
IDA 19 and the Private Sector Window: Time for Course Corrections
This year, donors will negotiate the 19th replenishment of IDA, the triennial fundraising exercise for the World Bank’s poorest clients.
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This year, donors will negotiate the 19th replenishment of IDA, the triennial fundraising exercise for the World Bank’s poorest clients.
A few weeks ago, the World Bank’s soft-lending arm IDA held the mid-term review of its 18th round of funding. As background for the meeting, the World Bank produced a status update of the new IDA Private Sector Window (PSW) that I have blogged about before. The update provides valuable insight into how the $2.5 billion of PSW funding is being used at the halfway mark of its spending cycle but leaves some big unknowns.
In my last blog post on the IDA Private Sector Window, I noted the strong principles on subsidies to the private sector that were agreed by the heads of the multilateral development banks (MDBs) in 2012 as part of the Multilateral Development Bank Principles to Support Sustainable Private Sector Operations. Those principles can be summarized as “start with the public policy problem, use open offers or competitive approaches, maximize transparency.” It is interesting to compare the MDB principles to the principles which later emerged from the DFI Working Group on Blended Concessional Finance for Private Sector Projects.
I have previously suggested that the current design of the $2.5 billion World Bank/IDA Private Sector Window (PSW) seemed an inefficient use of scarce aid resources, didn’t follow the World Bank’s own guidance on disclosure and design of subsidies to the private sector, and is noncompetitive, nontransparent, and unstructured. In this blog post, I offer some ideas on how the World Bank Group could reconstruct the PSW towards real development impact in the next round of IDA funding, to be negotiated in 2019.
While energy advocates have mostly focused on the 600 million people in sub-Saharan Africa that lack access to electricity at home, the region’s power shortages are especially damaging to firms. Companies across the continent suffer from unreliable power supplies, affecting productivity, employment, and growth.
We estimate that there are between 915,087 and 2,186,829 working-age refugees in major urban areas in developing nations—constituting a potential hiring pipeline for many multinational, regional, and local businesses.
A recent blog post by Ricardo Hausmann caught my eye because it addresses issues that I’ll be focusing on during my visiting fellowship here at the Center for Global Development. Hausmann—a former Venezuelan minister of planning—discusses the difficulty of closing the infrastructure gap in developing countries, and highlights the dilemma of whether governments should finance infrastructure projects through public-private partnerships or through their national budgets. He’s right about the dilemma, but his solution isn’t workable for fragile and low-income countries where infrastructure needs are greatest.
Last year the World Bank adopted a new “cascade” approach that intended to maximise finance for development by prioritising private solutions wherever possible. In what world would this “cascade” algorithm make sense? Without a good answer to that question, the cascade risks looking like ideology rather than sound development finance advice.
As more than 1,900 corporate leaders convene in Davos this week to “create a shared future in a fractured world,” they should prioritize the well-being of the 22.5 million refugees around the world. In a joint report with the Tent Foundation, I highlight how global businesses can move beyond corporate social responsibility to engage refugees in their core business, especially by including refugees in hiring and supply chains.
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.
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