On behalf of the Modernizing Foreign Assistance Network (MFAN), we write to express our appreciation for your work to complete the conference on the United States Innovation and Competition Act (USICA) and to highlight an item of great concern to our membership regarding the U.S. International Development Finance Corporation (DFC).
As you know, Congress created the DFC in 2018 (BUILD Act) as the U.S. government’s premier international development finance agency and a critical partner in America’s foreign policy tool kit to support inclusive economic growth in developing countries. Unfortunately, as the agency has begun to carry out its mission, it has been unable to fully realize its investment potential. Currently, the agency’s equity financing is being scored by the Office of Management and Budget as if every dollar invested is a grant, rather than what it actually is – an investment that, on a portfolio basis, will eventually be paid back plus any return. This dollar-for-dollar scoring was not the intent of the authors of the BUILD Act and continues to hamper the agency’s ability to make critical investments in low and lower-middle income countries where private finance is limited or not available.
In drafting the EAGLE Act, the House Foreign Affairs Committee accepted an amendment by Congressman Castro with bipartisan support to replace the scoring of DFC’s equity investments on a dollar-for-dollar basis by using a net present value model. As you reconcile the differences between USICA and the COMPETES Act, we call on you to include the urgently needed resolution of DFC’s equity scoring. While we strongly support Congressman Castro’s amendment that offers a permanent solution, we understand that other options are being considered that would provide a short-term fix to the problem. While we would prefer a permanent fix, we welcome options that would give the agency breathing room over the next few years until the Congress can consider a final resolution. It is our understanding that one such temporary solution under consideration would be to provide an appropriate amount of funding for DFC equity investments for the next few years.
In reviewing short term options, we strongly urge that any new and creative financing options meet two critical goals. First, any new funds made available for DFC equity do not affect the funding levels of other programs or agencies within the International Affairs 150 account. We have consistently expressed our concern about the impact of DFC equity scoring on programs within this account in each annual appropriation bill. New DFC equity funds, for example, could come through a one-time, special emergency spending allocation or other similar mechanisms that would not be charged against the 150 account. Second, it is imperative that any funds the DFC will receive as a result of re-payment of DFC’s equity investments must be permitted to return to the DFC’s Corporate Capital Account at the U.S. Treasury so that the agency may continue to utilize the funds for future projects.
Thank you for your willingness to examine options to resolve this important issue. We appreciate your efforts to ensure that a workable resolution is retained in the final USICA Conference Report.
Lester Munson, MFAN Co-Chair
Larry Nowels, MFAN Co-Chair
Tessie San Martin, MFAN Co-Chair