By Aaron Ranck, Senior Fellow, and Tenley Smith, Program Associate

There is something comforting about the predictable cycle of Washington. As the sweltering midsummer heat arrives, Members of Congress decamp for their districts for August, before a flurry of campaign activity leading up to the November elections.  Long-time observers know that Congress is likely to seek a new mandate before passing major funding and policy decisions. So, expect negotiations over funding levels to be pushed past the end of the fiscal year and the November elections. This doesn’t mean there haven’t been major movements on FY25 funding packages – far from it. Congress has been busy preparing for those negotiations by holding hearings and reporting nearly all funding bills out of committee. The House has even considered more than half of the twelve annual funding bills which comprise all discretionary funding for the federal government. Even though we expect a later completion because of the election, the process so far has been uncharacteristically ordered. The Biden Administration started the budget process with the release of its full FY2025 budget in March. It included a base discretionary funding request of $1.629 trillion, an increase of 1.7 percent over FY24. We now see a familiar battle playing out between a Republican-controlled House and Democrat-controlled Senate. House Republicans have pledged to restrain FY25 spending to the limits set forth in the Fiscal Responsibility Act by capping total discretionary funding at $1.605 trillion. The bipartisan leadership of the Senate Appropriations Committee has not finished their process, but has largely proposed bills above the Fiscal Responsibility Act limits.   

What does this mean for international financial institutions?  Funding for international financial institutions is included in the State, Foreign Operations and Related Agencies appropriations bill, one of the aforementioned twelve discretionary appropriations bills Congress must pass each year. When the House Appropriations Committee met in May to consider how to allocate spending between the twelve bills, it decided to substantially cut foreign operations funding from the FY24-enacted level. The cut, from $55.8 billion to $51.7 billion, saw certain funds deprioritized. In late June, the full House voted 212-200 to pass its version of the State and Foreign Operations funding bill.The Senate Appropriations Committee then met in early July and proposed funding roughly equivalent to the FY24-enacted level, which is now available for consideration on the Senate Floor. A notable difference between the House and Senate budget bills is the nearly $400 million difference in funding for IDA. Additional differences include no funding for the European Bank for Reconstruction and Development, the Clean Technology Fund, and the Global Agriculture and Food Security Fund in the House bill.

Selected IFI Funding Levels

Next Steps  

The House and the Senate have substantial work to reconcile their versions of the State and Foreign Operations bills. Congress will look to the election results in November to inform this reconciliation. So, we expect a continuing resolution in September which allows this process to continue into the next fiscal year. However, timing is only the tip of the iceberg on how elections will shape this budget cycle. A new administration and Congress may have different spending priorities than the current ones.  The election results in November will affect the overall spending in the State and Foreign Operations bill, but we will be looking for strong IDA funding in either case.  IDA represents the most effective and transparent multilateral funding for the US. It has an impactful multiplier effect, provides support for the world’s poorest countries, and is a key piece of continual US leadership in the IFIs. As negotiations remain in flux, BWC will be tracking the spending changes proposed in the State and Foreign Operations bill and looking for a robust package for IDA. Stay tuned for further developments.