US President Donald Trump's efforts to suspend US development aid payments pending a comprehensive review have been compromised by financial obligations, including letters of credit (L/Cs), that have already been entered into by the United States Agency for International Development (USAID).

While the Trump administration has paused new foreign aid disbursements, existing financial obligations, such as L/Cs, are still enforceable. This situation underscores the complex interplay between executive decisions and existing contractual commitments in the realm of international aid.

Background

​In January 2025, Trump issued an executive order mandating a 90-day suspension of all US foreign development assistance programmes to conduct a comprehensive review.

This suspension led to the suspension of numerous USAID grants and contracts, significantly disrupting global humanitarian efforts. ​

L/C validity

Despite the suspension, certain financial obligations, such as L/Cs issued under existing contracts, remain legally binding.

These L/Cs must remain valid because these are financial instrument that guarantee payment from the issuing bank to the beneficiary upon the fulfilment of specified conditions.

Government obligations

In the context of USAID, these instruments are often used to ensure that aid organisations receive payment for services rendered or goods delivered.

So even with the aid freeze, the US government is obliged to honour these commitments to maintain its financial credibility and avoid legal disputes.​

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.