A (4:39)

Yeah, I think there are questions. I mean, certainly a lot of food security programs now have shifted to be run out of the US Department of Agriculture. CDC is responsible for some programs related to global health. So I think there are questions about whether additional agencies will enact similar rules. I did hear from someone that there was originally an effort to do the rulemaking across the entire interagency process to include all of the agencies that work or disperse foreign aid funding. But that, that became too complicated. And so they sort of went first with the State Department. I think another interesting piece of this is that this rule applies to grants and cooperative agreements. It does not apply to contracts. But at least historically, what I've been told is that, you know, even though, you know, the Mexico City policy might come in place and they might have guidance first on sort of the grant side, often other implementing partners who might be operating under contracts are going to sort of pre comply or comply anyway because they don't want to put their funding at risk. And then sometimes implementers have both types of contracts, right? So they're going to have to sort of comply anyway. And I think, you know, one of the things when you have this sort of uncertainty about what do all these rules mean, how exactly are they implemented? That's not something that's foreign. Often with expansions to this policy or when it's implemented, there are questions about that that in the past folks at USAID or the State Department have answered. I think there's questions about capacity to answer those questions, but we will start to see some of those answers when we see new money out the door, new grants that have the language, though these rules have the specific language. We have not seen a rulemaking process around the Mexico City policy in the past. I had one source who told me it's actually pretty uncommon to see rulemaking in the sort of foreign affairs and foreign assistance realm. So I think there's quite a few things that are sort of unprecedented both in the process and sort of the way it's implemented. I think, you know, this also applies for the first time to US based NGOs, not just international or foreign NGOs. And that raises some interesting questions around constitutional freedoms. And I think, you know, I think we'll see if we'll see any sort of legal challenges or sort of process around process or constitutionality. I think they've tried to sort of craft the language, particularly around US Organizations in a way that's based on, you know, some court cases that we've seen in the US So they could, they're not totally restricting what US Organizations can do, but they are requiring that US Organizations, if they do anything that would violate these rules, do that in separate facilities with completely separate sort of segregated finances. And at least from the people I had talked to, they said that's in many cases pretty unworkable. Right, because like, what are you going to do, set up a second clinic across the street that provides abortion counseling? So I think it becomes sort of a de facto stop, even if it's not legally there.

B (7:47)

And it's interesting, you know, this gets to a point that you made in the article as well, is that US Funding, even though it's been diminished, is absolutely still critical, especially when it comes to global health. And there could be this danger of not just complying, compliance over compliance right off the bat because people are naturally worried about losing U.S. funding. It's a significant chunk of money, sometimes the bulk of money for some organizations. So I just think you're going to see maybe possibly some over compliance because. And that in turn, kind of will fulfill some fears that the Trump administration will have so much ideological leverage over programs to the point where, like you said, it's kind of unprecedented in scope, as before.

A (8:33)

