With rigorous economic research and practical policy solutions, we focus on the issues and institutions that are critical to global development. Explore our core themes and topics to learn more about our work.
In timely and incisive analysis, our experts parse the latest development news and devise practical solutions to new and emerging challenges. Our events convene the top thinkers and doers in global development.
International Financial Institutions (IFIs) and particularly the relationship between the IFIs and the United States.
Scott Morris is a senior fellow at the Center for Global Development and director of the US Development Policy Initiative. In addition to managing the center’s work on US development policy, his research addresses development finance issues, debt policy, governance issues at international financial institutions like the World Bank and IMF, and China’s role as a development actor.
Morris served as deputy assistant secretary for development finance and debt at the US Treasury Department during the first term of the Obama Administration. In that capacity, he led US engagement with the multilateral development bank, as well as US participation in the Paris Club of official creditors. He also represented the US government in the G-20’s Development Working Group and was the Treasury’s “+1” on the board of the Millennium Challenge Corporation. During his time at Treasury, Morris led negotiations for four general capital increases at the multilateral development banks and replenishments of the International Development Association (IDA), Asian Development Fund, and African Development Fund.
Morris was a senior staff member on the Financial Services Committee in the US House of Representatives, where he was responsible for the Committee’s international policy issues, including the Foreign Investment and National Security Act of 2007 (the landmark reform of the CFIUS process), as well multiple reauthorizations of the US Export-Import Bank charter and approval of a $108 billion financing agreement for the International Monetary Fund in 2009. Previously, Morris was a vice president at the Committee for Economic Development in Washington, DC.
Researchers urge China to improve their debt practices and adopt standards
Center for Global Development
Washington – China’s Belt and Road Initiative – which plans to invest as much as $8 trillion in infrastructure projects across Europe, Africa, and Asia – raises serious concerns about sovereign debt sustainability in eight countries it funds, according to a new study from the Center for Global Development.
The study evaluated the current and future debt levels of the 68 countries hosting BRI-funded projects. It found that of the 23 countries that are at risk of debt distress today, in eight of those countries, future BRI-related financing will significantly add to the risk of debt distress. You can see the full list of countries, their external debt levels, and China’s portion of that debt in the new study here.
“Belt and Road provides something that countries desperately want – financing for infrastructure,” said John Hurley, a visiting fellow at the Center for Global Development and a coauthor of the study. “But when it comes to this type of lending, there can be too much of a good thing.”
According to the study, China’s track record managing debt distress has been problematic, and unlike the world’s other leading government creditors, China has not signed on to a binding set of rules of the road when it comes to avoiding unsustainable lending and addressing debt problems when they arise.
“Our research makes clear that China needs to adopt standards and improve its debt practices – and soon,” said Scott Morris, a senior fellow at the Center for Global Development and a coauthor of the paper.
The study recommends that China:
Multilateralize the Belt and Road Initiative: Currently, the multilateral development institutions like the World Bank are lending their reputations to the broader initiative while only seeking to obtain operational standards that will apply to a very narrow slice of BRI projects: those financed by the MDBs themselves. Before going further, the MDBs should work toward a more detailed agreement with the Chinese government when it comes to the lending standards that will apply to any BRI project, no matter the lender.
Consider additional mechanisms to agree to lending standards: Some methods might include a post-Paris Club approach to collective creditor action, implementing a China-led G-20 sustainable financing agenda, and using China’s aid dollars to mitigate risks of default.
In all eight highest risk countries, the proportion of external debt that is owed to China and its banks will rise, sometimes dramatically, under the Belt and Road Initiative:
Pakistan: Pakistan, by far the largest country at high risk, currently projects an estimated $62 billion in additional debt, with China reportedly financing roughly 80 percent of that. Big-ticket BRI projects and the relatively high interest rates being charged by China add to Pakistan’s risk of debt distress.
Djibouti: The most recent IMF assessment stresses the extremely risky nature of Djibouti’s borrowing program, noting that in just two years, public external debt has increased from 50 to 85 percent of GDP, the highest of any low-income country. Much of the debt consists of government-guaranteed public enterprise debt and is owed to China Exim Bank.
Maldives: China is heavily involved in the Maldives’ three most prominent investment projects: an upgrade of the international airport costing around US$830 million, the development of a new population center and bridge near the airport costing around US$400 million, and the relocation of the major port (no cost estimate). The country is considered by the World Bank and the IMF to be at a high risk of debt distress and is currently being buffeted by domestic political turmoil.
Lao, P.D.R. (Laos): Laos, one of the poorest countries in Southeast Asia, has several BRI-linked projects. The largest, a $6.7 billion China-Laos railway, represents almost half the country’s GDP, which led the IMF to warn that the project might threaten the country’s ability to service its debts.
