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CGD in the News

March 21, 2019

IMF loan conditions detrimental to local policies in poor countries, says report

From the article:

Structural reforms enforced by the IMF prevented state bureaucrats from implementing essential policies in service such as health, education, and national security, according to a report by social scientists from universities including Oxford and Cambridge.

The IMF rejected the findings, pointing to other research that found the implementation of structural reform conditions had in fact helped spur public investment.

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Sanjeev Gupta, a senior policy fellow at the Centre for Global Development thinktank and a former IMF official, recently published research based on conditions covering 115 countries between 1992 and 2016. It found that conditions relating to structural public financial management, such as on budget execution and control, had proven to be effective in boosting the long-term level of education, health and public investment expenditures.

Implementation of structural conditionality helped spur public investment by 10%-19%, the research found. “In fact, the conclusion is that it helps countries build capacity over time and, for somebody who has spent 30 years in the business, I have seen the capacity of countries improving,” he said.

Gupta, who was deputy director of fiscal affairs at the IMF, said he did not find the AJS paper’s conclusions “tenable” and that he had written rebuttals to similar papers the same authors had produced recently.

“You cannot have stabilization without structural reform. You don’t just say ‘cut spending and raise revenue’ and that’s it. You have to go deeper into the analysis and see what policies to implement,” he said.

“All stakeholders, whether countries or financial institutions, have to ensure that critical spending, whether social spending or public investment, is taken care of and doesn’t get slashed.”

 

March 19, 2019

Development finance institutions grapple with their growing role (Devex)

From the article:

Small agencies that work alone, siloed off from the rest of a country’s development work: That’s how development finance institutions might have been described just a decade ago. But DFIs have gained prominence as the role of the private sector has been accepted and because their work can be put in direct service of meeting the Sustainable Development Goals.

As the paradigm shifted from a focus on social service support and grant-based official development assistance to one more driven by private sector development, countries have turned to development finance institutions to provide solutions to help create jobs, spur economic development, and reduce poverty. As a result, the number of institutions has proliferated.

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Taking risks

In the past several years, a number of DFIs moved to invest more in least developed or low-income countries.

Deals in LDCs are difficult and complex. They require taking more financial risk and more effort and creativity, said Colin Buckley, chief operating officer at CDC.

Historically, DFIs have been hesitant to invest in fragile states and risky settings where the investment had less than an 80 percent probability of success, even if it had the capacity for transformative impact, Buckley said.

“One thing DFIs need to be more comfortable doing is rolling the dice for transformative impact,” he said.

DFIs will not, and cannot, solely invest in the poorest, riskiest places. In an effort to remain profitable and balance their portfolios, they will continue to make some investments that are deemed safer, even as they look to invest more in low-income countries.

But some experts believe that DFIs should be taking more risk and doing more to crowd capital into higher risk markets where private finance is especially scarce.  

“Some DFIs — I’d pick on IFC [the International Finance Corp.] for sure here — are mostly not in high-risk markets and not very engaged in high-risk sectors and are mostly doing safe projects,” said Todd Moss, the executive director at the Energy for Growth Hub, a spin-off from the Center for Global Development, where he is also a visiting fellow.

Part of the problem has to do with incentives: At some DFIs, investment teams are rewarded based on the amount of money invested, rather than on where it is invested or what its impact will be. There is also often pressure on the financial side, especially for DFIs that operate like commercial banks and are trying to maintain AA or AAA credit ratings.

“The scale and risk issues mean for these agencies to succeed, they need to create internal incentives for people to take risk and subsidize upfront costs,” Moss said.

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As a result, in some industries, DFIs appear to be preventing a natural progression to more commercial capital over time, keeping them locked in as sectors dependent on concessional financing, he said.

Not all DFIs are investing in that way, the investor noted. He pointed to a recent Overseas Private Investment Corp. deal where OPIC made part of its investment junior debt, a move that would allow the fund to raise more commercial sources of capital, which would need to be senior debt.

