U.S. President Barack Obama's budget proposal for 2016 increases overall funding for international affairs by 2.4 percent or roughly $1.4 billion. Photo by: Pete Souza / The White House

U.S. President Barack Obama has asked Congress for $4 trillion in fiscal year 2016. Just over 1 percent of that hefty sum would go to international affairs and development programs. But buried further within that small slice are a number of new stories and signals about what the president has planned when it comes to “smart power” in the waning years of his administration.

Obama’s budget request to the 113th Congress argues that funding to Central America should be doubled and refugee assistance cut. It also moves toward phasing out funding for Overseas Contingency Operations — an account that has been synonymous with the “global war on terror” — over the next four years.

If the president’s request were to come to fruition, an outcome that seems unlikely in the face of a Republican-dominated Congress, overall funding for international affairs would increase by roughly $1.4 billion — or 2.4 percent — in the next fiscal year, which begins Oct. 1, 2015. That increase jumps to almost 8 percent if 2015 emergency funding for Ebola is taken out of the picture.

Some aid watchers are calling the budget request an “important first step” toward undoing some of the budget cuts that have arisen alongside budgetary gridlock in the last few years. But they still point to some areas of concern.

Here are some of the biggest story lines we see as the president looks to use his final two years to cement his legacy for the developing world.

Central America

As Devex anticipated in a report last month, the president’s budget request includes a significant new assistance package for Central America, intended to tackle some of the root causes of the immigration “crisis” that saw young people crowding the U.S.-Mexico border last year.

The administration proposed a new strategy in November but was unable to drive the plan through the outgoing 113th Congress. Vice President Joe Biden has since championed increased support for Mexico and Central America, including in a New York Times editorial last week.

The funding boost in this budget request — approximately $1.1 billion — would focus resources on three areas: promoting prosperity, improving governance and enhancing security, all through a revamped and better-resourced Central American Regional Security Initiative, which has been operating since 2008.

The proposed measures would more than double the fiscal 2014 funding to the region and would see direct aid to the so-called Northern Triangle countries — El Salvador, Guatemala and Honduras — increase by four times what it was in 2014.

Under the president’s request, Guatemala would take over as the single largest bilateral recipient of funding from the U.S. Agency for International Development’s Development Assistance account, which funds a number of longer-term priorities, including presidential initiatives. The fiscal 2016 proposal would increase Development Assistance account support to Guatemala from less than $43 million to roughly $205 million under the new budget proposal.

In discussing the funding shift toward Central America, administration officials have drawn parallels to the Plan Colombia initiative conceived under former President Bill Clinton which sought to use military and development assistance to combat drug trafficking and cartels in the South American country.

“We're talking about building the same kind of partnership with the Central American countries to make sure that they're advancing economically, but that they're also making the advances that are needed with respect to safety and security,” said Cecilia Muñoz, director of the White House Domestic Policy Council, in a press briefing Monday.

Global health

The Obama administration is proposing to cut funding to the Global Fund to Fight AIDS, Tuberculosis and Malaria by 18 percent, to $1.1 billion from $1.3 billion in 2014. The cuts are reflective of Obama’s pledge — made ahead of the fund’s 2014-16 replenishment — to provide $1 for every $2 provided by other donors.

“While a relatively small reduction in global health — a 3.2 percent cut — it is of concern to us,” said Larry Nowels, a budget analyst in Washington who works closely with the U.S. Global Leadership Coalition, the coalition of U.S. nonprofit and corporate partners.

Proposed cuts would also affect the global fight against neglected tropical diseases, Nowels suggested, as well as efforts to improve the lives of vulnerable children.

The proposal would also create a $300 million “impact fund” through the President’s Emergency Plan for AIDS Relief, aimed at controlling the epidemic at the country level and also increasing aid to the public-private partnership Gavi, the Vaccine Alliance, formerly the Global Alliance for Vaccines and Immunization.

At the intersection of education and gender, and in collaboration with the Office of the First Lady, the State Department and USAID plan to expand their new “Let Girls Learn” initiative. The $250 million whole-of-government initiative is expected to build on ongoing U.S. efforts that are meant to support more than a million adolescent girls worldwide every year. The initiative seeks to improve access to quality education and health care, and help address violence and other barriers to education that adolescent girls face.

Refugee assistance

Among the few areas of U.S. foreign assistance that saw significant cuts in Obama’s proposal was refugee assistance, down 20 percent from 2014 levels. According to Tod Preston, government relations director at USGLC, part of that reduction is due to the administration’s confidence that it can carry over funds from a generous allocation from Congress over the last three years.

The administration expects to have roughly $500 million in funds to carry over from fiscal 2015, according to Preston, but even with that carryover funding, the proposed cuts would amount to a 6 percent reduction to international disaster assistance spending.

Ongoing crises in Syria and elsewhere raise concerns that even with its carryover safety net, the president’s request could leave funding levels vulnerable to unforeseen crises. The rise of new disasters or current costs “spiraling out of control” could “hamstring our ability to sufficiently respond,” according to USGLC’s analysis of the president’s proposal.

Overseas Contingency Operations Fund

Originally created to support counterterrorism efforts in Iraq and Afghanistan, OCO was criticized as a “Pentagon slush fund” by members of Congress in 2014. Given that OCO is immune to sequestration, the fund attracted other humanitarian campaigns, most recently the fight against Ebola in West Africa. This warranted experts to wonder if the fund had evolved too far from its original purpose.

