Reauthorization of the US development finance corporation gains traction

The U.S. International Development Finance Corporation, or DFC, has been stuck in limbo, operating under a temporary extension as it has waited for lawmakers to approve a long-term reauthorization. That effort has now gathered momentum as lawmakers attached the DFC Modernization and Reauthorization Act of 2025 to the National Defense Authorization Act, which will be voted on this week and is typically considered a must-pass bill. This comes after weeks of meetings and at-times tense negotiations, where DFC’s reauthorization was uncertain, sources told Devex. As recently as last week, it was unclear if a compromise could be reached, sources said. Some of the key issues lawmakers grappled with include expanding the agency’s work to high-income countries, the agency’s mandate — and how much it should focus on development as its core mission versus strategic self-interests — and how much oversight lawmakers would have. “Broadly it’s a good thing that it’s getting done. It’s a bad place for DFC to be in a temporary state of authorization,” Erin Collinson, the director of policy outreach at the Center for Global Development, told Devex. “It’s important they were able to pull together some bipartisan political will to move ahead.” The compromise bill that emerged hews closely to the bipartisan bill proposed by the Senate, rather than the House bill which was nearly word for word what the administration proposed and did not garner Democratic support. But not all lawmakers agreed to this latest version, including Rep. Gregory Meeks, the top Democrat on the House Foreign Affairs Committee, who wanted even stronger language on the limits of DFC’s work in high-income countries, sources told Devex. The legislation reflects “that push and pull seen in debates on the Hill about how much to maintain the core development mission and how much ability it should have to invest in more strategic markets without clear development benefits,” Collinson said. Neither side was thrilled or got everything they wanted, as often happens in these negotiations, said Rob Mosbacher, former CEO of the defunct Overseas Private Investment Corporation, which was DFC’s predecessor. “There is evidence of a fair amount of horse-trading going back and forth on different things,” Mosbacher told Devex. “Folks worried about this process veering too much in pursuit of strategic interests — critical minerals, key infrastructure — should be mollified by, I think, a very concerted effort to reiterate the importance of development and this agency doing deals in middle- and low-income countries.” In the end, the bill, if passed, would lead to massive growth for DFC — both in how much it can invest and in the places where it can work. DFC will expand more than three-fold, with the ability to work in high-income countries for the first time and make more equity investments. It would have the authority to operate through Dec 31, 2031, but that will come with significant congressional oversight. This bill has “some positive aspects and some areas of concern,” a development expert closely following DFC told Devex. “The agency maintaining its development mandate while growing and capping investments in high-income countries are all very positive features, particularly in this environment and with what the White House was ultimately seeking.” What’s in the bill? If this compromise version passes the House and Senate and President Donald Trump signs it into law, DFC would be bigger, with a maximum contingent liability, or total spending cap, of $205 billion, up from $60 billion. The agency will have the authority to invest in more countries, including high-income countries, though there will be some limitations. Those guardrails include additional congressional notifications on high-income country investments, including an annual list of countries DFC intends to invest in, and a policy to evaluate their merits. It requires that projects advance national security or strategic economic interests, are designed to produce development impacts for the poorest in those countries, and maximize private capital mobilization. It also limits DFC funding so that it cannot provide more than 25% of the total investment in any individual project in high-income countries, and all of its investments in these countries cannot exceed 10% of the agency’s total spending cap. The bill prohibits DFC from investing in so-called countries of concern — Venezuela, Cuba, North Korea, Iran, China, Russia, and Belarus — or in the 20 wealthiest countries in the world, though there are exemptions in those wealthy countries for energy, critical minerals, and technology investments. An equity revolving fund with $5 billion to be funded by Congress between fiscal 2026 and 2031 will allow DFC to make more equity investments and retain and reinvest its earnings. The bill includes substantial congressional oversight and input, including a new congressional strategic advisory group to oversee the agency. Congress will require DFC to provide a five-year strategic priorities plan, and Congress has detailed the responsibilities of various agency officials, and will require reporting on a number of issues, including development impact. It also includes the various requirements around investments in high-income countries. The latter was necessary because “opening up DFC to effectively unrestricted investment in high-income countries is dangerous and moves the agency away from its development mission,” a senior Capitol Hill staffer told Devex. “With an administration that so often mixes the interests of the government with profits for the president, his family, and his friends, we will need to scrutinize every single investment the DFC makes under this administration, especially in high-income countries.” But not everyone agreed these additional measures will be good for the agency. “The greatest concern in my mind is the potential layers of bureaucracy and decision-making that will result from more rigorous congressional oversight and reporting,” Mosbacher said. “In order for DFC to compete with other [development finance institutions] and multilateral development banks, much less China, they’ve got to be nimble. I’m very concerned they will not be nimble enough.” A few provisions in the bill try to reduce this bureaucratic burden by requiring DFC to notify Congress of investments over $20 million, up from $10 million currently, and authorizing the agency’s CEO to approve investments that had been subject to an often slow State Department approval process. But Mosbacher said those are unlikely to make a big difference and, on balance, the bill could make it harder for the agency to move at the pace its private-sector clients expect. The House could vote on the bill today, and if it passes, all eyes would be on how the agency interprets and implements the changes. One thing is for sure: Congress will be watching.