Devex Newswire: Two critical US agencies, loads of changes

The Trump administration has big plans for two key U.S. development agencies, dramatically expanding one while significantly downsizing the other.

Also in today’s edition: USAID workers strike out in court.

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Going big on DFC

U.S. President Donald Trump is floating a plan, seen by Devex, that would supersize the U.S. International Development Finance Corporation. Whether that’s actually good for development remains to be seen.

My colleague Adva Saldinger has a detailed breakdown of the proposal and what it means for America’s premier development finance institution. The White House’s plan also comes as DFC faces a down-to-the-wire reauthorization in Congress, further putting its future in limbo.

Among the potential changes at the agency: a lot more investment firepower, greater reach, and less oversight.

Specifically, the Trump administration envisions boosting DFC’s maximum portfolio size from $60 billion to a whopping $250 billion. It would also create a revolving fund — a type of financial mechanism that would allow DFC to make more equity investments and then reinvest any profits.

Perhaps the most controversial part of the administration’s plan — to development advocates — is that DFC would be permitted to invest in high-income countries, shifting an initial mandate that focused more on lower-income countries. That could mean poorer countries already struggling to access private markets could be relegated to the sidelines.

There are also plans to cut out what the Trump administration says are bureaucratic delays. Today, DFC must notify the U.S. Congress of any project worth more than $10 million. Trump would increase that amount to transactions over $100 million. While it’s not a new idea, Congress might balk at the prospect of giving up its oversight authority to such a degree.

But before any of this can even happen, DFC needs to be reauthorized — and there aren’t a lot of legislative days left on the calendar before its expiration date of Oct. 6. This could imperil an agency that generally enjoys bipartisan support.

“It would be such a travesty, because it is actually something everyone agrees on,” says William Henagan of the Council on Foreign Relations. “There’s differences of policy thinking about what it should do and how it should operate, but there appears to be an area where everyone agrees this entity should exist, and so it's a tremendous failure of leadership that we can't simply reauthorize it.”

Read: Trump has big plans for DFC as reauthorization deadline looms

Going small on MCC

Another popular U.S. development agency, the Millennium Challenge Corporation, could meet a very different fate if Trump has his way.

MCC appears to have survived a 180-day foreign assistance review carried out by the Trump administration, but half of its programs are on the chopping block.

In some ways, it’s not as bad as feared. Earlier this year, the Department of Government Efficiency sparked fears that the agency — which issues large-scale grants to countries if they meet a set of good governance indicators — would be shuttered. So the news that the agency will continue to exist is a welcome relief to its supporters.

“Given what’s happened in the foreign aid landscape in the United States, this is clearly a victory for MCC’s model and the people who work there,” James Mazzarella, a former senior MCC and national security official, tells Adva. “Even if it is pretty harsh, it’s not as harsh as what other agencies have gone through and it keeps them independent, keeps them engaged in the world, and it allows them to fight poverty for another day.”

But MCC’s clout would be significantly diminished, and that could boost Chinese hegemony in the global south. That’s why critics of Trump’s proposal say gutting so many programs is counterintuitive to his foreign policy aims.

Sen. Jeanne Shaheen, the top Democrat on the Senate Foreign Relations Committee, criticized the administration for seeking to terminate half of MCC’s programs, calling it a “gift to our adversaries” that will undermine U.S. partnerships and “cede geopolitical influence to China.”

Read: Millennium Challenge Corporation will survive, but half its programs won’t

ICYMI: Senate Democrats warn US is retreating and China is rising under Trump

Court politics

While it remains to be seen how Trump’s DFC and MCC proposals will go down in Congress, when it comes to the courts, he’s been on a winning streak, with the Supreme Court recently paving the way for him to press ahead with his mass government firings. And on Friday, a lower court reaffirmed that the administration had the right to fire thousands of USAID workers.

A federal judge dismissed two lawsuits that tried to block the Trump administration’s dismantling of the U.S. Agency for International Development, with Judge Carl Nichols ruling that the court lacked jurisdiction over the claims, which were brought by organizations representing USAID employees and contractors.

Nichols said that those claims of “personnel-related injuries” should be channeled through different systems. He also said that plaintiffs had failed to demonstrate irreparable harm, and that there were no declarations from terminated employees stating they were “unable to find new work.”

In a statement on its X account on Friday, the American Foreign Service Association, one of the plaintiffs, said it was reviewing the ruling with its legal team and “exploring every option to appeal.”

“The actions of this administration will haunt our country far longer than any of us can foresee,” AFSA wrote several weeks before Nichols’ opinion. “The trust of allies and communities will take decades to rebuild — if it can ever be restored. This is not simply a policy failure; it is an open wound in American diplomacy that may never heal.”

Read: Judge dismisses lawsuits challenging Trump’s USAID dismantling

Hungry world

Levels of hunger increased sharply between 2019 and 2021, due to factors such as the COVID-19 pandemic and Russia’s war in Ukraine, but are estimated to have dropped slightly each year since. In fact, the number of hungry people in the world fell by an estimated 15 million in 2024 — the biggest decline in several years — according to a flagship annual U.N. global food security report.

Good news, right? Depends on how you look at it because overall, levels of hunger are still staggering. The report said that last year, between 638 million and 720 million people faced hunger, with the midpoint of that estimate — 673 million — representing 8.2% of the world’s population.

The picture also varied across regions. “In Asia, especially in India, there has been a significant increase in social protection that has allowed them to reduce hunger,” says Máximo Torero, chief economist at the Food and Agriculture Organization. “South America has a very solid social protection program, both in cash transfers but also in school meal programs, which has allowed them to target the most vulnerable populations — in Brazil, in Mexico, in Peru, in Chile.”

“In Africa, the challenges are a lot bigger because you have conflict,” Torero tells Devex Senior Editor Tania Karas. “Many of these countries are food net-importer countries. They are susceptible to the exchange rate. They are highly indebted and therefore they cannot afford their food import bill, and they have to pay debt services. And the investment in agrifood systems is not happening as you are seeing in India and South America.”  

Read: The number of hungry people worldwide is falling, says UN report

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Aid from the Aussies

What’s up with aid Down Under? Well, while it hasn’t gone up, Australia has at least been a fairly consistent funder in contrast to rampant cuts elsewhere.

But that belies the more nuanced picture compiled by my colleague Miguel Antonio Tamonan. Australia was the 13th-largest donor among the Development Assistance Committee member countries by volume in 2023, with a total aid spending of $3.3 billion. This represents 0.19% of the bilateral donor’s gross national income, which is below the DAC average of 0.37% and well below the U.N. target of 0.7% ODA-to-GNI ratio.

Climate action; disability equity and rights; gender equality; and humanitarian action were core focus areas of Australian aid, as was the geostrategic Indo-Pacific region.

Read: A primer on Australian aid (Pro)

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In other news

Australia and Turkey are deadlocked over which country will host next year’s U.N. climate change conference, causing delays in summit preparations. [Reuters]

Trump has acknowledged “real starvation” happening in Gaza and has said he will urge Israel to ensure people in the besieged enclave get “every ounce of food.” [The Guardian]

Zimbabwe, which owes $21 billion in arrears to the World Bank and other creditors, needs coordinated support from G20 countries to resolve its long-standing debt crisis, according to World Bank chief Ajay Banga. [Bloomberg]

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