Bangladesh has been dealt a significant financial setback as Switzerland announced it will wind down its development aid programs to the country, just days after the U.S. Agency for International Development (USAID) suspended its funding. The Swiss decision follows major reductions in its international cooperation budget, further compounding the challenges facing Bangladesh’s economy.
Bangladesh is facing severe economic distress as inflation soars, trade comes to a standstill, and factories shut down in large numbers following the July movement that led to Prime Minister Sheikh Hasina stepping down from power.
Switzerland Pulls the Plug on Development Aid
The Swiss government has decided to terminate its development programs in Bangladesh, Albania, and Zambia as part of its budget-tightening measures. The move comes after the Swiss parliament cut CHF 110 million ($121 million) from the 2025 international cooperation budget and slashed an additional CHF 321 million from financial plans for 2026-2028.
Despite these reductions, Switzerland has stated that its humanitarian aid, peacebuilding efforts, and support for Ukraine will remain unaffected. However, Swiss bilateral, economic, and thematic cooperation programs, as well as its contributions to multilateral organizations, will experience significant cutbacks.
As part of the budget restructuring, Switzerland’s executive body, the Federal Council, was formally informed that the Swiss Agency for Development and Cooperation (SDC) will phase out its development activities in Bangladesh by the end of 2028. Additionally, all country-specific programs, thematic initiatives, and organizational support between 2025 and 2028 will face extensive reductions.
USAID Halts Funding to Bangladesh Following Trump’s Executive Order
The Swiss decision follows an even more immediate financial blow: USAID’s suspension of all funding to Bangladesh’s interim government led by Muhammad Yunus. This suspension was enacted under an executive order signed by President Donald Trump on January 20, which temporarily halts all U.S. foreign aid for 90 days to reassess its alignment with American interests and values.
The U.S. State Department issued a “stop-work” order on Friday, mandating the immediate cessation of all foreign assistance programs, including those in Bangladesh. However, this order notably exempts military financing for Israel and Egypt, which remain unaffected.
A memo from Secretary of State Marco Rubio, as reported by NPR, states that a comprehensive review of all U.S. foreign aid must be completed within 85 days, after which recommendations will be made to the President.
What This Means for Bangladesh
USAID has directly communicated to its implementing partners in Bangladesh, instructing them to “immediately stop, cease, and/or suspend any work” under their respective contracts, grants, or cooperative agreements. The agency has also urged them to minimize costs and await further instructions before resuming operations.
President Trump’s executive order is highly critical of existing U.S. foreign aid policies, stating:
“The United States foreign aid industry and bureaucracy are not aligned with American interests and in many cases antithetical to American values.”
The order further claims that certain aid programs have contributed to global instability by promoting ideas contrary to stable international relations.
Bad News for the Yunus Administration?
The suspension of USAID funding is a major setback for Bangladesh, which heavily relies on U.S. assistance for food security, health, governance, education, environmental projects, and managing the Rohingya refugee crisis. With aid programs now in limbo, the country could face severe disruptions at a time when it is already grappling with economic instability.
The financial blow comes as the Yunus administration seeks urgent international assistance, including a $4.7 billion IMF bailout and an additional $5 billion to shore up foreign reserves. The U.S. had previously pledged $202 million in aid to Bangladesh in September 2024, part of a broader $954 million package (2021-2026). With these commitments now in question, Bangladesh may have to seek alternative funding sources to sustain its development and humanitarian programs.
Conclusion
With both Switzerland and the U.S. withdrawing crucial financial support, Bangladesh now faces a serious economic challenge. The loss of funding could disrupt key development programs, deepen economic uncertainty, and strain diplomatic relations with two of its major international partners. As the global political and economic landscape shifts, Bangladesh will need to reassess its financial strategies and explore new avenues for sustaining its development agenda.
