Next week in Zambia, donors to the World Bank’s financing window for low-income countries, the International Development Association (IDA), meet to discuss IDA’s future. This “mid-term review” is both a stocktaking session and a teeing up of the next round of fundraising for the world’s largest concessional lending fund. Formal negotiations will commence next year, but the meetings in Zambia set the scene for those negotiations.
CGD Policy Blogs
What would it look like today if major multilateral finance institutions like the World Bank had never adopted the climate agenda as a binding constraint on their operations? Unfortunately, we have a real-world approximation of that hypothetical in the form of Chinese development finance. At least, that’s a conclusion I draw from an important new report from World Resources Institute (WRI) and Boston University, Moving the Green Belt and Road Initiative: From Words to Actions.
In most developing countries, China's role as a creditor is modest—but in eight of the most debt vulnerable countries, Chinese lending is significant and growing fast.
Donors are considering a proposal for a new “innovative finance mechanism” to increase funding for education, based on recommendations from Gordon Brown’s Education Commission. We agree that we need to finance an expansion of education in the developing world. But sadly, the International Finance Facility for Education (IFFEd) proposal is too good to be true. Using donor guarantees to increase lending by multilateral banks could increase the supply of loans—but there are simpler ways to do that without setting up a new facility.
The formidable challenge of financing the Sustainable Development Goals has focused attention on the role of private capital in filling huge finance gaps. But for low-income countries (LICs), which receive only about 5 percent of total cross-border private capital flows to developing countries, there is little confidence that external private capital will make a significant contribution.
The IDFC represents a unique mix of bilateral agencies, national development banks, and regional development banks. As such, it holds promise for bringing new and productive collaborations to the SDG agenda that extend well beyond the work of the major multilateral development institutions. In a new brief, our efforts to map the scale and scope of IDFC members’ development financing through a membership survey and public databases provide some interesting takeaways:
In the biggest step forward in US development policy since the creation of the Millennium Challenge Corporation and PEPFAR, Congress approved legislation to establish a new, modernized US development finance agency.
In 2019, major sources of concessional finance—the big global health funders like the Global Fund and Gavi, as well as the development-bank-based IDA and the African Development Fund—will ask donors for more money to accomplish more health and development.
After toiling away for decades in relative obscurity, DFIs have found themselves thrust into the limelight and told to transform “billions to trillions,” to fill the yawning SDG financing gap.
The Trump administration is worried about the role of Chinese finance in spreading Marxism around the developing world. But it’s Chico Marx, not Karl, that they should be focused on.