With the end of the fiscal year only a few months away, the Biden-Harris administration finally submitted its first budget request to Congress. The Trump administration repeatedly proposed deep cuts in international affairs spending, which were roundly rejected by lawmakers year after year. In contrast, President Biden emphasized his desire to pursue robust US global engagement while still on the campaign trail—so it’s little surprise this administration has taken a very different approach. The recently released FY22 budget request includes more than $63.6 billion in international affairs spending, a more than 10 percent increase over the FY21 level absent the emergency spending provided in the end-of-year consolidated appropriations bill and supplemental funding included in the American Rescue Plan, the massive COVID relief package signed into law in March. Here’s a rundown of some of what we’ve learned about the administration’s overarching ambition and plans for future US development policy.
International Affairs Topline ($ millions)
|American Rescue Plan
The new request reflects a countercyclical approach to US foreign assistance, recognizing that increased investment particularly in lower-income countries will be needed in the months ahead to protect lives and livelihoods. (It also comes in marked contrast to the deep cuts in aid spending proposed by another large bilateral donor—the UK.) Still, a global pandemic and other pressing challenges, including climate change and democratic backsliding, continue to threaten hard-won development gains (see here, here, and here). And some foreign aid champions have voiced hopes that lawmakers will view this more ambitious request as a down payment or starting point.
Global health programs
The budget would provide an $855 million increase in global health funding, relative to last year’s non-emergency appropriations. The majority of this increase is earmarked for global health security, including $300 million for contributions to ACT-A—the multilateral COVID-19 response platform.
Notably, the budget also includes a down payment of $250 million to kick off a new health security financing mechanism to bolster countries’ preparedness to respond to future global health threats. This is a significant step and signal to other wealthy donor countries. With outbreaks and pandemics set to increase in frequency, enhancing all countries’ ability to prevent, detect, and respond to dangerous pathogens is of vital importance. For more on how the United States can shape a mechanism to incentivize countries to reinforce their pandemic readiness, see this proposal—authored by experts with CGD, NTI, CSIS, and Georgetown University—to establish a global health security challenge fund.
But with leaders of four of the most prominent multilateral organizations calling on donors—like the United States—to collectively fund a $50 billion investment in COVID-19 response, the international community is likely to hope these proposed global health security investments represent an opening bid.
Beyond pandemic preparedness, global health experts and advocates have underscored the need to mitigate COVID-19-related disruptions on essential healthcare, especially for women and girls. Under the budget request, family planning and reproductive health funding would see a boost of more than $26 million over last year’s funding level.
Bilateral economic assistance
*The chart above captures much of the foreign aid funding provided through the American Rescue Plan (ARP)—which was passed using a congressional procedure known as budget reconciliation. While formally designated as ESF spending, the funds provided through ARP are intended to support a range of COVID-19 response and recovery needs. For instance, ARP funding supported a $3.5 billion contribution to the Global Fund. In regular spending bills, contributions to the Global Fund are channeled through the Global Health Programs account.
The budget request includes a considerable boost in bilateral economic assistance—with increases in Development Assistance and the Economic Support Fund (ESF)—compared to regular FY21 spending.
A share of this assistance will seek to address the “root causes” of irregular migration from El Salvador, Guatemala, and Honduras—part of a four-year commitment to increased investment in the region. There’s no question this will be a difficult feat. Countries in the Northern Triangle face a complex set of challenges. If used effectively, foreign aid can be a tool to address some drivers of outmigration, but it must be accompanied by other policy reforms. Encouragingly the Biden-Harris administration—and USAID expressly—has acknowledged that facilitating access to legal migration pathways will be vital to reducing irregular migration.
One area where the budget request signals potential continuity from the previous administration is a commitment to investing in women’s economic empowerment. Though the request indicates the administration is looking to retire the Women’s Global Development and Prosperity (WGDP) moniker, replacing it with a successor initiative dubbed the Gender Equity and Equality Action (GEEA) Fund. Budget documents promise the GEEA Fund will look to “advance gender equity and equality globally” while emphasizing the disproportionate impact of COVID-19—as well as climate change, conflict, and other crises—on women and girls. Evidence is growing on the outsized adverse effects of the pandemic on women and girls in low- and middle-income countries. Thankfully, so is the body of research on what works to address gender inequality, which can be used to inform future US investments.
With the pandemic driving increased humanitarian need in many parts of the world—and exacerbating already dire situations precipitated by conflict, natural disasters, and more—the administration has requested additional funding for core humanitarian accounts. The congressional budget notification references USAID’s response to crises in Afghanistan, the Lake Chad Basin, South Sudan, Syria, Venezuela, and Yemen. In March and April of this year, USAID also deployed a new Disaster Assistance Response Team (DART) to Ethiopia, to address growing humanitarian needs in the country’s Tigray region, and to the Northern Triangle.
The budget request increase in Migration and Refugee Assistance includes $550 million to invest in the US refugee resettlement architecture and support the goal of admitting 125,000 refugees in FY22. The US Refugee Admissions Program sustained substantial damage under the Trump administration—which capped refugee admissions at the lowest levels in history. The Biden-Harris administration has pledged to rebuild the US refugee program. And after facing backlash for postponing a revision to the FY21 cap, President Biden signed a memorandum last month increasing the number of refugees authorized to be resettled in the United States in the current fiscal year from 15,000 to 62,500. But the president has acknowledged that restoring the program will take time.
