BAGHDAD, Iraq - In a dramatic move, United States President Donald Trump issued an executive order to freeze foreign aid for 90 days pending its review, causing chaos within the international aid system. The US is considered the largest donor of foreign aid in the world, having spent 68 billion dollars last year. According to specialists, the decision threatens to undermine wide-ranging humanitarian and development projects.

The website of the United States Agency for International Development (USAID), the governmental body responsible for implementing humanitarian aid, has went offline. There was a plan to merge the agency with the State Department, putting the future of international aid in a state of ambiguity.

Although US spending on foreign aid does not exceed one percent of the total federal budget, Trump and his billionaire advisor Elon Musk have targeted USAID as an example of what they describe as “government waste.”

In Iraq, these measures threatened to halt dozens of development and relief projects that rely on US support in vital sectors such as reconstruction, rehabilitating areas affected by war, supporting displaced persons, and development programs, as these projects are particularly concentrated in northern, western, and southern Iraq, where the effects of violence, terrorism, and tribal laws are still evident, and thousands of people there rely on aid to survive.

The US decision exempted some aid from the freeze, such as those provided to Egypt and Gaza, as well as emergency food aid, but it imposes a comprehensive review of the rest of the aid programs.

Over the past few years, US government agencies, led by the State Department, the Department of Defense (Pentagon), and USAID, have played a major role in supporting infrastructure and social service projects inside Iraq.

A large portion of this aid goes to local and international non-governmental organizations to implement projects aimed at empowering women survivors of conflicts, rehabilitating children in conflict zones, reintegrating displaced people into their communities, as well as supporting local governments in managing these complex files. But with the freeze decision, all of that becomes at risk, as these organizations face an unprecedented funding crisis, amid a lack of a clear vision for what will happen after the review launched by the Trump administration.

Funding of non-governmental organizations in Iraq and local challenges

After the fall of Saddam Hussein’s regime in 2003, Iraq witnessed a boom in the establishment of non-governmental organizations, which spread across the country with support from international institutions that provided funding and logistical assistance, contributing to the growth of the aid sector and enhancing its role. Over the years, these organizations have played a pivotal role in providing humanitarian aid, supporting marginalized groups, promoting human rights, as well as empowering women, combating corruption, monitoring elections, and spreading a culture of coexistence and peace.

The grants obtained by non-governmental organizations in Iraq are divided into two main types: one is overseas grants, which are funds provided by international entities that do not have offices or direct work programs inside Iraq. These grants often come from European or American organizations and are provided after field visits or through electronic communication with Iraqi local organizations. Although these grants represent an important source of funding, many local organizations suffer from a weak ability to effectively communicate with international donors, which limits their chances of obtaining sustainable funding.

The second type is grants provided by international organizations operating in Iraq. This type includes funding provided by entities such as the National Democratic Institute (NDI), the International Republican Institute (IRI), the International Organization for Migration (IOM), and UN agencies. These are also divided into two categories, namely: funding directed by international entities: where international organizations predefine their programs and seek local partners to implement specific projects.

Although these partnerships provide good opportunities for Iraqi organizations in terms of operation and capacity building, the second category of funding, which is based on project proposals, is considered more sustainable and beneficial, as some donors provide grants in response to proposals submitted by local organizations according to their priorities. This type of funding grants organizations more space to design solutions suited to the challenges of the local community and enhances their independence in work.

Widespread impacts on non-governmental organizations in Iraq

Montadhar Hassan, an employee at a local organization, told The New Region that “a deeper look into budget distribution reveals that the largest portion of US funding was directed to the Iraqi government directly, as well as to security and military projects, something most people are unaware of.”

When reviewing projects funded by USAID, it becomes clear that the majority of the budget is allocated to security and defense, with one military and security project exceeding $250 million in funding, while NGOs receive a small share of the total funding.

“The grants the United States provides to civil organizations increasingly require cooperation with the Iraqi government, which has reduced the independence of these organizations,” Montadhar pointed out.

In contrast, European funding is based on a different model, as approximately 90 percent of European Union grants are allocated directly to NGOs, while governments receive a relatively small percentage, not exceeding five to six percent.

Consequences of the decision on projects and organizations in Iraq

One organization operating in Iraq, which was significantly affected by the freeze decision, explains that this decision impacted one-third of its budget and one-third of the projects it was working on. Although one of its projects was close to completion, which reduced its losses, another project had just started and was directly affected by the funding halt.

Additionally, the organization received a notice just two days earlier about the possibility of continuing a specific project, while other projects were canceled entirely.

