The Economic Impact of the USAID Shutdown

On 28 January 2025 the second Trump administration issued a blanket stop-work order on the United States Agency for International Development (USAID), abruptly terminating the largest national bilateral aid programme in the world. We use this natural experiment to estimate the economic impact of the aid cut on two outcomes in Africa: local economic activity, measured through nighttime light radiance within fine spatial buffers around geocoded USAID project sites; and acute food insecurity, measured through the Integrated Food Security Phase Classification (IPC) at the subnational administrative level. We document three findings. First, the cessation of USAID activities produced a sharp and statistically significant decline in nighttime light radiance within 500 m to 10 km of project sites, with the magnitude attenuating monotonically and the effect no longer detectable at 25 km. Second, subnational areas with greater pre-shock exposure to USAID humanitarian assistance experienced relative increases in the share of population classified at IPC Phase 3 (Crisis) or worse and at Phase 4 (Emergency) or worse, with effects building up over the first year after the shock, amplified in regions with higher pre-shock vulnerability, and approximately fourteen times larger in countries with less democratic institutions. Third, both effects are driven by cuts to humanitarian aid (emergency response and food assistance); the nightlight effect is additionally driven by cuts to productive-sector aid (primarily agriculture).