|
Independent research & practical ideas for global prosperity
|
|
|
|
Independent research & practical ideas for global prosperity
|
|
December 4, 2009Will There Ever Be Any Serious Reform of World Bank Governance?Posted by Nancy Birdsall in Global Development, International Financial Institutions, World Bank Tags: Ernesto Zedillo, International Financial Institutions, World BankAt our recent event with former President of Mexico Ernesto Zedillo, who chaired the High Level Commission on Modernization of World Bank Group Governance on World Bank governance reform (report is here), panelists Moises Naim and Arvind Subramanian worried that there is no reason to expect the powers-that-be to take up any of the recommendations for reform. Read More… Comment »December 1, 2009Banks Raise Risky Holdings under the Eyes of SupervisorsPosted by Liliana Rojas-Suarez in Capitol Flows/Financial Crisis, Financial Crisis, Global Development, International Financial Institutions Tags: debt, FinanceThe Financial Times published my letter to the editor last week responding to Gillian Tett’s article “Will sovereign debt be the new subprime?” I elaborated on the risks of increasing public debt in the U.S. and other developed countries, and warned that mere perception of an excessive supply of sovereign debt can reduce the real value of that debt. Here’s my letter: Read More… Comment »November 24, 2009Cash for Poor Countries, or Another Round of Subprime Lending?Posted by Todd Moss in Capitol Flows/Financial Crisis, Debt Relief, International Financial Institutions, International Monetary Fund Tags: African Development Bank, IMF, Subprime Lending, World BankThis is a joint post with Benjamin Leo. A special new lending facility was announced in July 2009 with the objective of providing up to $17 billion in new loans through 2014 and, to entice cash-strapped borrowers, the lender is waiving interest payments for the first two years. This may sound like dangerous new short-term teaser offers for sub-prime borrowers. But this isn’t coming from Countrywide Financial. It actually is a new IMF facility for low-income countries, including some of heavily indebted poor countries (HIPCs) who are just barely coming out of the last debt crisis. The stated objectives of the new IMF facility are laudable: to offset the effects of the global economic crisis by boosting international reserves and supporting adjustment policies. And yes, the overall terms are more concessional than past IMF loans. Nonetheless, the net impact on national debt levels may be significant. And it was just four years ago that the IMF committed to cancel roughly $6 billion in bad loans to many of these very same countries. Comment »October 29, 2009Zedillo Commission Offers G-20 a Blueprint for Fixing the World Bank (But will Zoellick be Gorbachev or Brezhnev?)Posted by Lawrence MacDonald in Global Development, International Financial Institutions, World Bank Tags: Climate Change, Ernesto Zedillo, Governance, World Bank
Zoellick, a U.S. appointee, welcomed the report and said it would be “especially relevant as we undertake important institutional changes.” But he expressed doubts about recommendations for changes in the size and structure of the board, while side-stepping a recommendation that the next bank president be chosen without regard to nationality. Read More… 11 Comments »September 30, 2009The IMF beyond IstanbulPosted by Arvind Subramanian in Capitol Flows/Financial Crisis, Global Development, International Financial Institutions, International Monetary Fund Tags: Capital Flows, IMFThis post originally appeared in the Business Standard. Wanted: An Asian Managing Director and new approaches to capital flows. The IMF will strike a triumphalist tone at its forthcoming annual meetings in Istanbul. Some of this will be warranted because the IMF’s record in responding to the global financial crisis was commendable, even if its record leading up to it was less stellar (see http://www.iie.com/realtime/?p=942 for more details). Read More… Comment »September 28, 2009Mismatch between Newly Inclusive G-20 and Limited Changes at the IMF and World BankPosted by Nancy Birdsall in Global Development, International Financial Institutions Tags: G20, G8, IMF, World BankThe big headline from Pittsburgh was the G-20 officially becoming the recognized grouping on “global economic issues”, eclipsing forever the nearly four-decade role of the G-7/8. Presumably that was the quid pro quo for three steps by China: (1) its signing on to the promise in the communique to support for increasing domestic consumption at home to deal with the global imbalance problem; (2) keeping alive that China will find a way to help fill the unfilled gap in the $750 billion to be made available by the G-20 countries to the IMF’s short-term resources; and most important (3) the 5 percent shift in voting power at the IMF to underrepresented countries, which means mostly China. Read More… 3 Comments »September 10, 2009Birdsall Urges Pittsburgh G-20 Summit to Prepare for Next Global CrisisPosted by Lawrence MacDonald in Capitol Flows/Financial Crisis, Climate Change, Environment, Global Development, International Financial Institutions, World Bank Tags: G20, IMF, Poverty, UN, World Bank