Yeah. And I think one of the things that we're, you know, sort of hearing from, you know, human rights, gender rights activists is a real concern about exporting this ideology, including what some people say is really dangerous, particularly the, you know, the gender ideology piece, which folks say is basically trying to write out the existence of transgender people. So what does that mean in terms of their rights or access to services and health care and things like that, but that it's really trying to do this in a very broad way. So even if you're getting money to implement a road project or a water project, that means that if you're doing another project with other money, let's say you're building a school with UNICEF money, but the UNICEF curriculum, if that runs afoul of the restrictions on DEI or on gender equality, are you allowed to do that now? Right. It's really. It kind of takes it a step further in terms of what they can do in their work. And I think there are real questions also for foreign governments. Right. Because in some cases, particularly, I think people have the most questions maybe around the DEI rule, because that's seems to be the most vague. And, you know, there are countries that have laws requiring, you know, participation of women on boards or a participation of women in parliament. So how does that work? Right. And there is in theory, a waiver process that's mentioned in the rules, but we don't know exactly how often how the criteria for that to be applied. I do think there will be more flexibility with individual countries, but at least what some people told me is that this just then becomes another piece of leverage for the US to sort of get. Get what? Get what it wants. Okay, we'll give you a waiver if you do X, Y, Z. And I think, you know, one of the things that I heard yesterday from someone who's based in Kenya is really concerns about also what this could mean for, you know, people in Kenya, where they have fought for rights around abortion and women's rights. And so does this then sort of silence local civil society and the sort of existing laws on the books in service of trying to get US money. And that's. And that's a kind of a unique case because we actually know some of the details around the sort of Global Health Compact there. But I think, you know, Some people told me that some of the things to really watch are going to be in the humanitarian aid space. So folks in the global health space, certainly in the reproductive health space, they have experience with the Mexico City policy sort of coming in and out of enforcement for many, many years. It only applied to reproductive health. In the first Trump administration, it was expanded to all global health programs. But what's really significant is this now applies to all foreign assistance funding, so that includes humanitarian assistance. And so some of these organizations are organizations that maybe are not used to having to comply with this where there could be a very high compliance burden. And it raises some real questions. You know, in a refugee camp setting, if there has been, you know, sexual violence as part of a conflict, can you have targeted programs that will help people who are victims of gender based violence? I think there are real questions about whether that's possible. I think there are questions about how it might contradict laws and rules, particularly like UN organizations that are, have, play a big role in these places. So I think this raises a lot of questions and I think we'll, we'll find out more in the, in the weeks and months ahead. It technically goes into effect in about a month, so I think we'll then start seeing sort of what it means in practice. But it will, I think, have, you know, just creates a lot of uncertainty and it will also have a big price tag. In fact, the State Department estimates that it's going to cost about $342 million a year to implement these three rules.

B (12:19)

That's really interesting. And this is coming from a State Department that's already capacity strapped. So how are they going to answer these questions, this litany of questions and figure out, well, does this program actually, you know, cross this restriction or doesn't it? I mean, that takes a lot of effort. And you know, State Department is already attempting to take over USAID functions. And like you said, just in and of itself, this is going to be costing money.

A (12:46)

Yeah, no, I think there are a lot of questions about who's, you know, who's even there to answer the questions about implementation or how it applies to a specific program, et cetera. So I think, yeah, there's, there'll be a lot to sort of watch and keep an eye on there. I think one of the things that's interesting to me about these rules is that if we look at it in, in the bigger picture of official development assistance and some of the trends we're seeing, we are seeing sort of a shift to more self interest in aid and in this case, it's sort of that times 10 because it's about exporting sort of domestic political issues and a, and a, you know, very in this administration's worldview, through its policies to other countries and organizations.

B (13:33)

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A (14:03)

Jesse, I wanted to bring you into the conversation because I know you wrote a piece this week about a report from eurodad about how the way aid is counted today or sort of looked at today has sort of hollowed out the original purpose of official development assistance. Can you tell us a little bit about sort of what you found out there and sort of how that fits into what we're seeing sort of play out across the aid and development space?

C (14:29)

Yeah, absolutely. I just want to say your story is so fascinating. I could have sat here and listened all day to you guys talking about that. So really important stuff. So, yeah, the eurodad story, they put out a report today, as you said, about kind of a concern around the direction of ODA and how it's counted. And there were sort of five main points for where this concern comes from. The first is that loans are increasingly counted for their grant equivalents. So that means that the amount that a loan is subsidized is counted as a grant. The second is that, and we can come back to this after but funds are also that are used for peace and security are counted towards oda. And so there's some question of like blurring the lines between development and military objectives with this money. Also, a lot of ODA can be used, can be counted as in donor refugee costs. So like the cost of hosting asylum seekers for I think it's up to 12 months also would fall under ODA debt relief as well. So if a country forgives a certain amount of debt that could count towards their oda. And then finally like private sector instruments like guarantees and equity and stuff like that. So there's all these things that, that we wouldn't really think of as ODA as direct grants that now kind of cut back on how much these countries are overall really giving and more importantly, what the countries that need it are getting. And this aligns with the, I think this came out earlier in the year, but at least developed countries spent more on debt repayments in 2024 than they received in aid. So it's just adding further costs and fuel to the fire. When you think about, okay, if they're going to keep kind of putting these private instruments or loans out towards countries that already have a huge amount to pay back in debt, how are they ever going to kind of have a net gain when it comes to development assistance? But as you mentioned at the beginning, this is sort of a general broader story about a broader trend towards self interested aid which we're seeing everywhere of course, and I think we've really seen it take flight in the last year and obviously we've seen it in the US but I think in Europe as well, in Germany, defense and security is outpacing money for aid throughout all the budgets. And also the development kind of plans that governments are putting forward have a lot more to do with what's important to the German or the European economy rather than what exactly do these countries need. So the eurodad report was really saying we're seeing this shift of development assistance moving away from the needs of least developed countries and kind of the fundamental point of oda, which is to address poverty and moving more towards this donor specific kind of self interested aid. It's not a new story. We've been talking about this in one way or another over the past year, but I think they really put it all together into one place and kind of helpful to look at like that.