In general, most US-funded projects have either stopped completely or been frozen indefinitely. However, projects funded directly by the US State Department, not through USAID, are still partially operating, highlighting the differences within US funding mechanisms.

Legal and financial challenges facing organizations after the funding freeze

On January 24, the official suspension of all financial transfers related to US aid was announced, including those that were previously due or scheduled. This action led to the closure of many branches of international organizations operating in Iraq, especially American and European organizations that rely entirely on US funding. A group of well-known international organizations closed their offices in Iraq as a result of this decision, including War Child, Counterpart, Heartland Alliance International, Chemonics, Mercy Corps, and others. As for local organizations, the SEED organization has paused some its activities that were funded by the United States government, but continues to operate other programs with the support of other donors and private funding.

This crisis clashed with legal complexities related to labor contracts in Iraq. Iraqi law does not permit temporary suspension of contracts; it mandates either officially terminating contracts according to labor law or continuing to pay salaries. As a result, some organizations were forced to grant their employees mandatory unpaid leave, which is illegal under Iraqi legislation. The only legal option available was to terminate the contracts and pay an additional month’s salary as compensation, which created an additional financial burden on these organizations.

In addition, some organizations faced further financial challenges, as some long-serving employees were entitled to end-of-service benefits, adding to the financial crisis these institutions are experiencing.

The impact of the US administration’s decision to freeze foreign aid did not stop at disrupting development projects in Iraq, but also directly affected women’s rights and services provided to survivors of domestic violence and victims of abuse. NGOs have, for years, formed the first line of defense to protect women and provide them with legal and psychological support, especially given the challenges they face when turning to official institutions.

Legal and psychological services as a lifeline

Hassan, programs director at the Iraqi al-Amal Association, explained, “Before the funding cut decision, many organizations operated integrated support centers for women in a number of Iraqi provinces, offering legal services to help survivors of violence with lawsuits or request protection and communicate with community police. In addition, psychological and social support was provided, offering women a safe space for recovery and independence. Some organizations also ran economic programs to empower survivors through small projects that provided them with income sources to protect them from returning to cycles of violence.”

“But after the funding halt, these services were either completely stopped or significantly reduced, leaving hundreds of women without support,” he added.

One worker in the field recounted how women who had regularly sought help from these centers felt abandoned, saying “They used to say to us: You are our only hope. Now even you are going to leave us?”

A threat to women

Beyond field services, NGOs played a key role in pushing for legal reforms that guarantee women’s rights, such as developing a code of conduct for security forces to set standards for treating women in a way that respects their needs and rights, in cooperation between the Iraqi al-Amal Association, the Ministry of Interior, and the Women’s Department at the Iraqi Prime Minister’s Office. They also worked on new legislation such as amending the Personal Status Law and the Domestic Violence Law.

One of the major problems faced by women after the funding stopped is the absence of effective alternatives, as some security entities that are supposed to provide protection, like community police, suffer from issues related to confidentiality and the way they treat survivors. In contrast, organizations provided a safer and more confidential environment, where women could get help without fear of stigma or retaliation, and encouraged community police to adhere to those standards.

Although some countries other than the United States still offer partial funding to organizations that focus on women’s issues, a large portion of international and local organizations and Iraqi governmental bodies relied on US support, making the loss of this funding a severe blow to efforts aimed at protecting and empowering women in Iraq.

A new reality threatening civil organizations in Iraq

The US administration’s decision to freeze foreign aid was only part of a broader context unfolding globally.

“International funding for civil society has noticeably declined, especially in countries no longer classified as severe conflict zones or low-income nations,” Hassan noted. “Iraq, which has seen relative improvement in its economic classification and has shifted to a middle-income country, no longer receives the same funding priority compared to previous periods when it was viewed as a fragile state in need of intensive support.”

External funding for development projects is now subject to a new logic, focusing aid on emergency crises such as Ukraine, Sudan, and Syria, where a large portion of US and European funding has been redirected to support reconstruction efforts and humanitarian assistance there. Aid is also becoming more economically structured, with a focus on channeling support through governmental channels rather than directly funding NGOs.

Additionally, the political nature of aid has increased, as donor countries are directing support through diplomatic channels and in line with their strategic interests, rather than traditional criteria based solely on humanitarian or development needs. Governments have become the primary recipients of foreign aid, for example, the Iraqi government received around $330 million in direct US programs in 2023, while USAID provided approximately $94 million to programs run by NGOs (mostly international) that year, with most of it requiring coordination with governmental bodies, Hassan explained.

