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1 1 (June 1, 2023)

handle is hein.crs/govelve0001 and id is 1 raw text is: Congressbonal Research Sea infurrningi Vhe legsaive debat sic 19I14 Updated June 1, 2023 U.S. International Development Finance Corporation (DFC) DFC is a U.S. government agency that uses financial tools to promote private investment in less-developed countries. It seeks to support partners' economic development, U.S. economic interests, and U.S. foreign policy aims. Authorized by the Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act, Div. F of P.L. 115-254, 22 U.S.C. §9612 et seq.), DFC emerged from congressional intent to enhance U.S. development finance tools and respond to China's One Belt, One Road initiative (OBOR). DFC, launched in December 2019, assumed the functions of and replaced the Overseas Private Investment Corporation (OPIC) and the U.S. Agency for International Development's (USAID's) Development Credit Authority (DCA). DFC's authorities exceed those of its predecessors, including a higher lending cap ($60 billion, compared to OPIC's $29 billion cap) and a longer authorization (seven years, while OPIC's was often a year). Overview Organization. The BUILD Act vests DFC powers in a nine-member Board: a Chief Executive Officer (CEO); the Secretaries of State, the Treasury, and Commerce; the USAID Administrator; and four nongovernment members (for three-year terms, renewable once). Chaired by the Secretary of State, the Board oversees the agency, guides policy, and approves major projects. It has delegated some powers to the CEO. The Board meets quarterly, and a quorum is five members. Board members are presidentially appointed and Senate confirmed. The Senate confirmed Scott A. Nathan to be the CEO of DFC in 2022. Other statutory officers are a Deputy CEO, Chief Risk Officer, Chief Development Officer, and Inspector General (IG). On its own authority, DFC created a Chief Climate Officer and a Chief Diversity and Inclusion Officer, among others. Tools. DFC is authorized to provide: * Direct loans and loan guarantees of up to $1 billion for terms between 5 and 25 years, subject to federal credit law and other requirements, for projects and funds. * Political risk insurance coverage of up to $1 billion against losses due to political risks (e.g., currency inconvertibility, expropriation, and political violence), and reinsurance to increase underwriting capacity. * Equity investment in specific projects or investment funds, with exposure limited to no more than 30% per project and 35% of overall DFC exposure. * Feasibility studies and technical assistance to support project identification and preparation. DFC must aim to require cost-sharing by those receiving funds. DFC's activities are backed by the U.S. government's full faith and credit. DFC charges interest and other fees, generally at market rates. It considers support through a competitive application process. Use of DFC services depends on client demand DFC also seeks to attract applications through sector-specific requests for proposals and other outreach. Requirements and Limitations. In general, DFC must prioritize support for low- and lower-middle-income economies. DFC may support activities in upper-middle- income economies if such support is certified to have U.S. economic or foreign policy interests at stake and is designed for development impact. In addition, DFC may support energy projects in Europe and Eurasia regardless of country income classification, intended in part to reduce their dependence on Russian natural gas. DFC must give preference to projects involving U.S. persons as project sponsors or participants, as well as projects in countries complying with international trade obligations and embracing private enterprise. Additional factors relate to environmental and social impact, worker rights, and human rights, among other considerations. DFC also seeks to complement, and not compete with, the private sector. Policies and Processes. Pursuant to the BUILD Act, DFC sets and maintains internal policies to guide programs. DFC's corporate bylaws and all Board resolutions guide overall management and agency structure. DFC's Environmental and Social Policy and Procedures (ESPP) outline how DFC is to consider project applications and monitor ongoing projects. DFC uses a quantitative assessment tool, the Impact Quotient (IQ) to indicate likely development impact. A Transparency Policy to guide DFC's public information processes does not yet appear to be finalized, including for publicizing IQ information per the BUILD Act. DFC also monitors projects for credit risks and compliance with statutory and policy requirements. Funding. Congress appropriates funding for DFC through a Corporate Capital Account (CCA), consisting of appropriations and collections. DFC funding designates a portion of CCA collections that may be retained for operating expenses, and excess collections to date have been credited to the Treasury. DFC may transfer funds to the program account, which finances most DFC credit activities. USAID and the State Department may also fund DFC activities through a transfer. In FY2021, DFC's revenue exceeded costs by $162 million. In contrast, in FY2022, costs exceeded revenue by $16 million. Per DFC, a key cost driver was increased insurance claims related to political violence in Ukraine. For both FY2021 and FY2022, DFC maintained corporate reserves of $6.2 billion in Treasury securities. The Biden Administration requested $1.02 billion for DFC for FY2024 (see Figure 1), up slightly from FY2023 appropriations ($1.01 billion) and a nearly 50% increase from FY2022. It justifies the request as key to U.S. support for the G7-led Partnership for Global Infrastructure Investment (PGII) and more effective responses to challenges from strategic competitors. The Administration,

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