International Financial Institutions (IFIs) have been ,and remain, vital responders amid the COVID-19 crisis, with the ability to provide large-scale financing to countries with pressing financial needs. The latest request would follow through on existing US pledges and capital increase agreements to multilateral development banks—delivering scheduled payments to the World Bank’s International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA), the Asian Development Fund, the African Development Bank, and the African Development Fund.
And in a budget year with little in the way of new multilateral pledges, the administration has sought to expand its support for MDBs by requesting new money to pay down old commitments. The budget includes significant additional funding to begin to address US arrears at some of these institutions. US unmet commitments to the IFIs spanning over a decade now total an astonishing $2.7 billion, as of this fiscal year. Beyond any reputational benefit from beginning to address this problem, the driving rationale for making these additional payments now is to bolster the ability of IDA and the other multilateral funds to support the poorest countries through the pandemic.
The United States will make a new pledge to IDA as a leading part of this effort (through the early IDA-20 replenishment later this year), but the administration clearly doesn’t want to miss an opportunity in the FY22 budget to shore up IDA and the other multilateral funds amidst a dire crisis in low-income countries. This and future budgets offer opportunities to reverse a long period of relative neglect in US budgets of multilateral development banks (MDBs), among the most powerful tools the United States has for fighting global poverty, addressing global economic crises, and funding global public goods. Consistent with the Biden Administration’s resolve that the United States should seek to tackle these challenges in coordination with partners, US contributions to these institutions are also multiplied many times over by other countries’ contributions and by MDBs’ ability to borrow against their equity.
Under the FY22 budget request, the United States will also pay its first installment of a new pledge to the International Fund for Agricultural Development (IFAD) made by the administration in February.
Finally, in recognition of needs precipitated by COVID, the administration included $102 million for a contribution to the IMF’s Poverty Reduction and Growth Trust Fund or an alternative facility intended to address the financing needs of low-income countries, including the subsidy cost of loans of up to 15 billion in Special Drawing Rights (SDRs). The administration is also proposing language authorizing a loan of up to 15 billion SDRs to the PRGT or another IMF facility. The details of the mechanism and arrangement have yet to be worked out, but the request for IMF funding paired with signals on new uses of SDRs point to a US Treasury Department that is exploring all possible avenues for fighting the crisis.
A little over a year ago, G20 bilateral creditors—including the United States—agreed to postpone debt repayments from the poorest countries, if they request it. The Biden-Harris administration’s request includes $52 million for the Debt Service Suspension Initiative and possible additional debt relief under the G20’s Common Framework. The funding request doesn’t specify precisely how the $52 million will be allocated, but any reduction in debt payments to US government creditors (e.g., US Export-Import Bank, USDA, etc.) on a net present value basis would require appropriated funds to cover the cost to these agencies. In December, Congress included $120 million for multilateral debt relief to Sudan in a combined omnibus spending and COVID relief measure, fulfilling a longstanding commitment under the Heavily-Indebted Poor Country initiative (not pictured above).
Environmental and climate finance
The administration has made clear it sees climate change as among the world’s most pressing challenges, and accordingly, the budget request aims to ramp up climate finance. It’s notable that the administration is taking a portfolio approach to its international climate agenda, perhaps a signal that the United States will keep its options open rather than favor any one multilateral fund or approach. The administration has proposed a $1.25 billion contribution to the Green Climate Fund—with the Departments of State and Treasury each chipping in half. In addition, the request includes $300 million for the Clean Technology Fund, one of the World Bank’s Climate Investment Funds. The administration is also looking to provide additional funds to help address unmet commitments to the Global Environmental Facility—which supports a range of environmental projects, not all of them climate-related.
The US International Development Finance Corporation (DFC) would see a $29 million increase in administrative expenses under the FY22 budget request, which will allow the agency to hire additional staff to help grow its portfolio. Amid increasing pressure among lawmakers for DFC to deliver on a wide range of objectives, ensuring the agency is staffed appropriately to deliver on its core development mandate will be vital. Budget support documents also highlight DFC plans to expand collaboration with other US bilateral agencies and strengthen relationships with IFIs, NGOs, and think tanks in pursuit of development impact. DFC would also use new resources to invest in projects that support resilience in the facing of climate change and other threats. Moving forward, DFC would still benefit from a fix to current practice for scoring equity investments.
The Millennium Challenge Corporation (MCC) finally received a modest funding increase last fiscal year. The new request would maintain level funding for the agency. FY22 funding will support MCC’s compacts with Timor-Leste, Kosovo, and Malawi—and the agency’s first regional compact (planned cross-border investment involving Benin, Niger, Cote d’Ivoire, Burkina Faso). And MCC will have a full plate in FY22 with eight bilateral compacts currently in development. While not expected to impact this budget cycle, MCC’s budget justification also cautions that its largest-to-date threshold program ($53 million) with Ethiopia may not advance toward approval given the violence and unfolding humanitarian crisis in the country.
For even more on development in the FY22 budget request, check out the links below.
Congressional Budget Justifications:
White House Summary
Appendix – State and Foreign Operations (if you really want to delve into the numbers)
Many thanks to Amanda Glassman, Clemence Landers, Nancy Lee, Scott Morris, Sarah Rose, and Rachel Silverman for providing helpful input and comment on an earlier draft. Any errors are the authors’ alone.