How administrative costs devour international aid

Despite the annual allocations for supporting civil society projects worldwide, a significant portion of this funding does not reach the actual beneficiaries directly. In Iraq, international funding mechanisms reveal a large gap between the announced aid amounts and what actually reaches local organizations, as intermediary entities, such as UN and international organizations, claim large portions under the label of “administrative costs.”

“On paper, foreign aid seems to be provided directly to institutions and organizations working on the ground, but the reality is different,” said Hassan. “The money often passes through multiple layers of institutions that act as intermediaries. This chain starts with the primary donor, which may be foreign governments or corporations, then the funds are channeled to an intermediary institution such as international organizations or the United Nations, which manage the funding and distribute it to local organizations.”

What happens during this process is that each entity through which the money passes takes a percentage for itself under the pretext of administrative costs, significantly reducing the amount that ultimately reaches the target projects.

Administrative costs are considered a natural part of managing any nonprofit, as they cover expenses such as office rent, electricity, water and communications bills, and salaries of core staff (not linked to specific projects). But the problem begins when these costs reach unreasonably high percentages, depriving local organizations of the necessary resources to effectively implement their projects.

American organizations take about 40 percent of the grant value as administrative costs before the funding even reaches Iraq, in addition to salaries for the team working directly on the grant.

In some cases, such as a recent project by the French Development Agency to support women, a French intermediary organization received 36 percent of the funding without executing any actual work on the ground, only managing the distribution of funds to implementing organizations.

In other words, if $10 million is allocated to a specific project, what actually reaches the local organization for implementation may not exceed $2 million, while the majority goes to foreign institutions acting solely as administrative intermediaries.

Iraq and the Strategic Framework agreement

In Iraq’s case, the government requested that international funding be allocated directly to support the governmental sector through the Strategic Framework Agreement with the United States, instead of directing the funding to non-governmental organizations. As a result, funding for Iraqi civil society has been in continuous decline, with priority given to projects implemented in partnership with the government. This has weakened the independence of organizations that rely on external funding to implement their projects.

Amid this decline, a major problem emerges, there are no local alternatives for funding. The private sector in Iraq remains distant from the concept of supporting civil society, despite the existence of legal obligations requiring major companies to allocate part of their budgets for social responsibility. However, this responsibility is often carried out through superficial initiatives, such as ceremonial conferences and public events on occasions, without real investment in building civil society’s capacity or supporting human rights and public freedoms.

The largest society-oriented organization that receives funding is not a rights-based or developmental one, but rather a religious institution that relies on charitable donations, such as the al-Ayn Foundation, supported by Iraq’s highest Shiite religious authority, Ali al-Sistani. Donations in Iraq are tied to charitable work from citizens to citizens directly through a single local intermediary, which is the preferred method for most people.

The decline of direct funding and its impact on civil society

Previously, some funding was sent directly from international donors to local organizations, but such cases are now rare, as donors now prefer to channel funds through major international institutions. This change has further reduced the share received by local organizations.

The problem is not only the reduction in funding but also the increasing conditions imposed by donors, as local organizations are now required to coordinate with the Iraqi government to implement projects, which may limit their independent role in advocating for sensitive issues.

How international organizations swallow most of the funding

When millions of dollars in aid are announced to support civil society, the majority of it does not actually reach local organizations. Instead, it is drained by the administrative and security expenses of international institutions. According to common practices, the United Nations and its organizations take up about 60 percent of any funding under the labels of administrative, operational, and security costs, leaving only 40 percent for local organizations, which are expected to implement the projects and deliver results on the ground.

In parallel with funding challenges, NGOs in Iraq are facing increasing restrictions from the government. Projects, reports, and statistics now require more official approvals than before. Among the most prominent of these restrictions are:

·         Approval of surveys and research: It has become difficult for organizations to collect data or conduct studies on societal issues, as they are required to obtain prior government approval.

·         Monitoring of events: Security presence is often imposed at some activities, or a formal permit is required to hold them, limiting freedom of discussion and placing pressure on participants.

·         Recently, new banking restrictions: Cash deposits in US dollars by NGOs have been banned under the pretext of combating money laundering, even though the amounts received by these organizations are incomparable to the transactions in the private sector.

It has become clear that women's rights and human rights are among the most sensitive topics in Iraq. Any workshop or activity related to equality is met with negative reactions, not only from official entities but also from groups promoting so-called “anti-deviation” concepts, which are believed to be linked to armed factions.