A (17:28)

Yeah, it's definitely something I've heard in recent conversations about sort of trends to watch in development finance in the year ahead too, because we're seeing it among sort of development finance institutions as well. I think certainly bilateral development finance institutions are trying to find that sort of nexus of, you know, how do I do development but have it really benefit, you know, domestic companies, et cetera. And so I think that there's some tension there. And one of the people I spoke to recently said you, you often can't have both. Right? You have to have one objective. And I think there are questions about sort of where that lands for a lot of organizations. And you talked about this sort of idea of defense spending as part of development spending. And we did see sort of the European Investment bank as part of their strategy say they're going to do more investment on sort of and defense, which is something that, you know, traditionally we haven't really seen as much from, from, you know, development banks or development finance institutions. So I think it will be a really important thing to watch in the year ahead as well. Sort of what, what is the primary mission of some of these organizations? How do we see this sort of financing spreads changing?

B (18:33)

Like Jesse said, it's, it's, it's not a new story. It's, it's, we've been seeing for really a long time, it's kind of a long existing trend. There's always kind of been an underlying foreign policy, self serving purpose to foreign assistance. But you know, it's being really more out there in the open now. And where does this leave the poorest, most fragile countries? I mean especially now, I think what's, what's timely and you talked about this advice is the private sector, the MDBs and so forth. You know, they're being looked to as bilateral assistance gets cut, as grants get cut. They're being looked to as kind of the savior in a lot of ways. And, but you know, the return on investment in the poorest, most fragile settings, it's, it's not really there or at least it's not certainly not immediate. You know, there are going to be exceptions. You're going to have like the Democratic Republic of Congo with critical minerals. There are countries, Europe for instance, trying to tie aid to curbing migration to the continent. But this is all, you know, very, again kind of goes back to, it's not altruistic and poorer countries do not naturally fit into this paradigm. Again, I think it's, you know, we're talking more about what something that was more talked about behind closed doors. So I think that's also an interesting dynamic and certainly, you know, some self interest, if it's mutually beneficial does make sense. Again, you know, increasing private sector investment, trade ties, you know, decreasing dependence on traditional grants and assistance. You know, these are all things that the aid community has long said or reformed that are important. But again, I think the key to this report is that the poorer countries do not fit into this arrangement. And I think that it's yet another sign that they will be struggling in the future.

C (20:23)

Yeah, I want to add to that too because one of the pieces of the report actually says that in 2010 developed countries were receiving over 20% of total ODA and from 2021 that fell to 13%. So the overall there's a shift and I think this was exacerbated too when during the Russian invasion of Ukraine, a lot of EU especially aid is going to Ukraine. But we could see this shift towards, you know, maybe middle income countries where maybe there's a higher return on investment and, and leaving some of these least developed Countries in the dust. But I also wanted to comment too on this, what you were mentioning, adva, about the EIB and security. I'm also sort of interested in what double counts as like, development and security. Like, you know, does does focusing on a certain development project help keep refugees from coming into a country and therefore perhaps adding towards the security discussion of that country? And so are there discussions around how, you know, money is counted as a development fund versus a security fund? That's, I think probably something to watch moving forward as well.

