USAID cuts hit Jordan's economy and most vulnerable with immeasurable ripple effect

The kingdom, which hosts millions of Syrian and Palestinian refugees, is the US agency's third-largest recipient of aid

The severance of USAID funding is expected to immediately affect critical support for vulnerable groups in Jordan, including people with disabilities and millions of refugees. AFP

A decision to suspend US aid through the United States Agency for International Development (USAID) has sent “ripple effects” across Jordan's aid-reliant economy with a “devastating” effect felt by its most vulnerable groups – from refugees to people with disabilities – as the agency's third-biggest aid recipient reels from the fallout.

US President Donald Trump's order to shut down the agency will have far-reaching economic and geopolitical consequences for the kingdom as thousands of workers across USAID, contractors and partner agencies are laid off or put on leave, leaving life-saving programmes in the aid-dependent country hanging in the balance.

About 35,000 employees, both Jordanian and Americans, from public and private sector organisations working on US projects have lost their jobs, according to preliminary estimates by the NGO sector in Jordan.

The result has limited or severed access to essential services funded by the US agency such as health care, education, water projects, public infrastructure projects, gender-based violence response and protection programmes, and critical support for Syrian and Palestinian refugees in Jordan, according to members of NGOs and development communities.

In addition to upending its economy, suspending USAID “will have a devastating effect on human security and stability in Jordan and beyond”, the head of one of the country's larger NGOs told The National on condition of anonymity.

This will be “double devastation” for the underprivileged and marginalised, including refugees, the organisation leader added.

Ripple effect

Jordan is a strategically important country for the US and hosts nearly 3,000 American troops, according to a Congressional Research Service Report in 2022. US assistance has helped Jordan address serious vulnerabilities, both internal and external, it said. Jordan’s small size, refugee burden and lack of major economic resources have made it dependent on aid from western and various Arab sources.

The suspension of USAID will hit the beneficiaries that were receiving essential services from programmes funded by the agency as their activities come to a halt and the money dries up.

It goes beyond the numbers. It's a ripple effect on the whole economy

Jordanian NGO head

One of Jordan's larger NGOs said that more than 50 per cent of its budget comes from US sources and the aid block has affected its operations “tremendously”.

Its nearly 700 staff members have been “hit hard”, while its about 300 volunteers, who are mostly Syrian refugees or low-income earners, are completely dependent for their livelihoods on this work.

A programme focused on physical and mental health is “being hit the hardest” because the majority of its work is supported by USAID.

In January, the organisation had to stop providing services to 13,000 people with disabilities.

“They don't have access any more to screening, rehab services, mobility aids and psycho-social support. Immediately we had to stop [services], so imagine the devastating effect on these people.”

A second wave is expected in the next few months, as the organisation anticipates it must stop providing 58,000 beneficiaries, mostly vulnerable groups such as refugees, with sexual and reproductive health services and gender-based violence protection and rehabilitation services, said the NGO leader.

“Within one to two months, we have been hearing from UN agencies and others that we should expect more projects to stop, which means that we cannot afford any more to sustain a bigger number of staff.”

The organisation will also be forced to close community centres across Jordan, which will have “trickle effects across the ecosystem” in terms of rented spaces, consultants, suppliers and medical aid providers, she added.

“It goes beyond the numbers. It's a ripple effect on the whole economy.”

Ultimately, she expects her organisation to slash about 50 per cent of its budget, while the number of beneficiaries given access to services will also be halved in a worst-case scenario.

“We're talking about around 100,000 beneficiaries losing their services and maybe 30 per cent of the 700 staff we will have to let go,” she said. “It's the uncertainty and unpredictability of what's going to happen next … we are trying to mitigate this, because as an NGO we have an obligation towards our staff and we're trying to transfer people or find different means but it's a very harsh and hard situation we're finding ourselves in.”

Daoud Kuttab, director general of Amman-based Community Media Network, is also facing challenges following the USAID suspension.

