Trump has big plans for DFC as reauthorization deadline looms

The Trump administration has a plan for how it would like to see the U.S. International Development Finance Corporation evolve: more money, more countries, more equity, more flexibility, less oversight. U.S. President Donald Trump’s proposal, a copy of which was obtained by Devex, would revamp America’s premier development finance institution. There are a number of similar proposals being discussed in Congress, where DFC generally enjoys bipartisan support. But despite having the backing of many Democratic and Republican lawmakers, in addition to the administration — a rarity when it comes to development nowadays — DFC is fast approaching its expiration date. When the agency was created by the BUILD Act in 2018, it was authorized for seven years, a time frame that expires on Oct. 6, 2025. With few legislative days between now and then as Congress heads home for the August recess, and a lot of work to be done, worries are mounting among advocates whether a reauthorization is even possible before that expiration date. This comes despite efforts to reauthorize DFC starting nearly two years ago to avoid such a precipice. “It would be such a travesty, because it is actually something everyone agrees on. Everyone wants the DFC to continue and they want it to expand,” said William Henagan, a research fellow at the Council on Foreign Relations, who previously served as director for international economics on the National Security Council. It is one of the few areas of bipartisan support in the development space, he added. “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,” he told Devex. With Trump’s nominee to head DFC, Ben Black, awaiting confirmation by the Senate, there is no internal administration champion who can push the White House to urge Congress to make DFC a priority, Henagan said. If the authorization is allowed to lapse, DFC cannot function. While its balance sheet of investments would not disappear, any lapse would throw into chaos its investments and contractual obligations. “The private sector likes certainty and no bank or investment fund or specific entity looking for project financing is going to work with a development finance institution that, basically, at the whim of the United States Congress can suddenly disappear for some unknown amount of time,” said Henagan, who helped write the DFC reauthorization proposal submitted by the Biden administration to Congress last year. Even a single-day lapse in DFC’s authorities could “significantly, and perhaps permanently” damage the agency’s reputation, he said. The Trump proposal The Trump administration sent a letter to Republican House Speaker Mike Johnson last month detailing its plans for DFC, including text of a bill for its reauthorization. The proposal envisions a much larger DFC, including raising its total exposure, or maximum portfolio size, from $60 billion to $250 billion while extending its ability to operate through Dec. 31, 2031. It emphasizes the agency’s national security objectives and makes little mention of its development mandate and focus on poorer countries. But the proposal seeks to expand the number of countries DFC can work in, paving the way for it to invest in high-income countries, a shift from its initial remit to invest in lower-income countries. Specifically, it would allow investments in high-income countries where the president certifies to Congress that the project furthers national security and foreign policy objectives. It says this is intended to avoid piecemeal modifications to DFC’s mandate so that the agency can better pursue a holistic foreign policy agenda and counter China. It also proposes several more technical fixes. It would curtail current limitations on equity investments through a revolving fund that would allow DFC to make more equity investments and then reinvest any profits. The administration’s fiscal 2026 budget proposal suggested a $3 billion equity revolving fund, though the proposal shared with Congress did not specify how large it should be. The administration says expanding equity investments would allow DFC to better advance U.S. interests, take strategic risk, and be on more equal footing with other development finance institutions. And while a revolving fund isn’t the only way to solve the equity problem, another key proposal would change the way equity is accounted for, which budget officials and lawmakers have balked at because of the precedent it would set. While changing the budget scoring would be less costly to taxpayers, it seems to be a nonstarter after years of efforts to enact it, with a revolving fund seeming to be more palatable. Still, it remains to be seen if appropriators will support a revolving fund because they would not have control over those funds and “they don’t like to give away power,” Henagan said. Today, for any DFC project worth more than $10 million, the agency must notify Congress, which can result in additional questions or holds on investments. Trump’s proposal seeks to increase that amount to transactions of over $100 million to limit the “substantial or in some cases indefinite delays” that can be caused by the process. While an increase has been proposed by others, Congress might balk at giving up its oversight authority to this degree. But Robert Mosbacher Jr., former CEO of the Overseas Private Investment Corporation, DFC’s predecessor, and a member of DFC’s development advisory council, said that while lawmakers might find $100 billion too steep, if the figure landed at $50 million, that would help streamline operations. The administration also would like to see DFC collect and spend fees from its clients to cover due