USAID is being dismantled in front of our eyes, but what about the rest of the United States’ development toolkit?
Last week, we looked at what the Trump administration’s freeze on foreign aid could mean for the U.S. International Development Finance Corporation, or DFC. This week, it’s the Millennium Challenge Corporation — a 20-year-old agency that tries to unlock countries’ economic growth with large-scale grant agreements in exchange for good governance and other reforms.
What we’re hearing
We got hold of a record of DT Global CEO Torge Gerlach speaking to his staff at the global aid contractor last Friday. He predicted up to 3,000 immediate, sector-wide job losses in the Washington, D.C., area alone and told his team that the Trump administration doesn’t "understand the impact of what they just caused” by shutting down the U.S. aid apparatus almost overnight.
But, Gerlach said, there was some good news for his company: DT Global’s U.S. arm has “a sizable, material part” of its portfolio funded through MCC’s agreements (known as “compacts”) with countries around the world. And Gerlach told staff that DT had received confirmation that its funding there would continue.
My colleague Miguel Antonio Tamonan reported last month that MCC’s current active compacts, as well as the smaller “threshold” programs, amount to over $5 billion.
We wrote to MCC to ask for more information about the impact of Trump’s 90-day aid freeze and review, but are yet to hear back. (Remember: USAID’s Bureau for Global Health told staff members last week to stop sending emails asking what was going on because they did not have the answers.)
On the DFC front, Trump posted on Truth Social that he is nominating Benjamin Black to lead the U.S. development finance institution. Black, with a background from Harvard, Goldman Sachs, and, more recently, the investment fund Fortinbras Enterprises, was an unexpected pick, from what we can gather. But really, has anything been expected in the past fortnight?
Meanwhile, Trump issued an executive order Monday (in the presence of media mogul Rupert Murdoch) calling for a plan within 90 days to create a sovereign wealth fund. Last month, the Center for Global Development think tank took a look at that idea, and how it might interact with DFC.
Meantime, it’s worth revisiting this piece by my colleague Michael Igoe from June last year.
In it, Max Primorac, a USAID senior adviser during the first Trump administration and a key contributor to the conservatives’ Project 2025 vision document, said “we should give more money to MCC. They do a great job.”
Rather than “social reengineering,” Primorac said the U.S. should focus on promoting good governance.
“Let's stick to the health institutions of these countries working better,” he said at the time. “Let's get these countries to reform better in terms of making it easier for businesses to function, [and] anti-corruption laws.”
Background reading: A US conservative’s plan to beat the ‘industrial aid complex’ (Pro)
And props to The Guardian for this profile of Peter Marocco, whom U.S. Secretary of State Marco Rubio has tapped to oversee the “review and potential reorganization” of USAID.
“He is not a disruptor. He’s a destroyer,” a former USAID official was quoted as saying in The Guardian report. “And it’s clear to me. The plan is to come in, destroy USAid, take it down, and then build it up again, the way they want to do that.”
Related reading:
• Dismantling without a merger: How Trump and Musk undermined USAID.
• Up to 3,000 DC aid workers laid off by next week, CEO says.
• Inside MCC’s $292 million contracts for 2025 (Pro)
Taking stock
Devex reporters are following the implications of the aid freeze from the U.S. relentlessly. Get all the latest news here. And in particular check out:
• Elissa Miolene on the administration’s plans to fold parts of USAID into the State Department and potentially dissolve the rest.
• Colum Lynch on an internal survey with the most detailed account yet of the impact on the United Nations.
• Adva Saldinger on a limited exception or waiver for the U.S. President’s Emergency Plan for AIDS Relief, or PEPFAR.
+ Catch up on the latest news, in-depth analysis, and exclusive insights on how the Trump administration’s policies are reshaping global development.
Event: Trends to watch in 2025
As Trump puts almost all U.S. aid on hold for the next three months, with major cuts expected, can other sources or forms of financing fill the void? What will the role of multilateral development banks be, especially amid their ongoing reform efforts?
Join Devex and a panel of experts next Monday, Feb. 10, to discuss all these questions and more at this critical moment for development finance. Save your spot now.
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The view from Europe
Development ministers from the European Union’s 27 states will have a chance to discuss their response to events in the U.S. when they meet in Warsaw on Feb. 11.
Our take? The EU is not as coordinated as the joint meetings would have you believe, with many states preferring to push their own agenda, no matter the steer from the European Commission in Brussels. Plus, those states (and the commission itself) are often slashing their own aid budgets, as we reported at the start of the year.
That means the bloc is unlikely to step in to fill the funding gaps left by the U.S., as it did in 2017, for instance, with the €500 million Spotlight Initiative, designed to tackle gender-based violence through the U.N. system.
Attention in Brussels is more focused these days on an oncoming “omnibus,” due on Feb. 26, whereby the commission hopes to streamline (and NGOs fear water down) corporate sustainability reporting requirements.
ICYMI: A look back at European aid’s slash-and-burn year (Pro)
Mutually approved reliance
We reported last week on the World Bank and Asian Development Bank considering a new mutual reliance plan that would see a lead financier on select projects take all responsibility for appraisal, supervision, monitoring and reporting, including the use of their independent accountability mechanism. NGOs, meanwhile, said the plan would see a drop in standards and accountability, and decried the consultation process which they said consisted of merely a nine-page PowerPoint presentation.
In the end, the plan was approved, with a public chair’s summary noting that “Directors expressed strong support for the overarching objectives of the proposed Framework as an important step towards the MDBs working better as a system to achieve greater impact.”
ICYMI: World Bank, Asian Development Bank under fire for mutual reliance plan (Pro)
Love me tender
One last follow-up. We reported last month on a tender whereby the European Commission’s development department is offering €3 million over three years to consultants to develop a network of European experts to analyze China’s “policies, progress and strategic investments on digital technologies” and advise the EU on how to respond.
Is that what the global development budget should be used for? We asked the commission.
A spokesperson replied: ”As China is a key player in the field of digital technologies, this tender will enable the EU to fully understand the potential opportunities, challenges and geopolitical consequences that Chinese digital technologies have on the economic development of our partners.”
The group of experts is designed to make sure that EU policymakers “have the most up-to-date, comprehensive insights when making strategic decisions.”
We never did hear back, though, when we asked a follow-up question about which area of the commission’s development budget was being tapped for this spending.
What we’re reading
The future of international economic institutions is up for grabs. [Financial Times]
Five things to know about Trump’s plan to create a sovereign wealth fund. [The Hill]
A $150 million World Bank natural resource management project has been canceled in a victory for Tanzanian villagers. [Oakland Institute]
About the author
Vince Chadwickvchadw
Vince Chadwick is a contributing reporter at Devex. A law graduate from Melbourne, Australia, he was social affairs reporter for The Age newspaper, before covering breaking news, the arts, and public policy across Europe, including as a reporter and editor at POLITICO Europe. He was long-listed for International Journalist of the Year at the 2023 One World Media Awards.