“I dont think they’re chasing out private capital very often. The bigger problem is sometimes crowding in other DFIs rather than truly private capital,” Moss said, adding that it could be an issue of immature markets that would change over time.

Some, including Andreasen, said that they don’t see competition as a problem, and instead often see DFIs working together. About one-third of individual investments that the European bilateral DFIs make are done alongside other European DFIs, he said.

“It’s fine to have debate and scrutiny in this respect, but I don’t see a lot of specific evidence,” Andreasen said.

One place DFIs are playing a critical role, and are working together, is in financing local banks in Africa in the wake of restrictive regulations around risk that have led many commercial banks to pull out, he said.

Buckley said DFIs haven’t been very good at coordination with one another or with aid agencies. Often, transformative investments need regulatory or institutional reform — and that is where DFIs should work more closely with aid agencies to address some of those challenges.

“I think people should demand more cooperation as DFIs grow in prominence and capital,” Buckley said.

Transparency and measurement

As more funds are funneled through DFI investment mechanisms, demand is growing for better measurement and improved transparency.

“As public agencies, they should be as transparent as possible — they don’t need to release every detail of every project, but they should release information about activities ... as maximally as possible,” Moss said.

A DFI should release all information unless there is a commercial reason not to, he said. It should be transparent about systems for evaluating development impact during and after it makes investments, and the data should be made available in easily accessible formats.

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March 15, 2019

David Malpass unchallenged to be next World Bank president (Devex)

From the article:

LONDON — The legitimacy of the World Bank’s presidential appointment process is under renewed scrutiny after U.S. President Donald Trump’s pick, David Malpass, emerged as the only candidate to succeed Jim Kim.

Nominations for the position closed on Thursday, and the World Bank confirmed in a press release that Malpass, currently a U.S. Department of Treasury official and a former investment banker, was the only candidate nominated for the job.

Civil society groups and development experts reacted with dismay. Many had hoped the historic “gentleman’s agreement,” which sees the United States appoint the World Bank chief and Europe nominate the head of the International Monetary Fund, would face a genuine challenge this time around. With only one candidate, it is hard for the bank’s directors to argue credibly that the process was merit-based and transparent, they say.

“It is very depressing that the World Bank board has failed to live up to the repeated commitments of its members to an open, merit-based process for key international appointments,” said Owen Barder, vice president at the Center for Global Development.

“Going back to choosing the World Bank president by coronation rather than a fair contest is a setback for an effective, rules-based multilateral system. This is another nail in the coffin for the World Bank,” he said.

As Malpass made his rounds to meet with World Bank shareholders, he secured commitments of support from countries including Australia and South Korea before the nomination deadline closed, begging questions about whether they were ever open to challenging the Trump administration’s pick by considering alternative candidates.

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March 14, 2019

Trump's pick Malpass has clear path to lead World Bank, no challengers emerge (Reuters)

From the article:

U.S. President Donald Trump’s pick to lead the World Bank faces a clear path toward approval as a nomination deadline passed on Thursday with no challengers, continuing the tradition of the United States choosing the development lender’s president.

David Malpass, the U.S. Treasury’s undersecretary for international affairs, will interview with the World Bank’s executive directors in the coming days, the bank said in a statement.

The directors expect to conclude their selection process before the World Bank and International Monetary Fund spring meetings on April 12-14, the bank said.

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Malpass also has said he was committed to pursuing the World Bank’s goals on combating climate change, which have been at odds with the Trump administration’s support for coal. The lender has largely withdrawn from financing new coal-fired power projects in favor of renewable energy projects.

Pledging to stay the course on climate change goals will likely win support for Malpass from board members, said Scott Morris, a senior fellow at the Center for Global Development and a former Treasury official.

“He’s distanced himself from some of his past positions,” Morris said. “His message has been that he’s committed to implementing the bank’s agenda put forth in the capital increase last year. That’s an ambitious agenda, not one of dialing the bank back.”

