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If Development Finance Institutions Are Providing Aid, They Should Act Accordingly

How should member countries of the OECD's Development Assistance Committee classify their support to private sector investments in developing countries though development finance institutions? Either way, donors have decided that DFIs are in the aid business. And that means that DFIs should follow the principles of effective aid that DAC donors have signed up to.

Projected IDA allocations under scenario 4, with grants rising to 59%

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?

Various world currencies. Adobe Stock.

Can DFIs Be First Responders in a Crisis?

You might find this question odd. After all, since the outbreak of COVID-19, the development finance institutions DFIs have been busy announcing financial goals for crisis response, and offering reassurances of proactive stances. But it is important to recall at this moment that their financial models are not well suited for the purpose of crisis response. In this blog we explore their challenges and suggest how they can stretch and deploy their capital effectively at this moment of global crisis.

An image of money, to illustrate the proposal for special drawing rights

New SDRs? That Pesky 85 Percent Approval

Last week Senator Bernie Sanders and Congresswoman Ilhan Omar sent a letter signed by hundreds of lawmakers from 40 countries to the heads of the International Monetary Fund (IMF) and the World Bank, urging them to greatly increase the access of developing countries to financial assistance. They called for a new issue of Special Drawing Rights (SDRs) at the IMF, echoing the earlier plea of Gordon Brown and Larry Summers for at least $1 trillion in new SDRs.

A construction worker at an unfinished building in China. Curt Carnemark, World Bank photo.

With a Debt Crisis Looming, Researchers Who Estimated China’s “Hidden” Lending Respond to Their Critics

Last year, economists Sebastian Horn, Carmen Reinhart, and Christoph Trebesch put forward estimates of the Chinese government’s external (“overseas”) lending in a working paper. Their work was a landmark effort in a number of respects. Perhaps not surprisingly for a working paper, Horn et al. also attracted critics. In a new note for CGD, Horn et al. respond to this criticism.

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