Islamabad, July 17, 2025: In a major diplomatic development, the United States has partially reinstated USAID funding to Pakistan, reviving key development programs after a suspension earlier this year.
Islamabad has confirmed the restoration of funding under two flagship projects — the US Need-Based Merit Scholarships for Pakistani University Students (Phase-II) and the FATA Infrastructure Program, both extended till June 2025.
This decision comes after the U.S. government suspended $845 million in development aid to Pakistan in February 2025 under Executive Order 14169. The freeze affected both government-to-government (G2G) funding and off-budget NGO-led projects, significantly slowing the pace of ongoing development initiatives.
According to sources, productive discussions between the U.S. Embassy in Islamabad and Pakistan’s Economic Affairs Division (EAD) are underway to broaden the reinstatement of USAID programs. Pakistani officials have strongly pushed for a transparent and accountable funding mechanism where grants to NGOs are routed via relevant federal ministries, allowing for improved visibility and alignment with national development goals.
Government representatives argue that the current model lacks proper oversight, as ministries remain unaware of the exact disbursement and beneficiaries of U.S.-funded NGO projects. A revised system would not only ensure better fund monitoring but also align aid distribution with Pakistan’s socio-economic development priorities.
The USAID-Pakistan partnership spans decades, with several landmark agreements shaping bilateral cooperation. In 2010, both countries signed the Pakistan Enhanced Partnership Agreement (PEPA). More recently, a $445.6 million Development Objectives Assistance Agreement (DOAG) was signed in 2023 to promote climate-resilient growth, inclusive governance, and healthcare improvement.
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That same year, an additional $407 million amendment to PEPA was introduced to further bolster Pakistan’s development framework.
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The partial unfreezing of USAID funds marks a significant step towards restoring full U.S.-Pakistan development cooperation, with transparency, accountability, and local ownership likely to remain central themes in ongoing negotiations.