Morris added that it would be “extremely unlikely” that Malpass would be rejected by the bank’s board in the absence of other candidates.

One of Malpass’ first issues to handle at the bank would be dealing with the aftermath of a U.S. Supreme Court ruling that opens the door to lawsuits against the International Finance Corp, part of the World Bank Group, in American courts over projects it finances.

 

March 13, 2019

Trump’s World Bank Nominee Tries to Distance Himself From the President (The New York Times)

From the article:

WASHINGTON — When President Trump selected David Malpass to lead the World Bank last month, he showered his nominee with gratitude for years of loyal support, praised his intelligence and made one thing abundantly clear: The World Bank under his watch must put America first.

“My administration has made it a top priority to ensure that U.S. taxpayers’ dollars are spent effectively and wisely, serve American interests and defend American values,” Mr. Trump said. He noted, not for the first time, that the United States was the bank’s biggest donor and said that Mr. Malpass “has been a strong advocate for accountability at the World Bank.”

But as Mr. Malpass, 63, canvasses the world to seek support for his candidacy, he is trying to distance himself from his boss. In meetings with dozens of world leaders in both established and developing economies, Mr. Malpass has struck a conciliatory tone and tried to assure other nations that he will not simply serve as a proxy for the United States president.

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Mr. Trump himself has called global warming a “hoax” and promotes climate change deniers on Twitter. He has also vowed to pull the United States out of the Paris Agreement and said that the pact among nearly 200 nations to voluntarily curb greenhouse gases “hamstrings the United States.” Those positions have made other global leaders apprehensive about whether Mr. Malpass can effectively take the reins on what has become a core issue for the bank.

“As he has made the rounds, this is the key area where he would have to provide reassurances,” Scott Morris, a senior fellow at the Center for Global Development, said of preserving the bank’s climate agenda. “That said, it’s still hard to imagine him going off to the climate summits and being a cheerleader.”

March 12, 2019

China’s Tab at World Bank May Get Squeezed Under Trump’s Nominee (Bloomberg)

From the article:

In the summer of 1981, a poor, technologically backward country looking to move up in the world got its first loan from the World Bank. China borrowed $200 million to modernize its universities so they could churn out more scientists and engineers—a big step for a nation whose average worker earned less in a year than most Americans did in a week.

More than three decades later, China is the world’s No. 2 economy, with more than $3 trillion in foreign-currency reserves and development banks of its own that lend around the world. It’s also one of the World Bank’s biggest borrowers. But maybe not for long.

China’s huge trade surplus with the U.S., along with its plans to muscle into such areas as artificial intelligence, has raised hackles in Washington. President Donald Trump tends to talk about China in zero-sum terms: Its rise is a threat to America. Curtailing World Bank lending to China would fit with the administration’s efforts to contain Beijing’s economic power.

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As part of a deal that paved the way for a $13 billion capital increase from members last year, the World Bank agreed to curb lending to “upper-middle-income” countries. Nations with per capita incomes above roughly $7,000 are supposed to start the process of “graduating.” If they still get loans, it should be to finance “global public goods” that markets can’t provide, according to the plan. The idea is that World Bank capital could be harnessed to fight problems that transcend borders, such as global warming.

Yet only 38 percent of World Bank loans to China went to public goods such as pollution control in the last three years, according to a new report by Scott Morris and Gailyn Portelance of the Center for Global Development. The rest went to such areas as transportation and agriculture that critics argue China could easily finance on its own.

World Bank loans to China are already falling—to $1.8 billion in the year through June 30, from $2.4 billion the previous year. Under Malpass, there could be a further squeeze. Plans for the bank to invest alongside China in some Belt and Road projects may also be shelved. Still, with other nations pushing back on the bank’s board and environmental questions rapidly rising on the list of global concerns, China’s graduation could be gradual.

But Morris says there are downsides to forcing China to quit cold turkey, including the risk that the bank will be worse-equipped to tackle the big global problems its members want it to target. “China is the world's largest polluter,” he says.

