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US lawmaker threatens World Bank capital increase over private sector concerns (Devex)

April 10, 2019

From the article:

U.S. Rep. Maxine Waters, chair of the House Financial Services Committee, voiced concerns about a World Bank effort to direct more private investment to low-income, fragile, and conflict-affected countries — and she threatened to withhold support for the bank’s capital increase package unless the institution shows greater transparency.

In a hearing with U.S. Treasury Secretary Steven Mnuchin on Tuesday, Waters began her opening remarks with a statement about the International Development Association — the arm of the bank that delivers grants to 75 low-income countries — and its “private sector window.” Her remarks came just as the World Bank Spring Meetings were getting underway, and on the day that David Malpass, a now-former U.S. Treasury official, took over as the institution's president.

“I’m concerned that IDA, through its new private sector window ... today is transferring $2.5 billion to the World Bank’s private sector arm, the International Finance Corporation, and is subsidizing private firms selected without competition on the basis of unsolicited proposals,” Waters said.

“The PSW is likely to prioritize financial returns over positive development impacts, which will be difficult to monitor. The PSW also stands in conflict with the World Bank’s own principles that call for subsidies to be justified, transparent, competitively based, focused on impact, and guarded against rent-seeking opportunities,” she said.

Waters concluded with a specific request — and a specific consequence if the bank chooses not to heed it.

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Waters is not the first to raise questions and concerns about IDA’s private sector window.

After a review late last year noted that the PSW had only allocated $185 million of its resources, Charles Kenny, senior fellow at the Center for Global Developmentobserved that, “If anyone was still dreaming that there were a bunch of significant shovel-ready public-private infrastructure deals in low-income countries just waiting for slightly better financing terms, the PSW’s experience should get them woke.”

Kenny and others have also raised some of the transparency and open competition questions that Waters focused on in her remarks to Mnuchin. Resources from the IDA window subsidize private sector deals, but information about who actually receives those subsidies, and on what basis, and with what development impact are difficult to come by, Kenny wrote last year.

“The taxpayers who provide this finance, as well as the client countries of IDA which would otherwise have received it, have the right to know how it is being used,” he argued.

The World Bank did not immediately respond to a request for comment on this story.

 

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