CGD Policy Blogs
Current Budget Rules Stand in the Way of a Reasonable Path for US DFC to Realize Ambition on Climate and Pandemic Response
When Congress created the US International Development Finance Corporation (DFC) through the BUILD Act in 2018, it gave the new agency authority to make equity investments in funds and firms in developing country markets, building on the traditional lending programs of DFCs’ predecessor agency, OPIC.
In the Secretive World of Government-to-Government Lending, 100 Chinese Debt Contracts Offer a Trove of New Information
Is Chinese financing good for developing countries? Taking stock of China’s lending activities has long been hindered by the lack of publicly available data on dimensions like loan volumes and interest rates, let alone more esoteric features like loan collateral or default contingencies. A pathbreaking new study by researchers at AidData at William & Mary, the Kiel Institute for the World Economy, the Peterson Institute for International Economics, Georgetown Law School, and the Center for Global Development changes that.
The US International Development Finance Corporation has become a Rorschach test for the policy community: when they look at it, everyone sees something different.
The Biden administration and the Congress rightly went big in the recently passed American Rescue Plan at a time of tremendous need. The package was appropriately focused on the domestic side, but it did not neglect the rest of the world. One might reasonably ask then why $1 billion or $2 billion could not have been included for fighting the poverty, food insecurity, and health crises driven by the pandemic. That would have amounted 0.05 to 0.1 percent of the total package. And it would have been multiplied many times over in additional poverty reduction dollars, because that it was the MDB model does.
This week, the Inter-American Development Bank’s governors gather for their annual meeting. Much is at stake as the region reels under the compound crises of COVID-19 and recession. But none of this urgency is yet evident in the IDB’s public case to its member countries.
Today the IDB is again making the case for a capital increase to its shareholders. Yet, despite an unfolding crisis that threatens development progress in Latin America to a degree that eclipses the Global Financial Crisis, talk of a financing cliff at the bank is absent from its appeal for more capital. That’s because a spike in crisis financing has yet to materialize in IDB’s lending numbers.
Makhtar Diop, former minister of finance in Senegal and current vice president for infrastructure at the World Bank, has been tapped to be the next head of the International Finance Corporation, the World Bank Group’s private sector investment arm. This is welcome news: Diop’s experience and talents can help steer IFC towards greater development impact during the COVID-19 pandemic and beyond.
Last week DFC announced that it signed a framework agreement with the government of Ecuador to refinance up to $3.5 billion of the country’s external debt to China. In exchange, according to reporting by the Financial Times, the Ecuadorian government will commit to exclude Chinese companies from its telecom networks.
The White House and the World: Practical Proposals for Resetting US Engagement in Developing Countries
When President-Elect Biden takes office in January, he will face a daunting set of challenges in the US wrought by the COVID-19 pandemic. His administration’s core agenda will necessarily be shaped by the twin imperatives of containing the virus itself and supporting Americans as they weather the economic effects of the crisis. Both tasks will be considerably more difficult if US policy doesn’t also pivot toward constructive engagement with the rest of the world.