Congress Approves Major Expansion of U.S. Development Finance Corporation
In a significant move to enhance U.S. economic influence abroad, Congress is set to pass a sweeping defense authorization bill that includes transformative changes to the U.S. Development Finance Corporation (DFC). The legislation, part of the $900 billion National Defense Authorization Act (NDAA) for fiscal year 2026, reauthorizes the DFC through 2031 and dramatically increases its lending capacity.
Currently capped at $60 billion, the DFC’s lending ceiling will rise to an unprecedented $205 billion. This expansion is designed to empower the agency to issue hundreds of billions in loans to global partners, including, for the first time, certain high-income countries under specific conditions.
Bipartisan Negotiations Shape Final Agreement
The legislative package reflects a series of compromises between lawmakers and the White House. While the Republican-led executive branch sought fewer restrictions on the DFC’s operations, Democrats in Congress pushed to preserve the agency’s original mission of supporting economic development in lower-income regions.
“At the end of the day, neither side got everything they wanted for this, but it worked out and that’s the way Congress is supposed to work,” said Rep. Ami Bera, the ranking Democrat on the House Foreign Affairs subcommittee overseeing the DFC. “It was a good negotiation.”
One of the most notable changes allows the DFC to invest in projects in wealthier nations, a departure from its original mandate. However, this comes with strict limitations. The DFC can only finance up to 25% of a project’s total cost in high-income countries, and such loans must never exceed 10% of the agency’s overall portfolio.
Strategic Focus on Key Infrastructure Sectors
The types of projects eligible for funding in wealthy countries are also narrowly defined. The DFC will focus on initiatives in energy, critical minerals and rare earths, and information and communications technology—sectors considered vital to U.S. national interests. This includes projects like undersea communication cables, which have become strategic assets in the digital age.
Republican Rep. Michael McCaul, a long-time supporter of the DFC, hailed the expansion. “We’ve always wanted to put [the DFC] on steroids, so to speak, and now I think we’ve accomplished that,” he said. “The equity has been raised to a very high level now so the DFC can do its important work.”
McCaul emphasized the DFC’s growing strategic importance, particularly as the U.S. reduces its reliance on other forms of soft power diplomacy. “We’re pulling back in other areas of soft diplomatic power, so the DFC is going to be that much more important,” he added.
Origins and Evolution of the DFC
The DFC was established during President Donald Trump’s first term with bipartisan support. Its dual objectives were to promote economic development in low- and middle-income countries and to serve as a counterbalance to China’s global influence through its Belt and Road Initiative.
By offering an alternative source of financing to developing nations, the DFC has become a key component of U.S. foreign policy. The agency’s expansion signals a renewed commitment to using economic tools to advance U.S. interests abroad.
State Department Measures Ride Alongside
In addition to the DFC provisions, the NDAA includes several measures related to the State Department. Historically, Congress has folded diplomatic initiatives into the annual defense bill due to the State Department’s limited legislative traction on Capitol Hill.
This year’s NDAA incorporates aspects of a broader State Department reauthorization effort led by Republican Rep. Brian Mast, chair of the House Foreign Affairs Committee. Although Mast sought to pass a full reauthorization bill—a feat not accomplished since 2002—deep partisan divides ultimately derailed that effort.
Disagreements centered around Mast’s support for formalizing controversial changes made during the Trump administration, including the dismantling of the U.S. Agency for International Development (USAID). Without bipartisan support, most of the committee-approved bills lacked the necessary momentum for a House floor vote and were unlikely to survive the Senate.
Nevertheless, Mast highlighted some progress. The NDAA codifies, for the first time, the positions of regional assistant secretaries within the State Department. “Do I wish that we could get the Senate to do State Auth like they do NDAA? Yes. We’re not there yet,” Mast acknowledged. He described the process as a valuable learning experience that could pave the way for future success.
Implications for U.S. Foreign Policy
The reauthorization and expansion of the DFC mark a strategic shift in how the United States approaches global development and diplomacy. By significantly increasing the agency’s financial capacity and broadening its operational scope, Congress is positioning the DFC as a central pillar of U.S. foreign policy.
This move comes at a time when China continues to expand its economic influence across Asia, Africa, and Latin America. With a more robust DFC, the United States aims to offer a competitive alternative to Chinese infrastructure loans, reinforcing alliances and fostering sustainable growth in strategic regions.
This article is inspired by content from Original Source. It has been rephrased for originality. Images are credited to the original source.