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On November 13, CGD senior fellow Charles Kenny testified before the House Committee on Financial Services Subcommittee on National Security, International Development, and Monetary Policy Hearing, on How America Leads Abroad: An Examination of Multilateral Development Institutions. Kenny focused his testimony on the General Capital Increase requests of the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC), which await congressional approval.
From the Testimony:
I would like to make three points and three suggestions for reform: First, the IFC is doing less in the poorest countries not because of lack of cash but because of lack of good deals. Second, the IFC’s use of subsidized finance transferred from IDA does not help this problem and, third, they way that the IFC is using subsidies ignores the World Bank Group’s own principles as well as common sense. To help fix these problems, the IFC should move towards competitive subsidy award, cap subsidies, and provide far greater transparency across all of its operations.
The volume of support that the IFC is providing to poorer countries is declining. In 2011, 26 percent of IFC’s investments were in today’s (2019) IDA countries. In 2018, 24 percent of IFC’s investments were in IDA countries. Looking at the economies most in need of support, fragile and conflict affected states account for less than five percent of IFC commitments, and low-income countries accounted for 2.6 percent of commitments in 2016 (that compared to 25 percent in 2003).
Beyond volume is the quality of support: Between 2015-17, the Independent Evaluation Group at the World Bank rated only 45 percent of IFC private sector investment projects as mostly successful or better in terms of development outcome. In Sub-Saharan Africa, just 38 percent of IFC projects were rated mostly successful or better. That compares to a 76 percent satisfactory rating globally and 71 percent in Africa for World Bank IBRD and IDA projects with the public sector over the same period.