USAID Cancelled: Ethiopia has lost USAID’s significant and multifaceted impact on the country’s economy.

The news that President Donald Trump’s mission to upend the U.S. Agency for International Development, a government organization tasked with alleviating global poverty and providing humanitarian relief, has paralyzed efforts to distribute essential food, medicine and other lifesaving supplies around the world, according to nonprofit organizations, farm industry groups and federal lawmakers.

USAID’s involvement in Ethiopia has been broad and multifaceted, with impacts that span economic growth, agricultural development, private sector capacity building, human capital improvement, and humanitarian support. Below is a detailed look at how USAID’s programs influence the Ethiopian economy:

1. Stimulating Economic Growth and Trade

Enhancing Competitiveness and Job Creation

USAID works to strengthen Ethiopia’s private sector through initiatives that improve access to finance, modernize agricultural practices, and foster microenterprise development. For example, USAID-supported projects aim to improve market linkages for farmers and local businesses, helping boost productivity and incomes. In doing so, these efforts contribute to creating jobs and stimulating overall economic growth, which is especially important given that agriculture—Ethiopia’s dominant economic sector—accounts for a large share of GDP and employment.

Supporting Policy Reforms and Business Environment Improvements

By engaging with the Ethiopian government on regulatory and institutional reforms, USAID also seeks to create a more business-friendly environment. Initiatives such as those under the Feed the Future program help small- and medium-sized enterprises gain better access to credit and technical support, which is critical for sustaining long-term economic diversification and reducing reliance on donor funding.

2. Advancing Agricultural Productivity

Modernizing the Agricultural Sector

Agriculture is at the heart of Ethiopia’s economy, and USAID’s investments here are designed to overcome chronic challenges such as low productivity and limited irrigation. By introducing improved seeds, fertilizers, and modern techniques—as well as connecting farmers with markets—USAID helps boost yields and farmers’ incomes. These efforts are aligned with broader national strategies that seek to transition the economy from subsistence to market-oriented agriculture.

Building Resilience Against Shocks

USAID’s work also includes support for initiatives like the Productive Safety Net Program (PSNP), which provides food assistance and supports infrastructure projects during times of crisis. Such programs not only address immediate humanitarian needs but also lay the groundwork for reducing long-term food insecurity and vulnerability to climate shocks.

3. Strengthening Human Capital and Institutional Capacity

Health, Education, and Youth Development

USAID has invested in programs that enhance human capital by improving health services and educational opportunities. For instance, initiatives like the Kefeta Activity—a large-scale project aimed at empowering youth—seek to improve labor market outcomes and foster entrepreneurial skills among Ethiopia’s young population. These investments are crucial for building a skilled workforce that can support sustainable economic development.

Governance and Civil Society Support

In addition to direct economic interventions, USAID supports governance reforms and capacity building for local institutions. Strengthening these areas can improve the overall business climate and ensure that economic gains are more broadly shared across society.

4. Humanitarian Assistance and Its Complex Impacts

Immediate Crisis Response Versus Long-Term Dependency

USAID also plays a critical role in providing humanitarian aid during times of crisis—such as food assistance during droughts or conflict. While these efforts save lives and stabilize communities in the short term, there is ongoing debate about the risk of creating dependency if such aid becomes a long-term substitute for domestic development.

Challenges with Aid Distribution

There have been instances where challenges in aid management have been reported—for example, allegations of diversion of donated supplies during emergencies. Such issues underscore the importance of robust accountability and monitoring mechanisms to ensure that aid reaches its intended beneficiaries and contributes effectively to economic resilience.

 

Conclusion

USAID’s interventions in Ethiopia have a significant and multifaceted impact on the country’s economy. By bolstering agricultural productivity, enhancing private sector growth, investing in human capital, and providing critical humanitarian assistance, USAID helps drive economic transformation and stability. However, these benefits come with challenges—including risks of aid dependency and the complexities of ensuring effective aid distribution—that need continuous attention to maximize the long-term positive effects on Ethiopia’s economic development.

Overall, USAID’s contributions have helped lay the groundwork for a more resilient and competitive Ethiopian economy, even as ongoing reforms and accountability measures remain key to sustaining these gains.