In contrast, events related to economic empowerment or community development proceed with little to no issues. One civil society member working with a local organization said “Government surveillance of civil organizations has escalated, no longer limited to imposing restrictions on human rights reports, but has reached the point of summoning some active entities and investigating them. In addition, there are daily visits by security agencies to the offices of organizations, which are often of unknown source or affiliation.”

Layoffs and office closures

The activist explained that “the most affected group is the staff working in major organizations, who suddenly found themselves unemployed. Many of them relied on their jobs in this sector, and some had taken long leaves from their government jobs to work with these organizations. Now, with the increasing number of unemployed people from this sector, pressure on government jobs is expected to rise.”

The options available for these employees include returning to government jobs, despite the limited opportunities, or shifting to the private sector, especially large companies, or seeking work in the oil sector, which may attract individuals with administrative and technical expertise.

“NGOs can be considered a fourth economic sector, distinct from the governmental, private, and oil sectors, as it operates under a different system that requires relatively higher legal and ethical obligations than the private sector, with varying salaries and benefits,” the activist added.

“European organizations used to offer contracts with health insurance, good salaries, and official holidays, whereas local organizations offered lower salaries and longer working hours. This sector also had a strong social impact, providing job opportunities for various groups, especially women, youth, and survivors from conflict zones, opportunities not widely available in the public or private sectors due to different requirements.”

“There will be growing pressure on the local economy, as many former workers will try to find alternatives in other sectors. This could lead to fierce competition for government and private sector jobs, in addition to broader social impacts, such as the decline of projects supporting women and civil rights,” said the activist, who preferred to remain unnamed.

Sudden shutdown and psychological toll

Faten Saleh, a civil society member, described the decision as “sudden” and said it had “a sharp impact on organizations and staff, especially since it was issued without prior warning and on a holiday, making the situation more complicated.”

“Organizations had to stop projects immediately, without enough time to develop an alternative plan, which was unprecedented considering the scale of the projects. The affected organizations were not small, nor did they have just one or two staff members, they managed major projects employing dozens, even hundreds, of people. In some cases, 40 staff contracts were terminated immediately, while in others, the number reached 100 to 300 employees due to complete reliance on USAID and other US entities for funding,” she added.

The impact was also personal and psychological for Faten.

“Many staff members relied on these jobs as their sole source of income and had significant family obligations. Receiving a sudden notice that their contracts were terminated without knowing what their professional future held was extremely difficult, economically and mentally,” said Faten.

Despite the pressure, some organizations tried to adopt more humane approaches instead of immediately terminating contracts. For example:

·         Temporarily suspending contracts for 3 months rather than ending them outright, with the possibility of resuming or canceling them depending on project and funding developments.

·         Seeking alternative funding from other entities, such as the Norwegian Embassy or European donors, to ensure the continuation of some projects.

Ongoing projects despite the crisis

Despite the US funding freeze, there are previous achievements still standing, which Faten had worked on within her organization. These include empowering several women who went on to hold leadership positions as members of the parliament and the provincial councils. Most of them had started as trainees but are now active participants in the political and civil spheres. Women’s entrepreneurship projects were also supported, with many women succeeding in opening their own shops and continuing to work. These groups are still followed up with regularly despite the difficulties.

Faten’s organization came under heavy attack due to its focus on women’s rights issues - a growing pattern of pressure on organizations working with women. Their activities are constantly subject to inspection and investigation, with strict monitoring of anything related to women and their empowerment. The organization has been forced to alter the terminology it uses to avoid sensitivity. Project titles like “equality”, “women’s empowerment,” or “women’s rights” are no longer feasible. Alternative terms must now be used to bypass obstacles.

Protecting beneficiaries and staff

With increased surveillance, organizations have become more cautious in protecting their teams and beneficiaries, as any activity could be targeted or exploited to attack the organization. Despite all this pressure, Faten explained that “the organization is still trying to find ways to continue without putting anyone at risk.”

While the change might be limited at the policy level, it is powerful at the individual level. Some women have managed to create real change in their lives and the lives of others. One woman from Najaf, for example, began as a trainee in a civil society-supported project, then managed to find work, ran in the elections, and won a seat on the provincial council with civil society’s backing.

These changes may not appear structural at the state level, Faten noted, but they are profoundly meaningful at the individual level, as the women involved have become more influential in their communities and continue to pass that influence on to others.

Additional reporting by Amr Al Housni

CORRECTION: The article initially stated that SEED has ceased all activities, but the organization has since informed The New Region that it has only paused programs that were funded by Washington.

Updated at 3:24 PM, on March 29, 2025.