DFC Modernization Act of 2025
The DFC Modernization Act of 2025 would reauthorize and rewrite provisions of the BUILD Act of 2018 to enable the U.S. International Development Finance Corporation (DFC) to take on greater financial risk and mobilize more private capital for development and U.S. foreign policy goals. The bill would broaden the tools the DFC can use (equity, mezzanine debt, partial guarantees, first-loss capital, insurance, blended finance, etc.), allow investments in high-income countries when aligned with U.S. interests, and tighten policy toward countries of concern and state-owned enterprises. It also restructures DFC governance and management, creates new financing accounts, expands the corporation’s exposure limits, extends its authorization period, and adds oversight and policy requirements related to competition and partner-country risks. Overall, the bill aims to scale up private-sector-led development and energy security efforts while expanding the scope and control of risk, governance, and policy safeguards. The bill would also repeal or modify certain provisions tied to other U.S. development and energy-security authorities, update IT and operating authorities, and set new standards for accountability and strategic coordination (including with the Millennium Challenge Corporation). If enacted, the DFC would be empowered to accept higher risk in more countries and projects, with new requirements around high-risk or strategic sectors, and clearer rules governing investments involving state-owned enterprises or countries of concern.
Key Points
- 1Expanded risk-taking and tools: The DFC would be authorized to use a broader suite of instruments (equity, mezzanine debt, subordinate creditor status, partial guarantees, first-loss coverage, insurance, blended finance) to mobilize private capital and advance U.S. foreign policy and security goals.
- 2Scope broadened to high-income countries with safeguards: The DFC could provide support in high-income countries and areas when the President certifies such support serves U.S. economic or foreign policy interests, in addition to its ongoing focus on less-developed regions.
- 3Governance and leadership reforms: The Act would reduce the number of board members required in certain cases, require a vice chairperson, and restructure Chief Risk Officer and Chief Development Officer roles and authorities to streamline decision-making and prioritize private-sector transaction support and scale private finance mobilization.
- 4Financial authority, accounts, and timing: Equity investments would be allowed up to 49% (up from 30%), and a new Equity Investments Account would be established in the Treasury to hold and reinvest earnings and fees from equity investments. The maximum contingent liability would rise to $250 billion, and the termination date for the Act would be set to December 31, 2031.
- 5Policy safeguards and competition: The Act would require policies to address state-owned enterprises, sovereign wealth funds, and parastatal entities to ensure competitive neutrality; it would prohibit support for projects involving countries of concern or entities under their control that engage in anticompetitive practices. Definitions for terms like “state-owned enterprise,” “control,” and “qualified sovereign entity” would be established or clarified.
- 6Reforms and coordination: Provisions related to coordinating with other programs (e.g., Millennium Challenge Corporation) would be updated, and certain provisions from other energy-security laws would be repealed. Additional changes address IT updates, corporate notifications, and limits on agency-specific administrative costs.