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Views from the Center

CGD experts offer ideas and analysis to improve international development policy. Also check out our Global Health blog and US Development Policy blog.

 

Solving the Private Sector Aid Imbroglio

In 2014, Mark Lowcock, then head of the UK’s Department for International Development, pulled off an unexpected coup: securing an agreement between donor governments on new rules for counting official loans as aid. Some neat diplomatic footwork is needed again now, because negotiations over extending this agreement to donors’ investments in the private sector are threatening to fall apart. Among the consequences could be that the UK walks away from using internationally agreed standards for measuring aid and starts to create its own statistics. Other countries may follow.    

Can Technology Solve the De-risking Problem?

In recent years, regulators have raised their expectations for what counts as adequate AML/CFT compliance. At the same time, they have cracked down on institutions that have fallen short. While arguably necessary, this more stringent enforcement has produced some unintended side effects. In particular, it has put pressure on banks’ ability and willingness to deliver certain types of services, notably correspondent banking services.

The G20’s Commitment to Basel III: How will Emerging Markets be Affected? A New CGD Working Group Investigates

CGD is establishing a high-level Working Group, composed of leading experts on Basel III and economic development, that will identify challenges for emerging markets’ financial stability and development derived from the global implementation of Basel III. Effective and appropriate implementation of Basel III’s recommendations could make a huge contribution to global financial resilience with the attendant benefits for development progress. The G20’s commitment on this issue is welcome.

Stay tuned for more on our Working Group’s progress in the coming months.

Financial Stability Board Echoes CGD Finding on Decline in Correspondent Banking

The Financial Stability Board's long-awaited report finds that the number of active CBRs has declined by 6 percent since 2011 and has continued through 2016, affecting all regions and major international currencies. The analysis suggests that small economies are among the most affected by CBR withdrawal. The bottom line: the decline of correspondent banking relationships, especially with smaller and poorer countries, remains an important policy issue.

AIIB, Tajikistan, and the Risks of Non-Concessional Lending

The Asian Infrastructure Investment Bank's (AIIB) second loan to Tajikistan in the space of a year raises questions about lending on “hard terms” to poor countries. In its eagerness to meet the investment needs of Asian countries, is the AIIB going to get burned by lending at non-concessional rates to poor countries? Or, if a country becomes unable to pay all its bills, will it treat the AIIB as a preferred creditor and prioritize debt service payments over the needs of the poor?

The Time Is Right for Expanding the Use of the IMF’s Precautionary Credit Lines

Many emerging economies could benefit from insurance against this backdrop of volatility. Fortunately, cheap and no-strings-attached liquidity insurance exists, in the form of the IMF’s Flexible Credit Line (FCL) for countries with very strong policy fundamentals; for countries with somewhat weaker, but still sound fundamentals, the Precautionary and Liquidity Line (PLL) offers a similarly good deal. But these precautionary instruments remain underutilized. We have some suggestions on how the IMF could fix this.

$50 Billion and Three Lessons from Development Finance CEOs

Last week, AEI, CSIS, and CGD hosted a terrific forum with the heads of the British, German, Norwegian, and American development finance institutions (DFIs). It was billed as “$50 billion in one room,” a reference to the vast amounts of capital that these organizations bring to the table for development. Here’s what I took away from the session.

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