and threatening progress on critical health challenges. In the 2023 fiscal year alone, USAID disbursed $7.8 billion in health funding across multiple health focus areas (see Figure 1), accounting for nearly half (48%) of the total $16.1 billion the US spent on foreign health aid. Suspending this work carries severe consequences. Before mounting pressure on the Trump administration forced a waiver for lifesaving assistance, the stop work order included USAID’s flagship programme for support on HIV/AIDS, PEPFAR. PEPFAR provides HIV/AIDS medications for an estimated 20.6 million people annually and has saved 26 million lives. For PEPFAR alone, each day of the stop work order could mean, approximately 222,333 individuals who rely on antiretroviral refills lose access to treatment. Similarly, the Trump administration’s recently reinstated Mexico City Policy (known by opponents as the “global gag rule”) disrupted reproductive health services worldwide during his first term, reducing access to contraception and abortion care in countries like Uganda and Ethiopia, with effects that persisted even after the policy was rescinded.

Figure 1: US Health Aid, 2023  

IHME, (Source)

However volatility has been a longstanding feature of aid, with the Trump administration’s actions being only the most recent and extreme example. Political shifts frequently drive instability, as new administrations introduce new strategies, reallocate funding, or cut aid budgets altogether. From 2021 to 2022, the UK Foreign, Commonwealth & Development Office (FCDO) reduced bilateral aid to African countries by almost 30 percent, illustrating the broader risks of political volatility in global health financing. Beyond big shifts due to political change, volatility is baked into aid at the programme level. Three-to-five-year donor funding cycles often lead to disruptions, and implementation can often be delayed by months or even years after approval.

Countries must determine—and finance—essential health priorities

To address this issue of volatility and mitigate potential crises like the one unfolding due to the US freeze of foreign aid, countries can ensure they both define an essential package of health services and finance the highest priorities within it with domestic revenue. This means strengthening capabilities for evidence-informed priority-setting to determine national health priorities and ensuring there are effective public financial management systems to translate those priorities into services delivered. However, for many countries the package of services affordable to domestic budgets will be very limited indeed. Countries can then ask donors to better align with their priorities through support to expand that package—preferably through flexible funds, rather than earmarked support for the highest priority services.

CGD has been collaborating with a range of partners to develop a framework for a New Compact between countries and donors that adopts this approach. In short, the New Compact comprises three pillars:

  1. Locally-led evidence-informed priority-setting
  2. Domestic-first resource allocation
  3. Consolidated supplementary aid

The benefits of a New Compact approach to health financing go beyond reducing the risks of aid volatility. Such a shift can be expected to reduce fragmentation, avoid the displacement of domestic resources, improve prioritisation of both domestic and external funds, and empower national institutions.

Donor aid can facilitate global public goods, new capital investments, and an expanded package of health services

In the immediate term, the US must turn the tap back on for critical health services. If the new administration wishes to reduce external aid financing, it should do so responsibly and allow recipient countries an opportunity to make transition arrangements.

Donors should then collectively use this moment to recognise, and plan for, the volatility risk inherent to their offers. There is a strong rationale for high-income countries to take the lead on financing global public goods—and in an era of increasing self-interest for overseas financing, these are often easier to sell on grounds of increased national health security. And to be clear, there is still an important place for external assistance to finance health services; many of the poorest countries simply will not be able to maintain a decent level of healthcare without it.

The key is to move towards a model where aid takes its rightful place, as a top up to country priorities—helping countries expand the list of health services that they can provide their citizens versus directly providing the most basic, core care. Cross-cutting and capital investments in healthcare infrastructure can also be a good use of external financing, provided there is appropriate planning and financing for recurrent costs associated with running and maintaining the infrastructure. Though there are not necessarily bright lines between these categories.

There is widespread appetite for a new era in global health, exemplified by initiatives such as the Lusaka Agenda and Africa CDC’s New Public Health Order. Trump’s “stop work” order is a shock to a system that was already reckoning with its shortcomings, and there is likely to be further disruption to come. We should aim to ensure that the dust settles on a global health system that works better for the long-term interests of countries it aims to support. Decoupling external aid from direct financing of the most important health services in aid recipient countries would be a good start.

With thanks to comments from Erin Collinson and Sara Viglione.

Disclaimer

CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.


Image credit for social media/web: Celt Studio / Adobe Stock