Policy Updates

On June 12, 2025, the CGD released analysis that found that the US State Department is not substantially filling the funding gap left by the dissolution of USAID in early 2025.

USAID has issued 72 new awards since January 20, 2025, totalling under US$9 million, primarily for logistics, office closures, and support services. There have been no major new foreign assistance contracts, and most obligations have focused on administrative functions rather than direct assistance. A small number of contracts relate to humanitarian work, including ocean transport for therapeutic food and a human rights program.

The State Department has issued approximately 8,000 awards, with a total value of less than US$900 million, compared to US$1.9 billion in the same period in 2024. Most large contracts are directed toward embassy renovations, security, and public awareness, rather than foreign assistance or global health. As of late May 2025, the CGD found that the State Department has only obligated US$2.5 billion of US$21 billion available for global health programs.

The State Department is expected to take over all award management from USAID by July 15, 2025. CGD warned that there is a need to address capacity and expertise for managing complex development programs to maintain the delivery of lifesaving assistance.

On June 10, 2025, US Secretary of State Marco Rubio ordered all USAID overseas positions to be abolished by September 30, 2025, with control of foreign assistance programs being transferred directly to the US State Department.

The directive impacts hundreds of USAID staff globally, including foreign service officers, contractors, and local employees in over 100 countries. The State Department will take over foreign assistance programming from USAID starting June 15, 2025.

On June 10, 2025, the World Bank released an Economic Prospects Report that projected that the global economy will slow significantly in 2025, largely due to US trade policies that disrupted international commerce and heightened global uncertainty.

The report projected that global growth will fall to 2.3% in 2025, down from 2.8% in 2024 and below the 2.7% initially forecast in January 2025. While a recession is not expected, ongoing trade tensions are contributing to what may be the weakest decade of growth since the 1960s, with economic development stagnating in many of the world’s poorest regions.

Growth in emerging markets is set to outpace that of HICs, but many low-and middle-income countries are still struggling to recover from pandemic-related losses. Slower growth will hinder countries’ ability to create jobs, reduce extreme poverty, and narrow income gaps with HICs. The World Bank suggested that halving global tariffs and mitigating trade tensions could boost growth by 0.2% by 2027 and encouraged low-and middle-income countries to lower trade barriers to stimulate their economies.

Chief Economist of the World Bank Indermit Gill cautioned in the report that without swift course correction, living standards around the world could face severe blows. The report highlighted that global cooperation is essential to support the most vulnerable developing economies through multilateral action, concessional finance, and emergency assistance for conflict-affected countries.

On June 4, 2025, new findings from the Global Climate and Health Alliance showed that only 21 of 195 countries party to the UNFCCC Paris Agreement have submitted updated NDCs for 2035, nearly four months past deadline with most NDCs mentioning health benefits, such as reduced air pollution, but few including systems to track health outcomes.

The GCHA reviewed 11 countries’ NDCs and found that while many reference health benefits, only the UK’s plan includes specific air quality monitoring. Kenya’s NDC aims for 100% renewable energy and a 35% emissions cut by 2035, yet does not explicitly measure air pollution benefits. Brazil’s NDC focuses on deforestation and fossil fuel transition but lacks clarity on new oil extraction and zero deforestation pledges. The US, after submitting its plan, has withdrawn its targets, weakening global momentum.

Recent NDCs highlight varied approaches: New Zealand targets “super pollutants” but is seen as unambitious; Japan’s continued fossil fuel use has significant health impacts; Canada is phasing out coal; and the UAE is developing a national monitoring system. However, most plans fall short of the 1.5°C goal, with the UK as a notable exception.

The World Bank estimates that halving global exposure to dangerous air pollution by 2040 would require annual investments to rise from US$9 billion in 2020 to US$14 billion in 2040. Despite this, climate finance commitments remain inadequate, and the ;abbrUS exit further strains resources.

On June 3, 2025, the US Congress received a US$9.4 billion rescission request to claw back previously approved funding, with US$8.3 billion to be cut from the State Department and USAID.

The request is the first of several expected before the end of the discal year. The package includes funds already targeted by DOGE. If Congress passes the package, which requires only a simply majority, the cuts will become law.

Assistance to Europe, Eurasia, and Central Asia would be eliminated entirely. Other notable cuts included:

• US$1.7 billion cut from the Economic Support Fund, nearly half of its approved funding for 2025;
• US$500 million cut from USAID programs for MCH, HIV/AIDS, and infectious diseases;
• US$437 million cut from voluntary contributions to UN agencies, including UNICEF, UNDP, and UN Population Fund;
• US$400 million cut from the State Department's global health programs for HIV/AIDS;
• US$496 million cut from USAID's international disaster assistance fund;
• US$200 million cut from assessed contributions to the Contributions to International Organizations account, impacting UN organizations;
• US$83 million cut from the Democracy Fund's appropriated budget of US$345 million;
• US$57 million cut from the Transition Initiatives account from its appropriated budget of US$75 million; and
• US$27 million cut from the Inter-American Foundation and US$22 million from the US African Development Foundation, both around half of their respective budgets.

