US House committee debates DFC reauthorization

The House Foreign Affairs Committee released its proposal for the future of the U.S. International Development Finance Corporation on Thursday, less than a month before the agency’s authorization is set to expire. The DFC Modernization Act of 2025, introduced by the committee, is almost word-for-word the suggested text that the Trump administration sent to Congress earlier this year. It does differ, however, from a Senate proposal introduced last month. The House bill includes provisions to expand DFC, increasing its total lending cap to $250 billion from $60 billion and allowing it to invest in more countries. If the bill passes, DFC would be able to invest in high-income countries for the first time, if the president certifies to Congress that the investments support U.S. economic or foreign policy interests. It could also open up more investment in upper-middle-income countries, where special approvals have been required. The DFC Modernization Act will be debated by the House Foreign Affairs Committee next Wednesday, alongside a set of bills to authorize the State Department that were also introduced this Wednesday. But there are concerns that linking DFC to the State Department authorization could make the process more difficult. “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,” Robert Mosbacher Jr., former CEO of the Overseas Private Investment Corporation, DFC’s predecessor, told Devex in July. And Congress will have its work cut out for it to reconcile the two different House and Senate DFC proposals, which is why some observers told Devex they expect a short-term extension for DFC to give Congress more time to pass a bill. The House proposal includes a number of other items, including a revolving fund for equity investments that would allow DFC to retain and reinvest equity earnings and fees, which is similar to the administration and Senate proposals. This is a workaround to tackle what has been one of the trickiest reauthorization issues — that in current government financial “scoring,” equity is treated in a way that severely limits how many investments DFC can make. The House bill would also change congressional notification rules for DFC by requiring that it inform the relevant committees of all investments over $100 million. The current threshold is $10 million, which the Senate bill maintains. In addition, the House version encourages DFC to take more risk to maximize private capital mobilization and meet its objectives of “advancing United States foreign policy, economic development and national security goals to make America safer, stronger and more prosperous.” The bill specifies that taking on more risk may mean some losses at the investment level, but says that DFC’s performance should be evaluated at the portfolio level. For some advocates who have been pushing for the agency to take more risks for years, it is likely a welcome inclusion. The bill also offers some additional insights into DFC’s role in carrying out those foreign policy, economic development, and national security goals. They include facilitating market-based private sector development, countering or limiting strategic competitors from further gains in key sectors, including infrastructure and critical minerals, and working in countries “that promote economic prosperity in a manner that can help curb illegal immigration.”