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In a major development for US-Pakistan relations, the United States Agency for International Development (USAID) has officially resumed development funding to Pakistan, sources confirmed to ProPakistani. The decision reverses a previous suspension of aid and signals renewed cooperation between Washington and Islamabad in areas of education, infrastructure, and governance.
According to official sources, the Government of Pakistan has already received grants under two critical USAID-funded projects:
- U.S. Need-Based Merit Scholarships for Pakistani University Students (Phase II)
- FATA Infrastructure Program
Both programs will receive continued funding through June 2025 as part of the phased reinstatement of USAID operations in the country.
Background: Aid Suspension Under Executive Order 14169
In February 2025, the U.S. government froze nearly $845 million in assistance to Pakistan under Executive Order 14169, which focused on stricter oversight of foreign development aid.
The suspension primarily affected:
- Government-to-Government (G2G) funding
- Off-budget projects where USAID directly funds non-governmental organizations (NGOs) operating in Pakistan
The freeze was part of a broader U.S. effort to ensure transparency and accountability in how development funds are disbursed, especially in countries where institutional monitoring mechanisms are weak or fragmented.
Ongoing Negotiations Lead to Partial Reinstatement
Over the past several months, officials from the U.S. Embassy in Islamabad and Pakistan’s Economic Affairs Division (EAD) have held multiple rounds of talks to resolve the stalemate. Discussions have focused on reviving key development initiatives while addressing structural concerns related to:
- Oversight of NGO funding
- Alignment with national priorities
- Transparency in fund utilization
Sources familiar with the matter said that these engagements have helped rebuild trust, allowing for a partial reinstatement of aid ahead of broader negotiations on the remaining programs.
Pakistan Pushes for New Funding Mechanism
One of the central concerns raised by Pakistani officials involves the lack of government visibility into USAID funds disbursed directly to international or local NGOs. They have proposed a revised mechanism that would route USAID grants through relevant government ministries rather than bypassing them.
Proponents of the new structure argue it would:
- Improve transparency and coordination
- Ensure alignment with Pakistan’s development goals
- Prevent duplication of efforts or misallocation of resources
- Strengthen institutional oversight and monitoring
“Ministries currently have little to no visibility into how much aid is going to NGOs or what outcomes are being achieved,” an official from the Economic Affairs Division said. “That needs to change if this partnership is to remain productive.”
A Longstanding Development Partnership
USAID and Pakistan share a history of development cooperation spanning several decades. Over the years, this partnership has focused on:
- Education and scholarships
- Health and nutrition
- Infrastructure development
- Governance and democracy
- Economic growth
Notably, in 2010, both nations signed the Pakistan Enhanced Partnership Agreement (PEPA) to formalize this collaboration. PEPA was designed to streamline aid delivery and improve coordination across various sectors.
More recently, in 2023, the two countries signed a five-year Development Objectives Assistance Agreement (DOAG) worth $445.6 million. This agreement focuses on:
- Climate-resilient economic growth
- Inclusive governance
- Improved health outcomes
Additionally, a $407 million amendment to PEPA was signed in the same year to strengthen Pakistan’s broader development agenda.
Programs Reinstated So Far
1. Need-Based Merit Scholarships (Phase II)
This flagship scholarship program supports underprivileged yet talented students enrolled in Pakistani universities. Funded by USAID and administered in partnership with Pakistan’s Higher Education Commission (HEC), the program enables students from low-income families to pursue higher education—particularly in critical fields like engineering, business, and agriculture.
2. FATA Infrastructure Program
Designed to improve infrastructure in the formerly Federally Administered Tribal Areas (FATA), this program aims to promote connectivity, economic development, and integration into the national mainstream. Roads, water supply systems, and schools are among the areas of focus.
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Looking Forward: Full Reinstatement Possible?
While only a portion of the funding has been restored so far, discussions are ongoing about fully reactivating all suspended USAID programs. According to officials involved in the talks, both sides are optimistic but cautious, as transparency and audit compliance remain top concerns for the U.S. administration.
“There is strong interest in resuming broader cooperation,” said a U.S. official in Islamabad. “But accountability and strategic alignment will be central to how we proceed.”
If negotiations succeed, it could open the door for further aid in climate resilience, women’s empowerment, economic policy reform, and vocational training.
Conclusion: A Strategic Reset in US-Pakistan Development Ties
The reinstatement of USAID funding marks a cautious but significant step forward in US-Pakistan development relations. It reflects growing diplomatic engagement and a mutual recognition of shared priorities—from education to infrastructure to institutional capacity building.
As the two nations continue to reshape their development cooperation model, a greater emphasis on transparency, national ownership, and sustainable impact will likely define the next chapter of this long-standing partnership.