The Strengthening Civil Society & Media Systems Activity (Sawt, Arabic for “voice”) – funded by USAID and implemented by Internews and partners – was launched to ensure “sustained civic engagement” in Jordan through civil society and digital media innovation, according to Internews' website.

“Our grant is aimed at our work with Jordanian youth and aims at improving our studio to be able to accommodate the needs of young Jordanians,” Mr Kuttab told The National. "The contract was signed, and equipment was approved and ordered before the suspension but now we are in limbo unable to receive the equipment and the staff we hired for this project cannot be paid.

“Even our attempts to talk to the USAID contractor Internews about the equipment shipment on its way have been blocked since they are no longer answering the phones or emails and are not even going to the office.”

As a result, “we are not able to honour the payment to the staff we hired based on the contract with USAID and our ability to carry out our programme and activities has been harmed”, he said. “The most important loss is that the end users, the youth that we were hoping to engage with as part of this grant will not be served.”

Mr Kuttab said they are searching for alternative funding but it will be difficult in the short-to-medium term since agencies have their own timelines that cannot be rushed.

“We are not dependent on the US for our general survival and we have for some time diversified our funding but this suspension has messed up our plans and we will not be able to carry out our strategy and activities, especially our goal of reaching young Jordanians and to transfer to a more digital environment,” he said.

Soft power's hard hand

Jordan and the US are close allies, and the kingdom hosts American forces under a treaty allowing them to deploy at Jordanian bases.

USAID was founded in 1961 and supports “strategically important” countries with humanitarian aid and US commercial interests by helping developing countries' economic growth, according to the Congressional Research Service Report.

The agency provided aid to some 130 countries in 2023, many of them shattered by conflict and deeply impoverished. The top recipients were Ukraine, followed by Ethiopia, and then Jordan.

“Jordan has long leveraged its geographic position to attract US strategic interest and therefore make its relationship with Washington more sustainable and long-lasting,” said Ryan Bohl, senior Middle East and North Africa analyst at US-based Rane Network.

“The US has been a long-time sponsor of Jordan because of its position next to Israel and the [Israel-Jordan peace] treaty that was signed in 1994 is in part guaranteed through US aid to Jordan.

“They are also very concerned about overall Jordanian stability and Jordan has a problem with Al Qaeda, with ISIS. So, aid is designed to help deradicalise some of the population. That's the major reason the US provides aid to Jordan.”

Mr Trump's decision to suspend aid through halting the work of USAID is seen as a pressure point of urging Jordan to agree to the President's plans. This includes Mr Trump's suggestion last week to take over and “clean out” Palestinians from Gaza, by having Jordan and Egypt take in the more than two million people.

Jordan's King Abdullah II rejected the proposal as he has been steadfast in supporting Palestinian rights and a two-state solution. His country – one of the Middle East's largest recipients of US foreign aid – faces a threat to its economic stability and security.

The halt of USAID assistance affects Jordan's economy to a “very large extent”, as the country is resource-poor and heavily depends on foreign aid, according to experts.

Economic impact

The move will have a cascading effect on Jordan’s economy, with several sectors affected, hitting it hard, according to Amro Zakaria, a global financial markets strategist and the founding partner of Kyoto Network and Madarik Ventures.

“Every dollar in development finance or development grants generates its own economy,” and if the money stops it will have a “multiplication effect”, he said.

Jordan receives financial support from USAID that goes towards development programmes. A second is defence and military co-operation, while a third is guaranteeing the sovereign bonds to support its economy.

“Jordan is a big benefactor of US foreign aid that comes from multiple institutions, whether it be the USAID, the developmental aid, or from the Defence Department like defence joint operations, US military bases in Jordan and the financial support that might not be monetary, but in terms of credit, where the US guarantees the payment of principal on Jordanian sovereign bonds,” Mr Zakaria said.

Because of the credit guarantees, the Jordanian government is able to borrow in the global capital markets at a very low rate.

“If that was not the case, then probably Jordan will not be able to borrow or if they borrow they will have to pay high interest rates,” Mr Zakaria said.

It received $1.27 billion worth of aid from the USAID in 2024, according to the US government data.

