Amid Partisan Rancor, Congress Reaches Bipartisan Agreement on Foreign Aid Spending

That’s a wrap! In a flurry of activity, Congress completed its work on Fiscal Year (FY) 2020 spending bills just ahead of the holiday break. For the third year running, lawmakers rejected the steep cuts to foreign assistance proposed by the Trump administration, providing a modest increase in funding for development and diplomacy compared to FY19. You can find the text of the bill containing State and Foreign Operations spending, and the accompanying section of the joint explanatory statement on the House Appropriations website. (And check out this post if you need a refresher on what was included the president’s FY20 budget request.)

Read on to find out how a number of CGD’s most-watched development and humanitarian accounts fared.

Economic support and development assistance

As expected, Congress declined to pursue consolidation of a number of bilateral economic assistance accounts outlined in the president’s budget request. Interestingly, appropriators shifted a greater share of funding to the USAID-managed Development Assistance account—perhaps a vote of confidence in the aid agency and its current leadership?

Appropriators also signaled continued support for USAID’s Development Innovation Ventures (DIV), which—as my colleagues pointed out in a recent blog post—boasts an incredible social rate of return and an impressive pedigree (it was founded by 2019 Nobel Laureate Michael Kremer). Uncertainty about future funding led the program to briefly suspend applications in 2017, but congressional champions have helped keep it afloat with a $23 million annual set-aside ever since. And just this week, USAID announced 15 new grants under the window.

International financial institutions

The final spending package includes funding to make good on previous commitments to the World Bank’s International Development Association (IDA), the Asian Development Fund, and the African Development Fund, as well as for contributions to the Global Environment Facility (GEF) and International Fund for Agricultural Development (IFAD) that were not requested by the administration. The White House declined to pledge during IFAD’s replenishment session last year and cited previously appropriated funds as sufficient support for the GEF. But appropriators continue to indicate they see value in strong US support for these multilateral funds.

Congress delivered one new commitment sought by the administration, the first of a series of payments to the World Bank’s International Bank for Reconstruction and Development (IBRD), based on an agreement reached by shareholders last Spring to provide capital increases to the institution. Division P includes complementary authorizing language that allows the US to participate in the capital increase.

Noticeably absent is authorizing language greenlighting a capital increase for the International Finance Corporation (IFC)—the Bank’s private sector lending arm—which was also agreed to by shareholders last spring. While the administration opted not to contribute funding the capital increase for the IFC, owing to the United States’ unique veto power, Congress will need to sign off before other countries can start paying up.

Tucked in Division J is authority for the Treasury Department to support debt relief for Somalia. The president’s FY20 budget requested broad authority for multilateral debt relief, but according to reporting by Foreign Policy, administration officials did little to follow up on that request. As a result, draft appropriations measures in both chambers were silent on the matter. Its last minute insertion sparks a collective sigh of relief, since failing to include it in a final bill could have torpedoed Somalia’s chance at debt relief in the near term even as the process is well underway at the International Monetary Fund and World Bank.

US International Development Finance Corporation (DFC)

Passage of a final FY20 spending package means the new US International Development Finance Corporation (DFC) can finally open its doors! While the agency has had a Senate-confirmed CEO in place since late September, reliance on stop-gap funding measures meant the official launch has had to wait. Signed into law in October 2018, the Better Utilization of Investments Leading to Development Act (BUILD) Act envisions a full-service US development finance institution with a stronger development mandate, increased transparency, and robust systems for measuring development impact and managing risk. To deliver, DFC will need sufficient resources and staffing.

Unfortunately, the president’s budget request shorted the new agency’s operations budget—failing to account for a loss of flexibility in the use of collected fees enjoyed by its predecessor, OPIC. Appropriators have sought to remedy this with a 21 percent increase in funding to cover DFC’s administrative expenses. This increase is vital but came at the expense of the agency’s program account, which could limit DFC’s ability to make use of new authority to provide technical assistance and support feasibility studies. Further, while the legislation includes the full $150 million requested to support equity investments, the system for scoring equity proposed by the Office of Management and Budget will limit its use significantly. Still, after an extended transition period, we’re excited to see DFC get up and running. Here’s hoping there is continued momentum and appetite to ensure DFC is set up for success. (And stay tuned for the launch of our new dashboard in January to see how the new DFC compares to other development finance institutions!)

Humanitarian assistance

As a partial response to a governmentwide reform and reorganization plan released in 2018, the administration proposed merging humanitarian funding streams in its FY20 budget request. It failed to gain traction in Congress, in part, because like so many White House reform proposals this one was paired with deep funding cuts.