A (21:31)

Yeah. And I think another piece of this is because we're seeing less and less money going to these least developed countries and generally less oda. I do think it's forcing a lot of conversations domestically and within the aid community about prioritization. Right. So you have limited grant dollars. Where should those go? I mean, I think a lot of people would argue they should go to the LDCs and then the other instruments can probably serve other places. But I think that's a really important conversation to watch and I'm sure will be had a lot in the year ahead is sort of a prior prioritization of dollars. I wanted to to jump to another story you were writing about. You wrote, Jesse, and that's about the Asian Infrastructure Investment Bank. And you know, I think one of the things in this story I wrote recently about development finance trends to watch is sort of the role of these institutions that don't have the US As a shareholder are playing, I think, a really interesting role in the development finance space right now. And AIB is one of those institutions. But I think one of the questions over time has really been about its sort of systems and frameworks, particularly when it comes to accountability. And so you've written a couple stories recently sort of about that. One is about sort of a particular example of sort of a standoff on accountability with aaib. And so maybe you can give us the details of that example. But I know you've also written about how they recently updated their accountability policies. So maybe you can sort of tell us a little bit about both of those pieces and what we should really be looking at with the AIIB moving forward.

C (23:04)

Yes, absolutely. So, yeah, I recently wrote two seemingly kind of opposing stories on the Big at the beginning of January, they passed this new updated accountability mechanism, which they'd been getting a lot of flack for, because as of, I think still as of now, they haven't actually accepted any cases that have been submitted to them as eligible and therefore for them to do something about. And so a lot of NGOs were saying, you know, this process needs to be more transparent, we need to, to be able to have our cases looked at at least. And so the sort of simplified shift between the old and the new one is that previously they required complainants to try and resolve their issue locally and then also directly with AIB management. And then if none of that happened, it would be brought to this accountability mechanism called ppm, which is already a lot more steps than other banks have. I don't think it's typical that there's this many steps, steps to getting your complaint heard. And the main change, they still have those steps, but the main change is now there's a 45 day limit for that second step, the AIIB management to respond and respond meaningfully. So now at least there's time bound, it's definitely progress. I think a lot of NGOs were happy to see that, but it wasn't seen as quite enough. So we'll see how much they keep pushing. And then the second story which does obviously it's also about accountability, but I'll get to the relationship in a sec is about this long term kind of standoff between a project that AIB is funding in Indonesia and the locals there and the watchdog group that's sort of representing the locals. It's a complicated project, it's been going on for like eight years or something and there have been a lot of complaints, there have been some human rights concerns around it. And the group that's representing the locals is in that second step. They're saying, you know, we have a problem with this project that you're funding. It's a big tourism project and AIB is discussing it with them. But there's a standoff and you know, where are they going to meet in the actual tourism, actual village where these people live to see the problem, to see evictions. And aib, based on emails we saw, has not at least yet agreed to do that. But really interestingly, the group I talked to said they don't want to go through that accountability mechanism, that third step, because they don't like to me, they were just like, why would we go through that step if we know that they're not going to look at it if no other cases have been eligible? They need all this paperwork that they have to submit in order to submit to this mechanism and AIB needs to give them the paperwork. So we're definitely still smoothing out some issues and I think AIB has been very responsive both to me and the people, the watchdog groups that I've talked to, they, they're answering, they're talking. They seem to be trying to figure out a way forward, but also they seem to be kind of avoiding a direct answer to the problem. So. Yeah, something to keep following for sure.

A (26:08)

Yeah. And I think one of the things that sort of stood out to me is because there hasn't been a case that's come before the accountability mechanism. People were saying, like, okay, they're trying to improve it, but the real test will be do they actually accept cases and what do they do when that happens? Right. And I think that's where you really see when push comes to shove, it's one thing to have the mechanism, it's another thing to use it and to make it usable. And so I think that will be the test. But I do think it's interesting that not everyone wants to have to jump through all those hoops and maybe there is a resolution that can be had before that process. But we'll see in that specific project and more broadly as well. Unfortunately, I think we are out of time for today. But Jesse and Anna, I really wanted to thank you for joining me and obviously a lot to keep track of and keep following here. So to everyone, stay tuned to devex and our newswire and certainly for the development finance news, to devex invested, for all the news that you want on these issues. Thanks again. I'm Advaas Aldinger. This has been this Week in Global Development. Sam.