American support constitutes 7 per cent of public revenues and 40 per cent of foreign aid, totalling $1.45 billion annually (including $1.035 billion in economic assistance and $400 million in military aid)

In 2022, the US also signed a preliminary agreement with Jordan to provide the country with $1.45 billion worth of foreign assistance every year beginning in fiscal year 2023 and ending in 2029, according to a Wam report.

In December, the IMF said regional conflict spurred by the Gaza war is having a bigger impact than expected on Jordan’s economy. However, the fund also stressed that the country has shown resilience and managed to maintain economic stability.

The USAID suspension threatens Jordan's economic stability and development, Milad Azar, a market analyst at XTB Mena, said.

“The suspension of US aid to Jordan risks destabilising an economy where American support constitutes 7 per cent of public revenues and 40 per cent of foreign aid, totalling $1.45 billion annually [including $1.035 billion in economic assistance and $400 million in military aid],” he said.

Immediate impacts include layoffs in USAID-funded sectors such as health care, education and water infrastructure, worsening Jordan’s 21 per cent unemployment rate.

About 60 school projects and a $362 million water infrastructure programme have been halted because of the suspension of aid.

“The freeze also jeopardises 70 per cent of US aid allocated as direct budget support, threatening to widen Jordan’s fiscal deficit [projected at 3.5 per cent of gross domestic product in 2024] and escalate public debt [82.3 per cent of GDP],” Mr Azar said.

Jordan, which is the second most water-scarce country in the world according to the UN, will have its water-scarcity programmes face paralysis, threatening progress on irrigation and municipal supply projects. This is critical for a nation with less than 100 cubic metres of renewable water for each person.

Healthcare systems are also expected to be hit as maternal health initiatives and disease prevention campaigns lose funding, while the delayed construction of 60 schools under USAID’s Knowledge Economy programme exacerbates classroom overcrowding.

Long-term risks involve slowed GDP growth and geopolitical pressure to accept Palestinian refugees in exchange for aid restoration.

However, Jordan 2025 Vision, which aims to boost industry contribution to 27.4 per cent of GDP, provides buffers, alongside potential Gulf investments and private-sector growth in renewable energy.

Diversifying from US aid?

The extent of the impact on the Jordanian economy will depend on how long the aid interruption lasts, said Mr Bohl.

The US will also work to convince Gulf countries including Saudi Arabia and the UAE to provide more aid to Jordan, allowing the US to step back and “making the Gulf Arabs pay for it, since the Gulf Arabs have a greater imperative to keep Jordan stable than the United States does”, he added.

“After all, the US is on a whole different continent. Jordan is right next to Saudi Arabia.”

Jordan is also taking measures to diversify its revenue through tax reforms and targeted subsidies and not depend on US aid to sustain its economy.

The International Monetary Fund in December confirmed that, following the second review of its economic reform programme, Jordan would have access to about $131 million as part of the $1.2 billion four-year Extended Fund Facility (EFF) approved in January to support the country’s economic and financial reforms.

The country's economy is projected to grow 2.5 per cent this year from 2.3 per cent in 2024, according to the IMF.

“Jordan is on the right track with a lot of their tax reforms and spending changes more targeted subsidies, instead of cutting subsidies, they're directing it into places that are more effective,” Mr Bohl said.

The country is also seeking international investment in agriculture, alternative energy and industries to diversify its economy and develop it further.

“Their primary partners for that are, again, the Gulf Arab states, particularly the UAE and Saudi, are the states where they're getting a fair bit of that investment from but that's what they need to continue to do, is look towards the region,” Mr Bohl said.

In the case of one of Jordan's larger NGOs, they are “still hoping” that the historical good relationship between Jordan and the US will overcome this geopolitical hurdle and return needed aid inflows to the struggling country.

“I'm trying to reach out to philanthropists, family foundations … and we really need support globally [from the] US, Europe, Middle East,” said the NGO director, seeking to not only fill its current and massive funding gap, but also shift towards more reliable future aid partners. “We really need to make sure that we have an endowment that will make sure we don't go through this dilemma again.”