FY2011 Budget Deal: International Financial Institution Winners and Losers

The FY2011 budget deal worked out over the weekend to avoid a government shutdown includes $8 billion in cuts to foreign operations spending. The numbers aren’t as bad as feared, as my colleague Connie Veillette argues. The international financial institutions take a $1 billion hit overall, but come out with $850 million more than the first House spending plan—H.R.1—would have allotted.Here’s what a few of the accounts look like:Winners:

• The World Bank’s International Development Association (IDA) is cut only $50 million from the FY2011 request (it’s unclear whether the U.S. would still owe $50 million in past arrears or whether currently owed contributions are covered elsewhere).
• The Inter-American Development Bank’s funding request was small to begin with and sees no change.
• The International Fund for Agricultural Development also comes out with minor cuts ($29.5 million, down from $30 million requested).
• While the Asian Development Fund is zeroed out, this is still mostly a good news story because the Asian Development Bank’s general capital increase is authorized (a good sign for next year when other banks will propose general capital increases and means FY2010 payments to the Asian Development Fund can be made).

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• The African Development Fund is cut 29% below the request level and is the only account to come out with less than the proposed H.R.1 level.  The cut is significant and unfortunate given the African Development Bank’s role increasing lending during the global financial crisis and increasingly good marks on promoting economic growth, specializing in infrastructure and strengthening the bank’s role as a voice for the continent.
• The Clean Technology Fund gets $185 million, which is much better than the zero proposed by H.R.1, but still a far cry from the $400 million requested in FY2011.
• Treasury Technical Assistance is again a small program, but plays a big role in helping develop effective public financial systems (and cut down on corruption, terrorism finance, etc.) in hotspots like Iraq, Afghanistan and Pakistan.  Treasury’s Technical Assistance is cut from $38 million to $25.5 million, a third of the request but roughly equal to FY2010 enacted levels.

With a few exceptions--especially the African Development Fund--things look rosier than I anticipated. But I suspect the big battle is yet to come in FY2012 when the World Bank and four regional development banks for Africa, Asia, Europe and Latin America will ask to increase their capital base by 30 to 200 percent. A general capital increase is an unusual request; a simultaneous general capital increase request is a once-in-a-generation occurrence that will coincide with some of the biggest federal budget pressures in recent history. Stay tuned!