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Masood Ahmed cuts through the discussion about how much financial support the World Bank is providing to LMICs, and urges that the MDBs, and their sharedholders, should be more ambitious in their support of LMICs in light of the COVID-19 pandemic.
Providing reliable electricity is complex and expensive: large power plants can be billion-dollar investments. As a result, a growing number of cash-strapped developing countries are signing power purchase agreements with electricity providers to shift investment costs to the private sector.
In retrospect, the scale up in MDB financing during the 2008-2010 crisis, though significant, now looks conservative as we consider the potential scale of damage from the current COVID-19 pandemic. To put the question bluntly, if the human and economic devastation follows a worst-case scenario, just how much could the MDBs do to respond? We attempt to answer that question by assessing the legal, rather than prudential, constraints on MDB lending.
It is now only a question of when, not if, the COVID-19 pandemic will exact its human and economic toll on the poor and developing countries of South Asia, Africa, and Latin America the way it is already ravaging East Asia, Europe, and North America. And when it does, they too will need to respond with exceptional heath and financial measures in the face of this unprecedented global challenge.
Debt relief for low-income countries is on the table of measures to consider for coronavirus response. The imperative right now is to get cash to LICs as quickly as possible. Suspending some debt service payments may be a good first step in freeing up some budget space for new spending. Beyond that, protracted debt-relief negotiations with multilateral and commercial creditors right now could be a distraction at best but could also actively undermine the ability of institutions like the World Bank to offer new financing for crisis response.
The experience of the 2007 global financial crisis can tell us a few things about how low-income countries could be affected by the coronavirus pandemic in the near term, even as we recognize that the myriad economic problems created by the pandemic are almost certainly greater in number and scale than the problems in 2007.
This week, World Bank president David Malpass took the unusual step of calling out the bank’s peer institutions, the Asian Development Bank (ADB) and African Development Bank, for lending irresponsibly into unsustainable debt environments.
Trust funds are often regarded within donor agencies, such as DFID, as a useful mechanism to bypass lack of consensus within the multilateral, or to circumvent bureaucratic obstacles. But trust funds should properly be regarded as second or third best solutions.
With Jim Kim’s abrupt departure from the World Bank, there has been a swirl of commentary on questions of legacy, the best of which aim to answer the question, “how is the bank doing?” For large multilateral institutions like the World Bank, that’s a frustratingly difficult question to answer. Seemingly objective measures like volume of financing or sectoral targets are simplistic and bring their own value judgements about what the institution should be doing. Annual reports give us a narrative about institutional performance, but a heavily biased one.
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.