March 12, 2019

US budget slashes global development funding, stresses burden sharing (Devex)

From the article:

WASHINGTON — For the third consecutive year, the Trump administration’s budget proposes slashing global development funding. It also underscores the need for increased burden sharing and proposes policy changes related to U.S. aid reorganization.

The budget requests $42.7 billion for the foreign affairs budget, including the Department of State and U.S. Agency for International Development. Congress appropriated $56.1 billion in the fiscal year 2019.

It is widely expected that Congress will reject the administration’s proposal when determining its budget — and there were already some signals Monday that might be the case. Ranking member of the House Foreign Affairs Committee Michael McCaul, a Republican from Texas, said Monday in a statement that while he welcomes cutting “waste, fraud and abuse” from programs, “we must be careful that cuts don’t have unintended consequences that cost us more in the medium and long term. This is especially true of impactful cuts to humanitarian and development assistance.”

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A merger between USAID’s Office of U.S. Foreign Disaster Assistance and the Office of Food for Peace has long been in the works, but the budget proposes taking the consolidation a step further by bringing the State Department’s humanitarian assistance work into the new USAID bureau.

All humanitarian assistance would then be funded through a single appropriations account. It would also restructure some of the State Department’s refugee and migrant work and create a leadership position that would be dual-hatted at USAID and State.

Merging the principal humanitarian accounts is technically a very good idea, said Jeremy Konyndyk, a senior policy fellow at the Center for Global Development, who served as the director of OFDA from 2013-2017: “Having a refugee account and a food account and an everything else account does not really reflect how the world works,” he said, adding that it makes it difficult to have coherent humanitarian assistance.

Having a single account will mean that aid is less siloed, both in terms of the type of aid, but also by who is receiving it, and decisions can be made by professionals closest to the crisis rather than by Congressional appropriations, Konyndyk said.

The policy proposal, however, is only “half good,” he said. The decision to move all assistance from State to USAID is one that Konyndyk warned against in a 2017 blog post. It is useful to have refugee expertise and assistance at the State Department with resources tied to it, he said.

“You need a strong partnership between State and USAID. Displacement is an inherently diplomatic and political issue, so State needs both the expertise and the resources at its disposal to be able to respond and influence policy and we’re concerned that the proposal ignores that reality,” said Mercy Corps’ Doherty.

Congress will likely carefully examine the administration’s proposals for reforms, particularly when it comes to humanitarian assistance and refugee and migrant issues, Konyndyk said. The administration will have to work hard to make the case for the changes and convince legislators that it would not further undermine U.S. leadership on refugee and migrant issues, which will be a “tough case to make,” he said.

It will be made more difficult by the fact that the administration still lacks senior people in key positions who would be making that case, Konyndyk said.

The budget also reiterates a commitment to further reform USAID and focus on “self-reliance” by prioritizing private sector-led growth, domestic resource mobilization, and economic and governance reforms. It highlighted the Women’s Global Development and Prosperity Initiative as the type of “responsible spending” the administration wants to achieve and touted its “cohesive whole-of-government approach,” rigorous metrics and leveraging of partnerships.

Another change proposed in the budget is that the U.S. African Development Foundation and the Inter-American Foundation would cease to be independent organizations and will become part of a new small grants office at USAID. The key to such a move would be ensuring that the unique capabilities of the agencies — they provide direct support to organizations and local civil society in the developing world — would not be lost in the process and the U.S. doesn’t have a good track record of doing that, Konyndyk said.

 

March 11, 2019

India's Poorly Performing States need a Federal Takeover (OZY)

From the article:

India’s schooling system is notoriously unequal, with wealthy private schools offering horse-riding classes often sitting near crumbling public schools. But ask any Indian parent to pick between public schools run by the federal government and those managed by states, and you’ll likely hear this answer: “the so-called central schools, please.”

