Washington DC - Most employees at USAID will be placed on leave or fired by midnight on Sunday, the aid agency said, as President Donald Trump's administration plows ahead in slashing government spending.

Around 1,600 workers based in the US will be laid off in a "reduction-in-force" effort, according to a notice on the USAID website.

All other staff directly hired by USAID will be placed on administrative leave globally, except those responsible for "mission-critical functions, core leadership and/or specially designated programs."

The move is a step forward in Trump's effort to dismantle USAID, which has more than 10,000 employees and operates an array of humanitarian and development programs around the world.

Donald Trump Supreme Court goes against Trump in first ruling on executive actions

The agency announced earlier this month that all staff would be placed on administrative leave – a directive that faced legal challenges.

But on Friday, a federal judge lifted an order pausing the Trump administration's implementation of plans to gut USAID.

In its statement on Sunday, the agency said that remaining staff expected to continue working would be informed by management by 5:00 PM that day.

USAID added that it will fund return travel expenses for staff based overseas.

"In the coming week, we will provide details on how to retrieve personal items from the former USAID workspaces and return government issued devices," it said.

Trump and his allies – including billionaire donor Elon Musk – allege USAID is rife with "fraud."

The agency's budget of more than $40 billion is mandated by Congress, with its programs ranging from governance to food assistance.

The decades-old agency has been a key tool of global "soft power" as the US aims to persuade other countries through various means to do its will.