U.S. Withdrawal from UN Agencies: A New Risk Factor for EM Sovereigns

Mutisunge Zulu 

Chief Risk Officer | Global Executive PhD Cand. Business Mgt, AI & Strategy at ESCP Business School | Global Executive MBA (Manchester) | Advanced Management Program (Harvard) 

January 9, 2026

What looks like a diplomatic retreat is shaping up to be a balance-sheet shock for vulnerable sovereigns.

In a dramatic shift in U.S. foreign policy, Washington has announced its withdrawal from 31 United Nations agencies and related entities, alongside dozens of other international organizations, arguing they no longer serve American interests. The financial implications are material. Historically, the U.S. has been the UN system’s largest funder, covering roughly 22% of the regular UN budget, 26% of peacekeeping costs, and billions more in voluntary humanitarian and development funding each year. Recent pullbacks have already translated into hundreds of millions of dollars in lost contributions, with some agencies facing multi-billion-dollar funding gaps. Earlier last year the US announced exiting a number of other agencies which resulted in a sharp aid to EMs and health is one area that took a negative cue especially in the area of HIV/Aids.

For Africa and other emerging markets (EMs), this is not a diplomatic footnote, it is a macro-financial event. Reduced multilateral funding weakens fiscal shock absorbers, strains FX balances, and raises political-risk premiums at a time when global power competition is intensifying. As strategic rivalry between the U.S., China, and a growing bloc of non-Western powers reshapes development finance, markets will increasingly treat geopolitical exposure and sovereign credit risk as linked variables, not separate ones.

Which UN Agencies the U.S. Is Exiting

The U.S. withdrawal spans a wide range of institutions that underpin development, climate coordination, peacebuilding, and social protection:

• Economic & Development Bodies: Department of Economic and Social Affairs; ECOSOC commissions (Africa, Latin America & Caribbean, Asia; Western Asia); UN Conference on Trade and Development; UN Energy; UN Human Settlements Programme; UN Water; UN Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation.
• Peace, Conflict & Social Protection: Peacebuilding Commission; Peacebuilding Fund; International Residual Mechanism for Criminal Tribunals; Office of the Special Adviser on Africa; Offices of the Special Representative for Children in Armed Conflict, Sexual Violence in Conflict, and Violence Against Children.
• Population, Gender & Social Issues: UN Population Fund; UN Entity for Gender Equality and the Empowerment of Women.
• Climate & Environmental Bodies: UN Framework Convention on Climate Change (UNFCCC); UN Oceans.
• Legal & Arms Control: International Law Commission; UN Register of Conventional Arms.
• Other Coordination Bodies: UN Institute for Training and Research; Permanent Forum on People of African Descent; UN University; UN System Chief Executives Board for Coordination; UN System Staff College; and related entities.

This breadth matters. These agencies support climate resilience, development finance, humanitarian response, peacebuilding, and institutional capacity – all critical to macro stability in frontier and emerging economies.

A Reality Check for Africa and Emerging Markets

The U.S. retreat from key multilateral institutions is accelerating a long-overdue awakening across Africa and other emerging markets: external support is no longer a stable assumption, but a volatile and politically contingent variable. For decades, development finance and humanitarian funding were treated as quasi-permanent features of the fiscal landscape. Today, governments are being forced to price in funding risk, donor concentration risk, and geopolitical conditionality. Markets are reinforcing the lesson. Wider sovereign spreads, tighter FX liquidity, and rising refinancing costs are translating diplomatic shifts into hard balance-sheet constraints.

This is reshaping sovereign behavior. Countries are hedging between competing global powers, diversifying funding sources even at higher cost, and placing greater emphasis on domestic resilience through tax reform, subsidy rationalization, and local capital-market development. The adjustment is uneven, and fragile states remain exposed. But the direction of travel is clear: in a more fragmented and politicized global order, resilience is no longer gifted through multilateralism – it is earned through credibility, buffers, and strategic diversification.

Why This Matters Beyond Diplomacy

For African and EM sovereigns, three interconnected risk channels are now in play.

1) Fiscal & Balance-Sheet Pressure

Many governments rely on UN-linked technical assistance and concessional support to manage food security and health systems, climate adaptation and disaster response and education, gender, and social protection programmes.

As U.S. funding retreats, budget gaps widen. Countries must either reallocate domestic resources or turn to market financing. For fiscally constrained sovereigns, that means higher debt issuance, tighter liquidity conditions and greater exposure to refinancing risk.

From an investor lens, this weakens fiscal shock absorbers and increases sensitivity to commodity, climate, and external shocks. In credit markets, it translates into steeper curves, wider spreads, and higher volatility for vulnerable issuers.

2) Geopolitical Re-Pricing and Policy Risk

Nature, and geopolitics, abhors a vacuum.

As U.S. influence through multilateral channels recedes, alternative partners are stepping in, China via infrastructure and development finance, gulf states through energy, food security, and strategic investments and Russia through security cooperation.

These relationships often come with less transparency, greater geopolitical conditionality and harder financing terms.

For sovereign risk managers, this creates correlation risk: geopolitical exposure and financial vulnerability increasingly move in the same direction. For investors, geopolitical alignment is no longer a qualitative overlay, it is becoming a quantitative credit variable.

3) Second-Order Social and Political Risk

Reduced multilateral engagement has cascading effects:

• Food insecurity raises inflation risk
• Health system stress undermines productivity
• Refugee pressures destabilize borders
• Climate shocks amplify fiscal volatility

In politically sensitive environments, these pressures can quickly translate into policy slippage, election volatility, capital flight and FX pressure. Markets historically underprice these second-order risks – until they show up in currencies, spreads, and emergency fiscal measures.

Risk Implications for Africa & EMs

From a risk management perspective, this is not a soft-power story. It is a macro-financial volatility amplifier:

• Sovereign Credit: Risk premia widen where multilateral backstops weaken.
• FX Markets: Reduced aid flows raise FX demand for imports, tightening reserves.
• Fiscal Execution: Governments face harder trade-offs between social spending and debt service.
• Political Risk: Social stress increases policy uncertainty.

This does not imply uniform deterioration across EMs, but it does demand greater differentiation. Countries with strong institutions, diversified revenues, and IMF/World Bank anchors will remain relatively resilient. Fragile sovereigns will see risk repriced faster and harder.

The Strategic Overlay: A Multipolar Financial Order

This shift is occurring as the global system moves toward fragmented multilateralism, regionally aligned capital pools and politicized development finance. For Africa and EMs, this means less predictable external support, higher geopolitical conditionality and greater exposure to power competition. For markets, sovereign risk is no longer just about debt metrics, it is about strategic positioning.

Bottom Line: Markets Will Price the Gap, Not the Rationale

The U.S. withdrawal from 31 UN agencies spans climate action, development economics, peacebuilding, and social governance. For Africa and emerging markets, this is a structural shift in the risk environment, one that reshapes sovereign balance sheets, geopolitical exposure, and macro execution risk.

At its core, markets care less about the political rationale and more about who funds what, when, and on what terms. The absence of stable, predictable multilateral support is becoming a quantifiable risk factor on EM sovereign curves.

In this new regime, resilience will not be defined by diplomacy, but by buffers, credibility, and strategic diversification.