Pacific nations face aid uncertainty as US evaluates foreign funding priorities

Pacific nations face uncertainty over the United States Agency for International Development (USAID) funding due to the Trump administration’s ‘America First’ approach, which initiated a comprehensive review of US foreign assistance commitments.

Speaking on Pacific Mornings, Matt Terrill, former chief of staff to US Secretary of State Marco Rubio, acknowledges that all funding decisions are under review, emphasising that the administration prioritises US interests over international commitments.

“I think they [the US] care [about the Pacific]. No question about that,” Terrill says.

“China policy is front and centre for this administration. No question about that, either. I also think that we're at the wait-and-see kind of what takes shape here.”

Deputy Prime Minister Vaovasamanaia Winston Peters is in the US and is scheduled to meet with Rubio on Tuesday.

After his talks with Peter Marocco, the acting head of USAID, Peters confirmed that the United States will not make any decisions on aid funding for the Pacific region until mid-April.

Biden’s pledge to the Pacific

During his presidency, Joe Biden pledged over US$1 billion in new aid for Pacific Islands Forum countries.

This includes an initial commitment of US$810 million announced in late 2022 and an additional US$200m pledged in 2023​.

The US$810m package was revealed at the first US-Pacific Island Countries Summit in September 2022, while the additional US$200m was announced at a follow-up summit in 2023.

These pledges are on hold until mid-April.

Watch Matt Terrill's full interview below.

New Zealand’s response to the USAID funding freeze

Pacific Peoples Minister Dr Shane Reti addresses concerns about the USAID funding freeze, reaffirming New Zealand’s commitment to providing aid within its existing budgetary limits.

When asked whether New Zealand will increase funding to compensate for USAID’s withdrawal, Reti says Aotearoa’s aid is aligned with the needs of Pacific nations.

“We continue to provide support with the resources that we have in discussion with Pacific nations for what their needs are,” Reti says. "Regardless of what the quantum in dollars looks like, that approach has stood us in good stead.”

But he does not indicate that New Zealand will increase its aid budget to compensate for the shortfall.

Instead, Reti reaffirms New Zealand's ongoing support for Pacific development, including NZ$1.5 million over three years from the International Development Cooperation programme in the UNESCO Global Education Monitoring Report.

The announcement coincides with his travel to Papua New Guinea for the Conference of Pacific Education Ministers, where he will collaborate with representatives from Pacific nations and Australia to address shared education priorities.

Biden and Pacific leaders in Washington. Photo/Supplied

Pacific development advocates call for increased aid

Peter Rudd, executive director of the Council for International Development (CID), takes a stronger stance on the issue, emphasising the urgent need for increased aid commitment from New Zealand.

He warns that the USAID funding freeze and reductions from the United Kingdom and Europe have created a critical gap in development support.

“There is definitely a lot of retraction going on, with USAID, the UK, and other European donors shifting towards defense over development,” Rudd says.

“New Zealand’s international development spend is actually very low, about 1 per cent of our total budget. “We can certainly do more, and we will need to do more now that these vacuums are opening up.”

CID urges the New Zealand Government to increase its aid spending from NZ$325m to at least NZ$558m next year, rising to NZ$1.7b by 2035.

Rudd also stresses the importance of providing grants instead of loans to prevent further debt accumulation in Pacific nations, particularly as they struggle with climate-related challenges.

Watch Peter Rudd's full interview below.

MFAT’s response

The Ministry for Foreign Affairs has reaffirmed New Zealand’s ongoing relationship with its “Pacific whanau”.

“New Zealand’s international climate finance is integrated into, and delivered through, the International Development Cooperation (IDC) Programme.

“At least 60 per cent of IDC is delivered in the Pacific, with a focus on governance, peace and stability; social and economic resilience; and climate change.”

They highlight New Zealand’s engagement in various regional sectors, including energy security, science, data, and health.

“New Zealand’s four-year climate finance commitment of NZ$1.3 billion ends in December 2025, and future climate finance commitments beyond the end of 2025 are yet to be determined by the Government,” the spokesperson says.

“In the meantime, we remain focussed on delivering this commitment while continuing to mainstream climate considerations into overall international development cooperation plans and activities, noting this is good development practice.”

Listen to Dr Shane Reti's full interview below.

The Pacific Islands Forum’s perspective

Despite the funding freeze, Baron Waqa, forum secretary-general, remains optimistic that the Pacific can establish a strong working relationship with the Trump administration once its policies are clarified.

“We're very pleased that our Pacific Resilience Facility fund of 5.8 million US for helping with administration and operation has been given to us that was very quick,” Waqa told a media conference.

“So I mean there are areas of cooperation that we can make sure that we work well together. “We're trying our utmost best to sit down with the current administration.

“We understand that they've just come in, and they've got a lot on their plate at this moment. They're trying to get themselves organised, but as soon as that is done, we would like to have a really good rapport.”

Winston Peters meets the acting head of USAID, Peter Marocco. Photo/Supplied