As much as current US policy has sought to characterize China’s lending program in blunt and strictly negative terms, the reality is mixed.
The World Bank is a multilateral organization that provides financial and technical assistance to developing countries. As the World Bank’s largest shareholder, the United States maintains a unique influence in shaping its agenda and has a vested interest in ensuring the institution is well managed and appropriately resourced. The US Congress has an important role both in funding US contributions to the World Bank and in overseeing US participation in the institution. Past congressional decisions tied to US funding have led to changes in World Bank policies and institutional reforms.
ABCs of the IFIs: The African Development Bank, the Asian Development Bank, and the International Fund for Agricultural Development
The African Development Bank (AfDB), the Asian Development Bank (ADB), and the International Fund for Agricultural Development (IFAD) are among the international financial institutions seeking pledges from donor countries as part of upcoming replenishment cycles in 2019 and 2020.
The Sustainable Development Goals face a key dilemma. Major multilateral institutions like the World Bank and the other core MDBs have played a leadership role in shaping the SDG financing framework. However, there is a significant misalignment between the structure of these institutions and the SDG financing needs.
The US Development Policy Initiative at the Center for Global Development launched the Foreign Assistance Agency Briefs for a simple reason. Foreign assistance is in the spotlight, slated for significant budget cuts during the Trump administration, yet it remains poorly understood. The series of five briefs contained here provide a snapshot of the primary US foreign assistance agencies. And while these agencies implement nearly 90 percent of US development and humanitarian assistance, there are twenty agencies in total that implement aid-related programs. Additionally, the United States has the Overseas Private Investment Corporation (OPIC), which does not manage foreign assistance funds but uses other tools to catalyze private investment in developing countries.
Since 1971, the Overseas Private Investment Corporation (OPIC) has served as the US government’s development finance institution. OPIC works to mobilize private capital to address development challenges while advancing US foreign policy priorities—furthering strategic, development, economic, and political objectives. OPIC aims to catalyze investment abroad through loans, guarantees, and insurance, which enable OPIC to complement rather than compete with the private sector. The independent agency also plays a key role in helping US investors gain a foothold in emerging markets and is barred from supporting projects that could have a negative impact on the US economy.
Established in 2004, the Millennium Challenge Corporation (MCC) was designed with a singular mission: to reduce poverty through economic growth. The agency’s approach reflects key principles of aid effectiveness, in particular, country selectivity, focus on results, and emphasis on local ownership.
Treasury’s Office of International Affairs works with other federal agencies, foreign governments, and international financial institutions to strengthen the global economy and foster economic stability. The United States’ international engagement through Treasury supports our national economic and security interests by promoting strong economic governance abroad and bolstering financial sector stability in developing countries. Through Treasury, the United States exercises leadership in international financial institutions where it shapes the global economic and development agenda and leverages US government investments, while tackling poverty and other challenges around the world.
State Department guidance underscores the importance of its work in furthering development: “The surest path to creating more prosperous societies requires indigenous political will; responsive, effective, accountable, and transparent governance; and broad-based, inclusive economic growth. Without this enabling environment, sustained development progress often remains out of reach.”
The US Agency for International Development (USAID) is the lead US development agency, managing roughly $20 billion in annual appropriations. The agency operates in over 120 countries, including the world’s poorest and most fragile. Its work spans a wide range of sectors, supporting humanitarian relief, economic growth, health, education, and more. USAID’s broad remit reflects the agency’s mission: “We partner to end extreme poverty and promote resilient, democratic societies while advancing our security and prosperity."
Attention presidential transition teams: the Rethinking US Development Policy team at the Center for Global Development strongly urges you to include these three big ideas in your first year budget submission to Congress and pursue these three smart reforms during your first year.
Since its establishment more than 54 years ago, the United States Agency for International Development (USAID) has expanded into an $18-billion-a-year agency, operating in over 145 countries and in nearly every development sector. But USAID is often constrained in its ability to adapt to emerging development challenges due to differing political priorities among key stakeholders and resource constraints. This memo is the result of a roundtable discussion in July 2016 on how the next US administration, in close concert with Congress, can build upon and maximize the development impact of USAID.
US leadership in multilateral institutions such as the World Bank and regional development banks is flagging. These institutions, rated as some of the most effective development actors globally, provide clear advantages to the United States in terms of geostrategic interests, cost-effectiveness, and results on the ground. Restoring US leadership in institutions like the World Bank will mean giving a greater priority to MDB funding, which today accounts for less than 10 percent of the total US foreign assistance budget and less than 0.1 percent of the total federal budget. Prioritizing multilateral assistance in an era of flat or declining foreign assistance budgets will necessarily mean some reallocation from other pots of foreign assistance money, as well as an effort to address the structural impediments to considering reallocations.