Mongolia: Mongolia’s future economic prosperity depends on major infrastructure investments. Recognizing Mongolia’s difficult situation, China Exim Bank agreed in early 2017 to provide financing under its US$1 billion line of credit at concessional rates for a hydropower project and a highway project. If reports of an additional $30 billion in credit for BRI-related projects over the next five to ten years are true, then the prospect of a Mongolia default is extremely high, regardless of the concessional nature of the financing.
Montenegro: The World Bank estimates that public debt as a share of GDP will climb to a whopping 83 percent in 2018. The source of the problem is one very large infrastructure project, a motorway linking the port of Bar with Serbia that would integrate the Montenegrin transport network with other Balkan countries. The Montenegro authorities concluded an agreement with China Exim Bank in 2014 to finance 85 percent of the estimated US$1 billion cost for the first phase of the project, with the second and third phases likely to lead to default if financing is not provided on highly concessional terms.
Tajikistan: One of the poorest countries in Asia, Tajikistan is already assessed by the IMF and World Bank to be at “high risk” of debt distress. Despite this, it is planning to increase its external debt to pay for infrastructure investments in the power and transportation sectors. Debt to China, Tajikistan’s single largest creditor, accounts for almost 80 percent of the total increase in Tajikistan’s external debt over the 2007-2016 period.
Kyrgyzstan: Kyrgyzstan is a relatively poor country with significant new BRI-related infrastructure projects, much of it financed by external debt. China Exim Bank is the largest single creditor, with reported loans by the end of 2016 totaling US$1.5 billion, or roughly 40 percent of the country's total external debt. While currently considered to be at a “moderate” risk of debt distress, Kyrgyzstan remains vulnerable.
The full study, “Examining the Debt Implications of the Belt and Road Initiative from a Policy Perspective” can be found at: https://www.cgdev.org/publication/examining-debt-implications-belt-and-road-initiative-policy-perspective.
In 1944, the United States created a blueprint for economic statecraft that relied heavily on a new class of multilateral institutions to pursue US interests in the world. The blueprint itself is now under serious duress in the “America First” strategy of international engagement of the Trump administration.
Foreign aid advocates might be tempted to take heart from the budget deal just struck on Capitol Hill. But the overall shift in the US fiscal position, driven primarily by last year's tax cuts and furthered by this spending agreement, suggests that developing countries will be net losers by orders of magnitude that swamp the entire US foreign assistance budget.
As donors gather next week in Rome to pledge funds to the International Fund for Agriculture Development , they may be wondering where the United States is. Given the generally high marks this independent fund earns for development effectiveness, the uncertainty around a US pledge is troubling. In this “America First” moment, it’s worth asking when it comes to IFAD, what’s in it for the United States and what will be lost if the United States drops out?
As the World Bank makes a case to its shareholders for a capital increase this year, they are grappling with an uncomfortable truth: one of their biggest borrowers, China, happens to hold the world’s largest foreign exchange reserves, is one of the largest recipients of foreign direct investment, enjoys some of the best borrowing terms of any sovereign borrower, and is itself the world’s largest sovereign lender.
The US Agency for International Development (USAID) is the lead US development agency, managing roughly $20 billion in annual appropriations. The agency operates in over 120 countries, including the world’s poorest and most fragile. Its work spans a wide range of sectors, supporting humanitarian relief, economic growth, health, education, and more. USAID’s broad remit reflects the agency’s mission: “We partner to end extreme poverty and promote resilient, democratic societies while advancing our security and prosperity."
The evidence is compelling that countries benefit from immigration, particularly if immigrants are already well-educated, working-age adults, as is the case with most of the Syrians fleeing war at home. Still, there are real economic, security, and political costs of hosting refugees when, as with the Syrians, the arrivals are sudden and substantial. Given those costs, how should we think about the obligations of potential host countries?
The Asian Infrastructure Investment Bank’s new articles of agreement contain a great deal of information about shareholding and governance in the new institution. However, the articles require some additional analysis in order to answer key questions about voting power and board composition. Based on the information provided, we are able to generate voting shares as well as some preliminary conclusions about the composition of the AIIB’s board of directors.
Since its establishment more than 54 years ago, the United States Agency for International Development (USAID) has expanded into an $18-billion-a-year agency, operating in over 145 countries and in nearly every development sector. But USAID is often constrained in its ability to adapt to emerging development challenges due to differing political priorities among key stakeholders and resource constraints. This memo is the result of a roundtable discussion in July 2016 on how the next US administration, in close concert with Congress, can build upon and maximize the development impact of USAID.
In 2016 on the CGD Podcast, we have discussed some of development's biggest questions: How do we pay for development? How do we measure the sustainable development goals (SDGs)? What should we do about refugees and migrants? And is there life yet in the notion of globalism? The links to all the full podcasts featured and the work they reference are below, but in this edition, we bring you highlights of some of those conversations.
Attention presidential transition teams: the Rethinking US Development Policy team at the Center for Global Development strongly urges you to include these three big ideas in your first year budget submission to Congress and pursue these three smart reforms during your first year.