In the 117th Congress, US lawmakers have introduced four separate proposals to establish a national development bank. Three would set up national green finance institutions; the fourth would focus more broadly on providing public financing for high-tech domestic manufacturing, including green technology. (A version of the National Climate Bank proposal—or “Clean Energy Accelerator”—could soon come to the House floor as part of the Democratic budget reconciliation measure).
CGD Policy Blogs
Giving up the “Statebuilding” Ghost: Lessons from Afghanistan for Foreign Assistance in Fragile States
The end of America’s twenty-year war in Afghanistan will change many paradigms that have dominated US foreign policy for decades. President Biden’s recent assertion that military interventions are not the solution to humanitarian crises is a good place to start. Just as urgent is the need to revisit the notion that foreign assistance can build a state.
To help developing countries meet their financing needs, the multilateral development bank (MDB) system needs to get much bigger. Key to a bigger MDB system is a more financially efficient one.
The US International Development Finance Corporation has become a Rorschach test for the policy community: when they look at it, everyone sees something different.
The Biden administration and the Congress rightly went big in the recently passed American Rescue Plan at a time of tremendous need. The package was appropriately focused on the domestic side, but it did not neglect the rest of the world. One might reasonably ask then why $1 billion or $2 billion could not have been included for fighting the poverty, food insecurity, and health crises driven by the pandemic. That would have amounted 0.05 to 0.1 percent of the total package. And it would have been multiplied many times over in additional poverty reduction dollars, because that it was the MDB model does.
Last week DFC announced that it signed a framework agreement with the government of Ecuador to refinance up to $3.5 billion of the country’s external debt to China. In exchange, according to reporting by the Financial Times, the Ecuadorian government will commit to exclude Chinese companies from its telecom networks.
Last week, DFC held its fourth and final board meeting concluding its first year in operation. DFC approved close to $8 billion in 2020, a significant rise from OPIC annual program which stood at $3-4 billion in recent years. This year the institution also deployed its new equity instrument to the tune of $171 million, expanded its portfolio in Africa, and launched new initiatives to address the economic and health consequences of the COVID-19 pandemic.
The Biden administration has a unique opportunity to push the new agency towards a greener mandate which could help mobilize billions more in climate finance. Here are a few pathways incoming DFC leadership could consider.
While reflecting on DFC’s progress in implementing its core development mandate, and confronting the challenges posed the COVID-19 pandemic, we reached out to Senator Chris Coons (D-DE), a lead sponsor of the BUILD Act and a member of the Senate Foreign Relations Committee. We asked Senator Coons for his take on how the newest US development agency is faring and what he hopes to see in DFC’s future.