Newly released funding provisions for US' DFC raise concerns among development stakeholders
President Trump's newly released FY2021 budget will include funding for the new US Development Finance Corporation (DFC). One of the provisions of that funding, however, is causing significant concern among US development stakeholders who have, until now, been largely supportive of the new development finance institution.
At issue is how the new equity authority will be 'scored' under US budget rules; experts say that combining the DFC's previously distinct program and equity acounts will lead to a 'zero-sum foreign assistance pie fight', with DFC gaining funding at the expense of other important development programs.
The new budget is expected to include US$700 million to support DFC's equity investments, a significant increase from last year's allocation. However, the provision proposes to treat these investments on a one-to-one basis, comparable to how grants are scored. Development experts reacted to the proposal, calling it “stupid,” a “non-starter,” a “terrible idea,” and “financially inefficient.” They called on the Trump administration as well as Congress to make the necessary fix to the scoring issue.