State Department Pauses Almost All Foreign Assistance Funding

On January 20, 2025, President Trump issued an Executive Order titled Reevaluating and Realigning United States Foreign Aid, aimed at ensuring U.S. foreign assistance is “fully aligned” with the administration’s foreign policy goals. The Order called for an immediate 90-day pause on all foreign development assistance, applicable to all assistance funding for foreign countries, NGOs, international organizations, and federal contractors.

Consistent with that direction, on January 24, 2025, the State Department, in a communique to all U.S. diplomatic and consular posts, officially “pause[d] all new obligations of funding, pending a review, for foreign assistance programs funded by the Department and [the U.S. Agency for International Development (“USAID”)].” For existing foreign assistance awards, contracting officers and grant officers were directed to “immediately issue stop-work orders . . . until such time as the Secretary shall determine, following a review.” (The pause does not apply to foreign military financing to Israel and Egypt, or to emergency food assistance.) USAID country officers began issuing stop-work orders that same day. 

The State Department’s January 24, 2025 communique requires the contemplated review of all foreign assistance programs to be completed within 85 days—by April 19, 2025—resulting in a report “to be produced to the Secretary of State for his consideration and recommendation to the President.” To facilitate that review, by February 28, 2025, State Department officials—in consultation with the Office of Budget and Planning and the Office of Management and Budget—must develop “appropriate review standards” “to ensure that all foreign assistance is aligned with President Trump’s foreign policy agenda.” 

Neither the Executive Order nor the January 24, 2025 communique define or outline “President Trump’s foreign policy agenda.” But given President Trump’s longstanding skepticism of foreign assistance programs, coupled with the new administration’s efforts to cut government spending, contractors may find that even long-standing programs could be subject to significant streamlining. 

Contractors supporting State Department and USAID foreign assistance programs should follow these developments closely and anticipate myriad program-specific updates to be released in the coming weeks. And in response to forthcoming stop-work orders, contractors should document all costs incurred through the stop-work, as well as costs incurred to pause and/or wind down existing programs as may be necessary.