What is U.S. Foreign Aid?

According to opinion polls, many Americans believe about one quarter of the federal budget goes toward foreign aid. But the truth is foreign aid typically makes up about 1 percent of the U.S. budget.

These overestimations may reflect a misunderstanding of foreign aid in general. For example, a 2013 survey found that, even though about half of Americans think the foreign aid budget should be cut back, as many as 82 percent support foreign aid when asked about its specific programs or goals.

So what is foreign aid? And why does the United States send billions of dollars worth of it to other countries each year? This resource explores the various types of aid that the United States distributes, the goals behind U.S. foreign aid, and the impact that aid has on both recipient countries and U.S. interests. 

What is foreign aid?

Foreign aid is the money, services, or physical goods that a country sends to another to help it in some way. Foreign aid might support the recipient country’s economic growth, strengthen its social programs, respond to a crisis, or improve its defense capabilities. For example, during a health crisis, a country might send money to fund local hospitals, services in the form of doctors to administer medication, and goods in the form of those medicines themselves.

The United States has consistently been the largest single provider of foreign aid worldwide in total dollars. Since World War II, the United States has distributed almost $4 trillion (adjusted for inflation) in foreign aid. But most developed countries spend a higher percentage of their GDP on foreign aid than the United States does.

How does the United States use foreign aid?

For decades, the U.S. Agency for International Development (USAID) has played a leading role in coordinating U.S. foreign aid. Founded in 1961 against the backdrop of Cold War tensions, the agency was designed to promote economic development and counter Soviet influence abroad. USAID became a core pillar of U.S. foreign aid, even after the Cold War. In 2023, the agency accounted for over half of all U.S. foreign aid.|

Depending on the project, about twenty other departments and agencies are also involved in distributing U.S. foreign aid. These include the Department of State, the Department of Defense, Peace Corps, and economic development-focused Millennium Challenge Corporation.

Foreign aid typically falls into four general categories:

• Humanitarian aid: Humanitarian aid consists of materials or other forms of assistance for people in need due to manmade or natural disasters such as war, famine, and extreme weather. This type of aid often aims to address the immediate needs of a population in crisis. In 2020, for example, the United States committed $4 billion in humanitarian assistance to an international partnership aiming to provide COVID-19 vaccines to ninety-two low- and middle-income countries.
• Development aid: Development aid includes investments in the long-term economic development of a country or community. This type of aid aims to give people the building blocks to develop their own businesses and continued sources of income into the future. For instance, in 2016, USAID focused on providing economic development aid to Bangladesh by partnering with local banks to give loans to low-income farmers to build their businesses.
• Military aid: Military aid includes arms, training, money, or other forms of assistance for the explicit purpose of defense. For example, the United States has provided more than $100 billion worth of military equipment to Ukraine since Russia’s full-scale invasion of the country in 2022.
• Political and economic aid: Political and economic aid supports political stability, economic policy reforms, and democratic institutions. It can provide general budget support in countries where the United States has strategic interests; it can also support activities such as peace talks, human rights organizing, political and criminal justice reforms, and treaty implementation. Following years of accusations of election corruption in Georgia in 2014, for example, USAID sent targeted political development aid to local organizations there to train and deploy election monitors.

Why does the United States use foreign aid?

The United States uses aid as a foreign policy tool to advance its interests abroad, while it also aims to promote democracy, improve humanitarian conditions, and advance economic development for the benefit of all people.

Many policymakers view foreign aid as a tool of soft power: a way to advance U.S. interests without resorting to more forceful methods. The idea is that countries receiving U.S. foreign aid are more inclined to view the United States positively and will be more likely to cooperate with it.

Another core belief that drives foreign aid is that investing in other countries creates a more stable, prosperous, and democratic world. This in turn benefits the United States by boosting its trade opportunities and reducing the risk of instability in a foreign country becoming a threat to U.S. security.

Does foreign aid work?

There is no simple answer to that question. Some experts note a lack of accountability for programs and places that receive aid to demonstrate effectiveness in achieving its goals. That accountability issue fuels criticisms that foreign aid is a waste of money. And in some cases, it’s difficult to determine whether foreign aid has achieved its goals: when, for example, the long-term goals include broad concepts such as sustainable development or a more peaceful world, measuring outcomes is difficult, especially in the short term.

Sometimes the effects of foreign aid can be more easily identified. As of 2023, the President’s Emergency Plan for AIDS Relief (PEPFAR) has delivered care to more than 20 million people and provided training for 340,000 health workers around the world (much of this progress was made in sub-Saharan Africa). (When the program launched in 2003, only fifty thousand people in Africa had access to any antiretroviral treatment.) Projects like PEPFAR that distribute humanitarian and development assistance demonstrably save lives and promote long lasting development.

But other programs are more of a mixed bag. Despite having received more than $100 billion in U.S. aid since 2002, several USAID projects in Afghanistan remain unfinished. When misused, foreign aid can perpetuate graft, reward mismanagement, and prop up authoritarians. The bottom line is that foreign aid can help but it can also be wasteful or even harmful.

What is the future of U.S. foreign aid?

Upon taking office in January 2025, President Donald Trump has sought to overhaul U.S. foreign aid strategy to cut spending that Trump characterized as wasteful and counter to U.S. interests. In March, the Trump administration announced that it would terminate 83 percent of USAID contracts. It also announced plans to merge USAID into the State Department and cut nearly all of the agency’s current staff of more than ten thousand people around the world.

Other forms of foreign aid, including many military aid programs, have remained in place, although Trump momentarily paused U.S. military aid to Ukraine and has signaled that his administration would consider cutting or reducing other programs.

Trump’s cuts to foreign aid have met widespread criticism among experts and humanitarian workers, who warn that they could undermine U.S. leadership abroad and endanger vulnerable communities. Several organizations have launched legal challenges seeking to halt or reverse aspects of Trump’s foreign aid policies. As those are determined, however, questions of how much foreign aid the United States will continue to provide, to whom, and for what purpose, remain uncertain.

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