Congress controls the federal budget, approving annual funding for government operations, with the president needing congressional consent to defer or withhold funds. The rescinded funds can then be redirected or returned to the Treasury. Congressional committees have 25 days to review the request. After committee approval, the package moves to the House and Senate for expedited votes, where Congress has 45 days to act on the request.

The Congressional Budget Office estimates the US government is on track to spend ~US$7 trillion in 2025, with the rescission request equivalent to 0.1% of government spending.

On May 30, 2025, officials from the US government announced the termination of a US$258 million program for HIV vaccine research at Duke University and the Scripps Research Institute.

A senior agency official stated that NIH leadership reviewed the consortia for HIV/AIDS vaccine development and immunology and decided not to support its continuation, stating that it will focus on using existing approaches to battle HIV/AIDS.

While ongoing clinical trials based on the work may continue, ending the programs indicates that no new candidates will enter trials in the future.

Public health experts have criticized that the cuts will hinder progress against HIV. Since 2010, new HIV infections have decreased steadily, but in 2023, the WHO still reported 1.3 million new cases, of which 120,000 were found in children.

On May 29, 2025, the US State Department informed Congress of an updated reorganization that would slash staff by 18%, eliminating 3,448 jobs as well as key human rights and refugee offices.

Positions eliminated include several special envoys and the undersecretary for civilian security, democracy, and human rights. Over 300 bureaus and offices will be affected, with regional bureaus taking over day-to-day decisions on foreign assistance as well as the duties of functional or thematic bureaus and offices.

The department also introduced a new Office of Natural Rights to emphasize traditional ‘Western values’ and counter perceived free speech issues in Europe and other ‘developed’ nations.

According to the organizational chart, US President Donald Trump would appoint a new Undersecretary of State for foreign assistance and humanitarian affairs, who would also oversee disaster response. The appointee would need to be approved by the Senate.

On May 22, 2025, a fiscal bill from US President Donald Trump that was passed by the House of Representatives, with the notable inclusion of a 3.5% tax on remittances sent by workers in the US to foreign nations.

Originally planned at 5%, the proposed tax was lowered before the vote. Under this legislation, workers would pay an additional 3.5% federal tax, plus 6% to banks and remittance companies, totaling nearly US$10 from every US$100. This would make the US the most expensive G7 country from which to send remittances. Critics of the tax assert that people sending money from the US are effectively being taxed twice, as they must also pay income tax on their earnings.

The measure has faced significant criticism for its likely effect on the families of immigrants and migrants from Africa, Latin America, and Asia who work in the US. Under the bill, Nigerians would see the largest absolute reduction, with remittances decreasing by approximately US$215 million. Gambia and Liberia would experience the largest relative impact, as remittances account for about 25% of GNI.

The World Bank reports the US is the largest supplier of remittances, totaling more than US$656 billion in 2023. Remittances to low- and middle-income countries rose by 3.8% from 2022. Global remittances in 2023 were estimated at US$860 billion, more than global ODA and FDI combined. The UN has stated an aim to reduce remittance fees to less than 3% by 2030, however, the current global average is twice that.

The Senate must confirm the wider fiscal spending bill for the tax to come into practice.

On May 20, 2025, at the Qatar Economic Forum, US government advisor Elon Musk responded to estimates from UNAIDS predicting that the discontinuation of PEPFAR could result in 4 million additional AIDS-related deaths by stating he would ‘fix’ the crisis stemming from the withdrawal of US funding for HIV/AIDS services.

Musk, who implemented significant cuts to USAID under DOGE, previously stated when pressed that that useful parts of USAID had been transferred to the State Department. UNAIDS published a positive reaction to Musk's assertion and emphasized the urgent need to resume funding for global HIV/AIDS prevention and treatment services.

Many HIV/AIDS prevention programs supported by PEPFAR have not resumed operations, despite a limited waiver for some testing and treatment efforts focused on pregnant or breastfeeding women to continue.

On May 20, 2025, during a State Department budget hearing, several US Democrats on the Foreign Relations Committee expressed regret over US Secretary of State Marco Rubio's confirmation and sharply criticized recent action on foreign assistance.

The Trump administration took action to dissolve and integrate USAID into the State Department in early 2025, resulting in considerable reductions in the capacity to provide foreign assistance. Democrats contended that the elimination of USAID was unlawful and emphasized the adverse effects of reducing foreign assistance. Rubio was also accused by several Democrats of overstating the amount of wasted foreign assistance dollars.

Rubio challenged claims that diminished foreign assistances would cede influence to global competitors, asserting that the US will continue to be the largest foreign assistance contributor globally.