The World Bank Group has some very clear (and very good) guidelines about what makes for a successful public-private partnership where governments contract service provision like energy supply or education from private firms. Sadly, the bank has been ignoring that rule recently. And that is a sign of a broader problem in donor-backed financing of public-private partnership deals.
CGD Policy Blogs
We need a new public-private actor to fill the gap in the development finance architechure. Nancy Lee and Dan Preson have a solution: The Stretch Fund.
Why isn’t the African Development Bank Group bigger? Clemence Landers and Nancy Lee have a proposal to reform the bank and increase its size and impact.
Today the IFC announced a step forward in its transparency around the use of aid resources to finance private companies. That’s right and proper: When scarce aid, and scarce tax resources, are used to support private firms, citizens of donor countries and recipient countries alike have a right to know where the money is going to and how generous the terms. A number of us at CGD had been calling for greater transparency around subsidies to the private sector from the IFC and other development finance institutions, so this is a welcome first step. However, a few aspects have might be cause for concern.
For much of the last decade, the World Bank’s private sector arm, the International Finance Corporation (IFC), has delivered a share of its profits as grants to the World Bank Group’s soft lending arm for governments, the International Development Association (IDA). In the last couple of years that pattern has reversed.
In a world of stagnating public aid, limited fiscal space, and rising public debt in low-income countries, can they realistically expect to rely more on private finance from foreigners?
Chairwoman of the US House Committee on Financial Services Maxine Waters' recent intervention provides an opportunity for the Bank Group to rethink the Private Sector Window to better align with the International Finance Corporation’s 3.0 reform process, which was designed to increase the Corporation’s development impact, move toward making markets, and improve standards. At the same time, reform could allow the PSW to live up to the Multilateral Development Bank Principles to support sustainable private sector operations.
The global narrative on development finance centers on enabling all countries to achieve the Sustainable Development Goals (SDGs) by 2030. This cascades into a set of questions about how much financing is needed, how it should be mobilized, and how it will be used. While the SDGs motivate action and have a reasonable prospect of being met in middle-income developing countries, achieving the SDGs in low-income countries (LICs), which have further to travel and more binding resource and institutional constraints, will be harder. The challenge will be most acute in Africa, where pockets of absolute poverty are increasingly concentrated and environmental degradation and conflict add to state fragility.
Spring has finally sprung in Washington, DC! And that also means a series of substantive discussions on today's most pressing global development issues—from private sector financing in Africa to the future of the World Bank—are springing up at the Center for Global Development. Join us next week in person or online for these important conversations that will happen alongside the World Bank and IMF Spring Meetings.
Concern about relatively low development finance institution (DFI) mobilization ratios (dollars of private finance mobilized per dollar of DFI’s own commitments) is drawing attention to the product mix in DFI operations.