Welcome to an inconvenient truth about Indian democracy. Decentralization of power is, without a doubt, essential for deepening the roots of democracy. Indian elections, from the national level down to the villages, mean the world’s largest democracy is also among its most robust, and an example for other postcolonial nations. But what if education and health standards in some states are consistently much poorer than in most union territories (UTs) — seven federally governed regions spread out across India? In those cases, it’s time for the central government to step in.

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Why are the UTs outperforming states in education and health?

First, the central government simply has more funds at its disposal than any state. And successive federal governments have focused those financial resources on building top-notch educational and health institutions in the major union territories, especially Delhi, Chandigarh and Puducherry, according to Rama Baru, a professor at the Centre of Social Medicine and Community Health at New Delhi’s Jawaharlal Nehru University (JNU).

Officials in charge of implementing policies in many states also typically face greater political interference than their counterparts managing federal education and health programs, experts say. Because states run programs using a combination of some of their own funds and the rest from the federal government, officials in states often receive conflicting instructions, complicating their work. “The UTs have a big advantage because there is just one set of instructions to be followed,” says Anit Mukherjee, a policy fellow at the Center for Global Development in Washington, D.C.

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But there are examples from the recent past, says Mukherjee, where the central government has taken greater control of key social programs without leaving state governments feeling threatened. Under the Sarva Shiksha Abhiyan, India’s mega education-for-all initiative that has helped dramatically improve school attendance this century, the central government identified 121 particularly troubled districts across the country and pumped in additional money and resources — in exchange for greater control over policy implementation. The federal government has driven India’s HIV/AIDs prevention program. “We were clear that, given the sensitivities [condoms and sex are taboo subjects in many parts of the country], many states may not take it up,” recalls Mukherjee. And at the very least, says Tilak, state institutions should pick up the stricter governance and quality norms that have made their central counterparts tick.

India owes that to its citizens.

 

March 11, 2019

Blame game over aid leaves Syrian refugees stranded in desert ‘death’ camp (Public Radio International)

From the article:

Stranded in the remote deserts of Syria near the Jordanian border lies Rukban Camp — an unofficial tent city of over 40,000 displaced people who fled from war in Syria. What began as an informal settlement in 2014 evolved over time into a complex camp with no running water, regular food supplies or access to medical care. 

“I can't explain to you how bad the situation is,” Rukban resident Muhammad A’kil, 27, told The World over a smuggled satellite phone that connects to the internet for about one hour every few days. A’kil, originally from Homs, Syria, has been in limbo at the camp for four years.  

“Don’t call it Rukban Camp; it's a death camp,” A’kil said. 

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Rukban stands out as another bitter example of how delivering humanitarian aid can often get hampered by politics. 

“When aid becomes a proxy for a political struggle, it's just much, much harder to get it to the communities who need it, because one side or the other will see it as a threat,” said Jeremy Konyndyk, former director of foreign disaster assistance programs for USAID in Syria during the Obama administration.

 

March 11, 2019

Pregnant Women & Vaccines Against Emerging Epidemic Threats (Johns Hopkins University Berman Institute of Bioethics)

Ethics Guidance for Preparedness, Research, and Response

Presenter: Dr. Carleigh Krubiner, Policy Fellow, Center for Global Development & Associate Faculty, Johns Hopkins Berman Institute of Bioethics

Moderator: Joseph Ali - Johns Hopkins Berman Institute of Bioethics and Johns Hopkins Bloomberg School of Public Health

Summary: The Johns Hopkins Fogarty African Bioethics Training Program, the Addis Ababa University, and the University of Zambia invite you to join a one-hour research ethics webinar. Dr. Carleigh Krubiner will present on the ethics of including pregnant women's health needs in the research agenda for Zika and other public health emergencies. Dr. Krubiner will also discuss her work on the ethical guidance to ensure that the development and deployment of vaccines against emerging pathogens fairly include the interests of pregnant women and their offspring.

Click here to watch the webinar!

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