diligence, monitoring, and other transaction-related costs, as is common with other DFIs. The fine print here would be important, as there are concerns that such funds could be set aside for use with little oversight, a former national security official told Devex. As for the workforce to enact all these potential changes, DFC has likely lost about 200 employees since Trump returned to office, Mosbacher said. That has come through a combination of return-to-work policies, buyouts or retirement offers, threats around terminations of probationary employees, and voluntary departures. The White House would like to hire 100 staff at the agency into “administratively determined positions,” a category of hiring that provides flexibility outside typical government employment contracts and would allow for higher salaries or different contract terms, enabling more competitive hiring. Similarities and differences Many of the key issues in the Trump plan have appeared in prior discussions about DFC reauthorization. These include changes to address mistakes in the original legislation and reflect tweaks in the ways the mission has changed or how its operations have been different than anticipated, sources said. DFC is running out of lending capacity — its portfolio stands at about $49 billion with a $60 billion cap. All of the various proposals floating around include an increase, but the administration’s boost to $250 billion is much higher than the others. Existing proposals from lawmakers, including House legislation last year, along with suggestions from outside experts, include increasing the countries where DFC can operate and streamlining approvals in part to fix what critics say has been a slow, bureaucratic, State Department-led process to approve investments in upper-middle-income countries. But the Trump proposal goes further by including high-income countries. Not everyone agrees with those ideas. In a letter to the chair of the House Foreign Affairs Committee, Rep. Brian Mast, the Modernizing Foreign Assistance Network, or MFAN, said that all projects in upper-middle-income countries should be structured to maximize private capital mobilization. It also recommended that the board create clear guidance for investments focused on poverty to avoid crowding out the private sector, and require the agency to report if more than a third of its annual project commitments are in upper-middle-income or high-income countries. That last recommendation could help ensure a continued focus on development and lower-income countries amid questions that Trump’s proposal would shift the priority to wealthy countries. It’s also unclear if high-income investments would follow DFC guidelines. DFC’s current policies require it to prove additionality — which essentially means that a deal could not be financed without DFC through the private sector. That is more difficult to prove in high-income countries where finance is more readily available. Another issue in the reauthorization process is how long a new authorization should extend. There have been various proposals, including some that advocate for a permanent authorization to avoid the kind of down-to-the-wire scenario DFC now finds itself in. “I would love to see a permanent authorization because Congress continues to have the right and opportunity to exercise oversight,” said Mosbacher. “It shouldn’t have a time clock that requires you to jump through hoops.” What’s next A likely possibility is that DFC’s reauthorization will be temporarily extended, perhaps by being tacked onto a broader fiscal 2026 budget bill extension called a continuing resolution, which many expect to pass in late September. How long that would last is unclear at this point, though several sources said it shouldn’t be too long so that there is pressure on a proper reauthorization. A bill might be introduced in the Senate soon, sources familiar with the discussions told Devex, though efforts to pass the reauthorization last year stalled in the Senate Foreign Relations Committee after passing in the House. There have also been discussions about whether a DFC reauthorization bill in the House could move alongside the State Department reauthorization that the House Foreign Affairs Committee is working on. That process could stretch late into the year, and thus could delay a DFC reauthorization. “I don’t like that idea, honestly, because there’s a fair amount of controversy around a State Department reauthorization, and there’s not nearly that kind of complication or controversy over the DFC. The DFC enjoys this incredibly broad bipartisan support, and I would hate to see anything that would diminish that or jeopardize that,” Mosbacher said. Mosbacher was CEO of OPIC when it was “perilously close” to running out of an authorization — before the agency was ultimately extended through a continuing resolution. “That’s not a good position to be in. It sends a signal to the market which is not helpful and frankly is very counterproductive in terms of the availability of the DFC to be their partner and be reliably available,” he told Devex. The sooner a reauthorization can happen, the better, he said, adding that the private sector insists on predictability and reliability. The uncertainty over reauthorization already comes after the agency has slowed operations — nearly to a halt at the start of the administration, though sources say projects are now beginning to move, albeit at a slower pace than in recent years. DFC’s future hangs in the balance, and Congress will have to take action, whether temporarily or permanently, for it to continue to operate. What seems clear is that after two years of discussions on the reauthorization, decisions will come down to the wire.