Sharing Risk in a World of Dangers and Opportunities
December 7, 2011
The changing nature of international development has produced an increasing interest in the use of development finance instruments. As the availability of soft grant money decreases and there is an increasing acceptance of the central role of private-sector-led growth, official development assistance–led development is shifting to focus on investment and trade. In this context, the U.S. government must more effectively use its existing development finance instruments. The Overseas Private Investment Corporation (OPIC), U.S. Trade and Development Agency (USTDA), Millennium Challenge Corporation (MCC), and U.S. Agency for International Development (USAID) encourage private-sector development while serving as instruments of U.S. national security and foreign policy, but, as currently conceived, are inadequate to meet the entire spectrum of challenges we face.
In order to achieve the best policy and development outcomes, these agencies need expanded authorities, must work in close alignment, and need to use their grant money more creatively. Given the current domestic economic situation and focus on reducing the federal deficit, any U.S. government agency that increases U.S. influence abroad and links international development to the U.S. economy should be given the opportunity to grow and expand. Development finance instruments are also an important way for the United States to help middle-income countries graduate from traditional USAID programs and offer a set of instruments to leverage and complement MCC compact programs. Now is the time to help U.S. government agencies create innovative solutions in a more coordinated fashion and increase the capabilities of existing development finance programs. This report makes broad policy recommendations that are applicable to the general use of development finance by the U.S. government, as well as agency-specific recommendations.