In a new report, we rely on public reporting from multilateral development institutions and funds to provide a clearer picture of China’s participation across the multilateral development system. We find that China has staked out a uniquely important position, one that relies on leading roles as a shareholder, donor, client, and commercial partner. No other country wears so many hats so effectively across these global institutions.
CGD Policy Blogs
If the World Bank Wants to Move On from the Doing Business Scandal, It Should Take a Look at AidData
Today’s release of a new dataset of over 13,000 Chinese-financed projects in developing countries marks a major contribution to our understanding of China’s role as a lender to the developing world, as well as the ways in which these projects are increasingly structured to avoid accounting for direct liabilities on public balance sheets. At a moment of high debt vulnerability in the developing world, both contributions ought to prove valuable to policymakers in rich and poor countries alike as they seek to work through these problems.
The G7 countries pledged a massive scale-up in support of developing-country financing at their recent summit in the UK. How it will be financed remains an open question. But analyzing trends in recent debt flows by lenders to developing countries, and taking stock of the Debt Service Suspension Initiative (DSSI), can provide some important lessons for the G7’s new ambitions.
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.
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.
Our recent paper examining the World Bank’s COVID-19 performance garnered a response from the institution, which you can read here. We very much welcome the bank’s comments on its crisis performance in reaction to our paper. We stand by the data and conclusions of our paper, but it’s worth reviewing some of the issues under debate here and reiterating the core questions and findings from our work.
The World Bank has committed to providing $104 billion in financing by next June to help developing countries deal with the COVID-19 crisis. Is that sufficient to meet the needs of developing countries facing a massive growth contraction? And will the bank actually deliver on its pledge?
More World Bank Borrowers Will Need Grants, Not Loans. As a Result, More World Bank Donors Will Need to Pony Up
Rather than providing relief on repayments from existing loans, IDA’s debt sustainability framework adjusts future financing from loans to grants for countries at high risk of debt distress. But what happens to IDA’s loans-to-grants model when a large number of IDA countries trigger the risk thresholds? Can IDA afford its commitment to debt sustainability?
Let’s unpack our arguments for why a debt standstill would be the wrong move for IDA at this point in time.
In retrospect, the scale up in MDB financing during the 2008-2010 crisis, though significant, now looks conservative as we consider the potential scale of damage from the current COVID-19 pandemic. To put the question bluntly, if the human and economic devastation follows a worst-case scenario, just how much could the MDBs do to respond? We attempt to answer that question by assessing the legal, rather than prudential, constraints on MDB lending.