USAID Freeze: Impacts of Funding Cuts on Egypt
Updated 2/11/2025 8:00:00 AM
Since 1978, the United States Agency for International Development (USAID) has been a key partner in Egypt's development.
Through programs designed in coordination with Egyptians, USAID has primarily fostered sustainable prosperity, especially in education.
However, recent developments involving funding cuts pose a threat to various sectors, affecting specific programs, including scholarships and skills development.
The Consequences of USAID’s Freeze
Over four decades, USAID has provided funding to bolster key sectors such as education, health, economic growth, and governance. In 2023, $26.28 million worth of the US aid package was allocated for education initiatives in Egypt.
Recently, US foreign aids have been frozen worldwide under President Donald Trump’s administration. As a result, thousands of USAID employees were furloughed or laid off and programs were halted, leading to the unexplained shutdown of the agency’s website on February 1st.
On February 6th, the Trump administration unveiled a plan to slash USAID’s workforce from over 10,000 to fewer than 300 employees.
This decision is part of a broader initiative to dismantle the agency. However, the remaining personnel will primarily focus on essential health and humanitarian programs.
Freezing USAID can have several impacts on Egypt. Economist Ahmed Zayed warns that halting USAID scholarships for Egyptian students could have long-term consequences.
“These scholarships have played a crucial role in providing access to quality education, fostering cross-cultural exchange, and enhancing workforce capabilities,” Zayed tells Arab Finance.
He further explains, “The disruption of such programs may slow down skill development, particularly in specialized fields where international exposure and advanced training are essential.”
“Without these programs, gaps in Egypt’s labor market could emerge over time, especially in sectors that rely on innovation and global expertise,” Zayed points out.
Saber Shaker, an international economics professor at the Faculty of Commerce, Helwan University, a former local economic development consultant at UN-HABITAT, and a former innovation and entrepreneurship consultant at USAID, highlights additional risks.
He tells Arab Finance: “Vocational educational initiatives aimed at improving literacy and access to quality education, especially in rural areas, are now vulnerable.”
“Also, economic development projects promoting small- and medium-sized enterprises (SMEs) and job creation may face setbacks. This could hinder Egypt's efforts to boost economic growth and reduce unemployment,” Shaker elaborates.
He adds, “Any disruption could have long-term repercussions on human capital development and inclusive growth.”
Exploring Innovative Financing Mechanisms
To address potential funding gaps from USAID reductions, Egypt needs to explore several alternatives. In this regard, Shaker emphasizes the need to prioritize domestic resource mobilization through tax reforms and improved revenue collection.
“Simultaneously, Egypt needs to develop a more attractive investment climate for both local and foreign investors. This involves streamlining regulations, reducing bureaucratic hurdles, and ensuring transparency and good governance,” as per Shaker.
Meanwhile, Zayed sees the situation as an opportunity. “The freeze on USAID funds is an opportunity to rethink Egypt’s approach to educational funding and development,” he says.
While alternative international partnerships, such as the EU, GIZ, or Gulf countries, could help bridge the gap, he believes that Egypt’s private sector can play a more active role,” he notes.
“Egyptian businessmen have a unique opportunity to step in and leverage their financial resources and industry expertise to invest in education and workforce development,” Zayed adds.
Shaker agrees, stating that strengthening partnerships with the private sector to leverage their expertise and resources in development projects is essential. Additionally, exploring innovative financing mechanisms, such as impact investing and social bonds, can help close funding gaps.
“A multi-pronged approach focusing on self-reliance, private sector engagement, and efficient resource utilization will be key to ensure Egypt's development trajectory remains on track,” Shaker stresses.
Moreover, Zayed outlines: “Scholarships, vocational training programs, and partnerships with local and international institutions can help the private sector fill the void left by USAID. This would ensure that education aligns with Egypt’s economic priorities and labor market needs.”
“Such a shift would mark an important step toward self-reliance and sustainable development, reinforcing the role of Egyptian businesses in shaping the country’s future,” Zayed indicates.
The potential reduction in USAID funding presents both challenges and opportunities for Egypt's education and training sector.
While USAID has played a long-standing role, Egypt now needs to strengthen domestic capabilities and explore alternative financing mechanisms to ensure continued progress.
By Sarah Samir
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