“We’re now at a level that the OCO option is going to be more and more of a challenge,” Nowels told Devex. noting that in fiscal year 2015, more than 50 percent of the humanitarian account resided there but “it didn’t have necessarily anything to do with OCO’s core function.”

But this year’s budget proposal shows a migration of funds from OCO back to base funding, an encouraging move for those who find the fund dubious. The administration announced its intention on Wednesday to narrow down the scope of OCO to its original mandate beginning with slight changes in this year’s budget followed with a long-term goal of phasing out OCO by 2020.

“Seeing the growth in the base budget — even though there’s a reduced OCO budget — is really good given the fact that we’re now going to be on a much shorter path toward ending OCO,” Nowels said. “But they will also have to have a plan for how contingencies and crises will be managed going forward, and we’ll be looking very closely at that.”

Millennium Challenge Corp.

The Millennium Challenge Corp. would get a massive boost if Congress adopted the Obama administration’s proposal: Its budget would total $1.25 billion, an increase of 39 percent, or $350 million, over 2015 levels.

That’s still less than the agency’s peak of $1.7 billion in fiscal 2007, but it’s a welcome increase after five years of virtually flat funding that is said to allow the agency to move forward with a number of compacts that are currently in the design phase, including, potentially, the agency’s first regional compact.

In a statement released Monday, MCC suggests the agency would use the money to deepen partnerships in Africa, including boosting economic development in Ebola-hit Liberia and Sierra Leone, as well as Asia, expecting to sign new compacts with the Philippines and Mongolia and make its first-ever investment in South Asia through a compact with Nepal.

The budget would also allow MCC to better leverage the private sector — perhaps for initiatives like Power Africa — and share expertise across U.S. government agencies, including with PEPFAR and Data2x, an initiative led by the United Nations Foundation to advance equality and women's empowerment through improved data collection by gender.

Conflict and post-conflict states

Obama’s budget proposal puts regional threats intensified by incursions of the Islamic State group front and center, with a $3.5 billion request for activities in Syria and for related security programs. That includes $1.6 billion in proposed funding for humanitarian relief programs.

The president has also proposed to amp up assistance to Ukraine, as the country continues to face ongoing conflicts over its eastern border with Russia. Obama has asked for resources to Ukraine to total $513 million — nearly six times the actual amount appropriated in the fiscal 2014 budget — with $275 million expected to go to an additional loan guarantee for up to $1 billion in macroeconomic financing.

Funding for other former Soviet — and potentially at-risk — satellites Moldova and Georgia also saw increases.

Other proposals

The president’s proposed $300 million down payment to the Green Climate Fund — already drawing criticism from Congress — will be the first installment on the $3 billion pledged over four years.

“There’s no question that this is going to be a challenge for the White House to convince a Congress, especially the House, who’s been skeptical of climate change, to approve it,” Nowels said. “It’s a partial payment, so it implies that there’s more to come.”  

The proposed budget also decreases funding to the Clean Technology Fund, which Nowels explained would account for some, but not nearly all, of the request for the Green Climate Fund.

Trade and investment agencies like the Overseas Private Investment Corp., Export-Import Bank and USAID’s Development Credit Authority see significant increases in the proposal, with the stated aim of showing “the commitment of using resources in international affairs to promote American businesses overseas,” Nowels said.

Funding for the National Endowment for Democracy is down 23 percent, while the State Department Democracy and Human Rights Fund is cut by 10 percent. USAID has yet to provide exact figures on proposed funds to its democracy programs.

Financing for combating cybercrimes was also boosted by about $1 million.

The president’s proposal would bump USAID’s operating expenses by 17 percent, up from $115 million in 2014. It would also, through appropriations in the Development Assistance account,  boost funding for the U.S. Global Development Lab by more than $50 million to $160 million and provide the lab with “schedule A” authority for more flexible hiring of short-term employees.

The lab is seen as a key legacy initiative for outgoing USAID Administrator Rajiv Shah, though questions remain about how firmly the new entity is entrenched in foreign assistance policy. Increases to the agency’s operating expenses and further support for its reform initiatives — including the lab — could help to ensure Shah’s priority initiatives are not easily overturned or ignored.

What’s your reaction to Obama’s budget request? What should — or should not — receive funding in the next fiscal year? Share your thoughts in the comments section below.

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About the authors

  • Molly Anders

    Molly Anders is a former U.K. correspondent for Devex. Based in London, she reports on development finance trends with a focus on British and European institutions. She is especially interested in evidence-based development and women’s economic empowerment, as well as innovative financing for the protection of migrants and refugees. Molly is a former Fulbright Scholar and studied Arabic in Syria, Jordan, Egypt and Morocco.
  • Michael Igoe

    Michael Igoe is a Senior Reporter with Devex, based in Washington, D.C. He covers U.S. foreign aid, global health, climate change, and development finance. Prior to joining Devex, Michael researched water management and climate change adaptation in post-Soviet Central Asia, where he also wrote for EurasiaNet. Michael earned his bachelor's degree from Bowdoin College, where he majored in Russian, and his master’s degree from the University of Montana, where he studied international conservation and development.
  • Rolf Rosenkranz

    Rolf Rosenkranz oversees a talented team of in-house journalists, correspondents and guest contributors located around the globe. Since joining Devex in early 2008, Rolf has been instrumental in growing its fledgling news operation into the leading online source for global development news and analysis. Previously, Rolf was managing editor at Inside Health Policy, a subscription-based news service in Washington. He has reported from Africa for the Johannesburg-based Star and its publisher, Independent News & Media, as well as the Westdeutsche Allgemeine Zeitung, a German daily.