KATHMANDU, Jan 28: A recent decision by the new US administration to pause all American assistance funded by or through the State Department and the US Agency for International Development (USAID) has sent ripples across the globe, including Nepal. With uncertainty looming over whether ongoing funding will continue after the 90-day pause—during which the US government will "reevaluate and realign" its foreign aid—concerns are growing about how this will shape US-Nepal relations and whether Nepal will retain its priority in US foreign assistance.
Newly-appointed US Secretary of State Marco Rubio has emphasized that all US spending, programs and policies must align with three core goals: enhancing America’s safety, strength, and prosperity. Some experts in Nepal interpret this as a shift in US foreign assistance from altruistic motives to a focus on achieving strategic interests.
“This clearly indicates that the US is becoming more ‘introverted’ in its foreign policy outlook,” says former Foreign Minister Ramesh Nath Pandey. “This posture will significantly impact the global order and power balance, compelling countries like Nepal to navigate a more complex world carefully.” Pandey believes this marks a fundamental shift in US foreign policy, necessitating strategic adjustments by Nepal.
Experts also caution that the implications of the US administration’s decision go beyond economic cooperation, potentially affecting Nepal’s broader development strategy and security. Although many believe that most of the ongoing projects will resume after the 90-day pause, the resumption may hinge on their alignment with the strategic goals of US foreign assistance—namely, enhancing American safety, strength, and prosperity.
52% of country's foreign aid went to province 3
“We might see other bilateral donors following the US lead, prioritizing their strategic interests,” Pandey adds. “For a country like Nepal, which struggles to meet its recurrent expenditure through internal revenue and depends heavily on foreign assistance for development, this will impact the overall security. Nepal must view this as a significant policy shift and devise an appropriate strategy.” The US aid is believed to have indirectly helped Nepal balance its relations with India and China.
As the Trump administration focuses on advancing economic interests, tensions with China have already surfaced, with President Donald Trump threatening to impose hefty tariffs on Chinese goods. While some experts believe US-Nepal relations will be significantly influenced by US-China dynamics, others disagree.
Prof. Jayraj Acharya argues that US support for Nepal was not solely driven by its considerations of China. “The US began its engagement in Nepal to fill the strategic vacuum left by the UK’s withdrawal from India in 1947. The US aimed to ensure Nepal remained sovereign and independent,” says Acharya, who also served as Ambassador of Nepal to the UN.
Prof. Acharya highlights the US role in eradicating malaria, promoting community forestry, land reforms, health, literacy, maternal and child health, and advancing democracy. “The US has always prioritized Nepal’s sovereignty and independence. While the current foreign policy pronouncement is highly US-centric, internal pressures from Congress and the Senate may eventually dilute this approach.”
In May 2022, the Government of Nepal and the USAID had signed a new Development Objective Grant Agreement (DOGA). The US government and USAID had a five-year strategic plan for Nepal with a commitment of $659 million. This includes both on-budget and off-budget funding.
President Trump’s executive order to pause all US-funded assistance through the State Department and USAID for 90 days is already impacting Nepal. At least four major government-implemented projects in partnership with USAID—focused on health ($25 million), agriculture ($21 million), education ($85 million) and inclusive policy—have been temporarily stalled, disrupting initiatives to improve health outcomes, boost food security and expand quality education.
The suspension decision is also set to adversely impact the government-to-government health programs, which receive $5 million annually from the US. According to Healthy Ministry officials, the US had recently committed $25 million over five years to support Nepal's health sector, but the recent decision raises concerns about the future of this funding.
In addition, funding for around 300 NGOs, consultancies and nonprofits has been frozen, affecting diverse sectors. While $550 million-MCC to which Nepal government contributes an additional $197 million, military aid and disaster response assistance remain unaffected for now, projects that do not align with the Trump administration’s priorities such as issues related to nutrition, climate change and LGBTQI, are expected to face cuts.
Despite these challenges, many experts remain optimistic about a gradual relaxation of US foreign assistance. “The suspension decision is part of the ‘America First’ policy. The US administration understands that if it withdraws, other countries will fill the vacuum,” argues former Foreign Secretary Madhu Raman Acharya. “I don’t think this will have a lasting impact on Nepal. There’s no reason to panic—for now.”
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