USAID Halt Unlikely to Dent Cambodia’s Economy, Experts Say

The recent global suspension of United States Agency for International Development (USAID) funding, initiated by newly elected US President Donald Trump, is unlikely to have a significant impact on the Kingdom’s overall economic landscape. However, emerging challenges need to be addressed, experts told Khmer Times yesterday.
Seun Sam, a policy analyst at the Royal Academy of Cambodia, said that the 90-day suspension of US aid is not targeted at any specific country, but rather applies globally with the exceptions of Israel and Egypt.
“As a socio-economic observer, I acknowledge that US aid plays a crucial role in the Kingdom, particularly in sectors like health, education, and demining. However, it is not the most vital source of support for the Royal Government of Cambodia (RGC),” he explained.
He added that a substantial part of aid from USAID is directed toward non-governmental organisations or institutions outside of the government’s control.
“While this aid is important, even if it is cut off, the government can still manage and plan the country’s economic situation effectively,” he noted.
Sam emphasised that the suspension should not be viewed as a political manoeuvre by the US aimed at pressuring the Kingdom to change its policies.
“The suspension is a result of the new US President’s internal decision, driven by the need to address domestic issues, conserve national funds for development, protect citizens from natural disasters, and stabilise the economy,” he said.
The suspension of USAID aid is not a tactic to exert pressure on Cambodia or a political bargaining chip, but rather an internal measure by the US to focus on its priorities, he added.
Anthony Galliano, Group CEO of Cambodian Investment Management Holdings (CIM), said that the Trump administration has issued “Stop Work Orders” globally, pausing funding for 90 days across all projects.
“The purpose of this suspension is to reevaluate and realign US foreign aid, temporarily halting all foreign assistance programs to ensure they align with the administration’s foreign policy objectives,” he explained.
He noted that a wide range of programmers is likely to be affected, including health services, landmine removal, food security efforts, and foreign military financing as projects currently underway will require approval to continue.
Galliano added that unless there is a shift in perspective, this suspension will likely disrupt US-funded initiatives and create uncertainty regarding the scope and potential exemptions of the order.
Chey Tech, a socio-economic researcher, explained that the current situation reflects American jurisprudence, commonly known as ‘America First’, a policy prioritising national interests.
“Last week, the Trump administration decided to suspend aid to all countries for about three months to reassess which foreign aid benefits the US and whether to continue or cut it.
While the suspension may not significantly impact Cambodia’s economy, Tech emphasised that the potential appointment of Marco Rubio as the new US Secretary of State could pose a challenge to the Royal Government.
He recalled that Rubio, during his time as a US Senator from Florida, had initiated legislation to impose sanctions on Cambodia, including removing the Kingdom’s tariff preferences for US exports and cutting other aid.
Tech predicted that Cambodia’s chances of receiving continued aid after the 90 days would be slim. He pointed out that the country had received $38 million in October 2024 for key sectors such as food security, environmental projects, civil society support and labour skills training.
The crucial question is whether US allies like the European Union (EU), Japan, and South Korea will follow suit in cutting aid, which could lead to further reductions, he wondered.
“However, cutting aid would not be a serious issue for Cambodia, as the country does not rely on foreign aid indefinitely. The concern lies in whether other major donors follow the US policy shift,” he noted.
Tech also highlighted the difference between grants and concessional loans, explaining that US funds are typically provided in the form of grants directly to non-governmental organisations that benefit local people directly.
In contrast, Chinese aid is generally provided as concessional loans that the Royal Government must repay within a timeframe which is similar to loans from the World Bank, Asian Development Bank and the International Monetary Fund, he added.
Source: khmertimeskh.com