Gaza aid services hit as millions of promised USAID dollars frozen
- 07 Mar 2025
The Trump administration’s cuts to USAID have frozen hundreds of millions of dollars in contractual payments to aid groups, leaving them paying out of pocket to preserve a fragile ceasefire, according to officials from the US humanitarian agency.
The cutbacks threaten to halt the small gains aid workers have made combating Gaza’s humanitarian crisis during the Israel-Hamas ceasefire. They also could endanger the tenuous truce, which the Trump administration helped cement.
USAID was supposed to fund much of the aid to Gaza as the ceasefire progressed, and the Trump administration approved over $383 million on Jan.31 to that end, according to three USAID officials.
But since then, there have been no confirmed payments to any partners in the Middle East, they said. The officials, who have survived multiple rounds of furloughs, spoke on condition of anonymity for fear of retribution.
Two senior officials at aid organisations confirmed they have not received any of the promised funds, after spending millions of dollars on supplies and services. They said they could not afford to continue aid operations indefinitely.
Laying off workers
Some organisations have already reported laying off workers and scaling down operations, according to internal USAID information shared with the AP.
That could imperil the ceasefire, under which Hamas is supposed to release hostages held in Gaza in exchange for Israel releasing Palestinian prisoners and ramping up the entry of humanitarian assistance.
"The US established very specific, concrete commitments for aid delivery under the ceasefire, and there is no way ... to fulfil those as long as the funding freeze is in place,” said Jeremy Konyndyk, president of Refugees International and a former USAID official.
USAID has been one of the biggest targets of a broad campaign by President Donald Trump and Elon Musk’s Department of Government Efficiency, or DOGE, to slash the size of the federal government.
Before Trump took office, USAID had roughly $446 million to disperse to partner organisations in Gaza in 2025, the USAID officials said.
But after Trump froze global foreign assistance, USAID’s Gaza team had to submit a waiver to ensure the funds for Gaza aid could continue to flow. They received approval on Jan. 31 to secure over $383 million in funding, less than two weeks after the US-brokered ceasefire was reached.
Some $40 million was subsequently cut under a measure that no money be provided for aid in the form of direct cash assistance.
USAID then signed contracts with eight partner organisations, including prominent NGOs and UN agencies, awarding them money to flood supplies and services into Gaza. Then, the officials said, they began hearing that organisations were not receiving the promised payments – even as they had already spent millions, expecting USAID reimbursement.
Some of those organisations are now spending less and scaling back programmes.
2 Gaza hospitals suffer
The International Medical Corps, a global nonprofit that provides medical and development assistance, was awarded $12 million to continue operations at two hospitals in Gaza. These include the largest field hospital in Gaza, whose construction was funded by USAID at the request of the Israeli government, according to internal USAID information.
It has now requested payback of over $1 million, said one USAID official, adding that the freeze has forced the organisation to lay off some 700 staff members and offer only basic services at the hospitals, with a skeletal crew.
A former IMC staffer, who quit citing lack of stability, said the programme providing life-saving treatment for malnutrition was almost frozen for lack of funds. The former staffer, who spoke on condition of anonymity to discuss the organisation’s details, said the current nutrition services were at a minimum level.
Termination letters
Meanwhile, termination letters severing the contracts between USAID and Gaza partners were also sent out to organisations that were major providers of shelter, child protection and logistical support in the Gaza aid operation, a USAID official said.
Some of the termination letters seen by the AP were signed by new USAID deputy chief Peter Marocco – a returning political appointee from Trump’s first term. They instruct organisations to "immediately cease” all activities and "avoid additional spending chargeable to the award,” citing a directive from Secretary of State Marco Rubio.
In addition to the spending freeze, officials say USAID has been wracked by internal chaos and the introduction of arbitrary regulations since the new administration took office.
During the first 42-day phase of the ceasefire, Israel had to allow at least 600 trucks of aid into Gaza a day, as well as 60,000 temporary homes and 200,000 tents.
Two USAID officials said the agency was originally supposed to buy 400 temporary homes that would make it into Gaza by the end of Phase 1 of the deal, and over 5,200 more during the next phase. That figure has since been slashed to just over 1,000.
Gaza team locked out of email accounts
USAID was never able to purchase the mobile homes because of newly-imposed policies requiring extra approvals for procurements.
On Feb.2, some 40 per cent of the Gaza team was locked out of their email accounts and software necessary to track awards, move payments and communicate with the organisations. An email sent immediately following the lockout came from Gavin Kliger, a DOGE staffer.
Access to the servers has now been restored, the officials said, but the team is smaller after waves of layoffs. From an original team of about 30 people, only six or seven remain.
Very few mobile homes entered Gaza during Phase 1 of the ceasefire, which ended last week, prompting Hamas to accuse Israel of violating the truce.
Israel has cut off all aid shipments into Gaza in a bid to pressure Hamas to accept an extension of the ceasefire. That has sent aid groups scrambling to distribute reserves of food and shelter to the most needy. Prime Minister Benjamin Netanyahu says he is considering cutting off electricity to raise the pressure on Hamas.
With USAID in flux, the US risks losing its influence, said Dave Harden, the former USAID assistant administrator of Democracy, Conflict and Humanitarian Aid and a longtime director of the agency’s work in the Palestinian territories.
"US aid assistance to Palestinians ... never, ever equated to US assistance to Israel, never quite balanced, but always gave us a seat at the table, always helped us to have real discussions with both the Palestinians and the Israelis about what the future might hold,” Harden said.
Now, he said, "We’re just simply not at the table in a meaningful way, and so I think the ceasefire is fragile.”
Associated Press