Liberia Scrambles to Fill Funding Gap After USAID Project Cancellations

The government is racing against time to fill a massive funding gap after the United States government canceled several USAID-funded projects in the country.

Finance Minister Augustine K. Ngafuan confirmed the development during an interview with Voice of America's James Butty on Tuesday, revealing that at least seven key initiatives, spanning taxation, healthcare, education, and governance, have been affected.

"The U.S. government--specifically, the American ambassador--paid me a courtesy call today and confirmed that the Local Empowerment for Accountability and Decentralization Project is among those canceled under this aid freeze," Ngafuan disclosed. "This is a significant setback, considering the vital role these projects played in supporting Liberia's economic and social development."

The USAID aid suspension has sent shockwaves through the Liberian government, which now faces the challenge of maintaining critical services without the financial backing of its second-largest donor after the World Bank. With USAID committing over $443 million between 2022 and 2029--including $120 million in funding for this year alone--the impact of this decision is expected to be far-reaching.

Among the most critical casualties of the aid withdrawal is a $17 billion domestic resource mobilization initiative, which was intended to modernize Liberia's tax system and increase government revenue.

The project was supporting the Liberia Revenue Authority's transition from a Goods and Services Tax (GST) to a Value-Added Tax (VAT) system by 2026--a reform seen as essential for strengthening the country's financial independence.

"USAID was a key partner in rolling out this new tax system. They provided critical training and invested in digital tax infrastructure," Ngafuan explained. "This project was also assisting us in improving our electronic tax database (ETAS), which has been crucial in expanding revenue collection in local territories."

The aid freeze has also dealt a heavy blow to Liberia's education sector. Thousands of schoolchildren, who rely on USAID-funded school feeding programs, are now at risk of losing daily meals.

"The school feeding program has been a lifeline for many children, especially in rural areas," an education ministry official, speaking on condition of anonymity, told reporters. "With USAID pulling out, we are deeply concerned about the nutritional and educational outcomes for these kids."

Healthcare services are also in jeopardy. USAID had been one of the primary funders of hospital supplies, medical training, and essential drug distribution across Liberia. Doctors and nurses in public hospitals are now worried about potential shortages of life-saving medications.

Another sector affected is governance, particularly election transparency. USAID had been a major supporter of independent election monitoring groups, which help ensure free and fair elections in Liberia. With the country preparing for future electoral cycles, the withdrawal of these funds could raise concerns about the integrity of the democratic process.

With the sudden loss of external support, the Liberian government is scrambling to come up with solutions.

Ngafuan outlined a multi-pronged strategy aimed at cushioning the impact of the aid withdrawal.

"Firstly, we have decided to assess the full impact of this decision," he stated. "The Ministry of Finance has already completed a report that was submitted to the President yesterday, and we will also be presenting it to the legislature. The report outlines the short-term and long-term effects and provides recommendations on how we can mitigate the impact."

Ngafuan emphasized that Liberia must now increase domestic revenue collection to compensate for the loss of USAID assistance. This means accelerating tax reforms, improving efficiency in revenue collection, and cracking down on tax evasion.

"We were already making progress in strengthening our revenue systems, and now we must push even harder," he said. "We are also implementing fiscal tightening measures--cutting unnecessary spending, eliminating inefficiencies, and ensuring that public funds are managed with the utmost discipline."

Beyond domestic reforms, the government is turning to international and regional partnerships to secure alternative funding. Ngafuan revealed that Liberia is actively engaging ECOWAS, the African Union (AU), and other bilateral partners to discuss potential financial support mechanisms.

"We are already in talks with our regional blocs to explore economic collaborations that could help mitigate some of the losses," he added. "Liberia is not alone in this, and we believe that through strategic partnerships, we can find ways to move forward."

Despite the government's efforts, the loss of USAID funding poses a serious challenge for Liberia's economic recovery and development agenda. With healthcare, education, and governance initiatives at risk, the coming months will be critical in determining whether the government can secure the necessary resources to sustain essential services.

While Ngafuan remains optimistic about the government's ability to adapt, experts caution that Liberia must act quickly to prevent long-term economic and social setbacks. With new partnerships, fiscal reforms, and tighter financial management, Liberia hopes to weather the storm--but the road ahead remains uncertain.

"The reality is, we are now in a difficult position," Ngafuan admitted. "But this is also an opportunity for us to strengthen our financial independence and build resilience. We have to take bold steps to ensure that Liberia's development does not stall because of this setback."

This article original appeared on the Liberian Observer.