1 Comment »August 26, 2009The G-20: An Idea from IndiaPosted by Arvind Subramanian in Asia, International Financial Institutions Tags: G20, IMFThis post originally appeared as a column in India’s Business Standard. In the run-up to the G-20 Summit in London in April, China created a frisson of excitement by pushing for the use of Special Drawing Rights (SDRs) as an alternative to the dollar as a global economic currency. To be sure, there was self-interest in China’s dèmarche. It is also true that when China now talks, people must listen. But, the Chinese proposal was taken seriously—indeed for a few months, the global economic policy-making chatterati could talk of little else—because it had enough objective appeal and systemic relevance. In all the discussions about the reform of the international economic architecture and the G-20 process, India’s predominant concern has been with getting a seat at the table. This desire for influence is appropriate and attaining it is long overdue. International economic arrangements, especially at the IMF and World Bank, are outdated and inequitable. Redressing these anomalies is a worthy endeavor. But acquiring influence cannot become an end in itself. “Influence for what” is a question that India needs to continually ask. Read More… 4 Comments »August 19, 2009On Current Path, IFC Is Set to Become Bigger than the World Bank in Five YearsPosted by Vijaya Ramachandran in International Financial Institutions Tags: World BankThis blog entry also appeared on the Huffington Post. Private capital flows to emerging markets have been badly hit by the recession. But the International Finance Corporation — the private sector arm of the World Bank Group — has managed to provide financing for private sector projects in the amount of $14.5 billion, including $4.0 billion mobilized through syndications and other initiatives. According to its annual results released a couple of weeks ago, IFC invested in 447 projects, of which half were in IDA countries. IFC reported income of $299 million for the fiscal year ended June 30, 2009. This is less than the $16.2 billion of financing provided in FY08 but is still a very large amount. And despite the recession, IFC’s net income for the fourth quarter of FY09 was $384 million versus $271 million for the same period last year. Read More… Comment »June 22, 2009U.S. Congress Takes Critical Step to Unlock $1 Trillion for Developing Countries Coping with CrisisPosted by Sarah Jane Staats in Global Development, International Financial Institutions Tags: Financial Crisis, G20, IMF, On the HillThe U.S. House and Senate passed the $105.9 billion war supplemental last week, which includes $5 billion to secure $108 billion in additional lending by the International Monetary Fund (IMF). Congress’s approval for increased IMF lending supports President Obama’s G20 commitments and paves the way to unlock the $1 trillion (mostly contributions from other high-income countries) for emerging and developing countries coping with the economic crisis. CGD president Nancy Birdsall recommended such a move first in mid-February (prior to the G20 summit) and more recently in testimony before two congressional committees. Read More… Comment »June 8, 2009President Lula to Head the World Bank? Process Matters, TooPosted by Nancy Birdsall in Global Development, International Financial Institutions Tags: Brazil, BRIC, Lula da Silva, World BankLast week the Guardian reported that the Obama Administration has approached President Luiz Inácio Lula da Silva of Brazil about becoming the next President of the World Bank. Seems unlikely to me – for one thing it’s early, since Robert Zoellick’s term lasts another three years, and the Administration has many other fish it is frying right now. Still it’s a welcome rumor, since it signals a willingness to imagine the World Bank having as its president a non-American – and one whose primary experience is in fighting poverty rather than primarily in finance. The Guardian cited a report in the respected Brazilian business weekly magazine Exame, and also noted that our friends at Foreign Policy magazine recently reported that the Obama administration was considering either Lula or Manmohan Singh, the prime minister of India, to head the World Bank. Read More… Comment »May 5, 2009IMF Gold Sales Should Fund Low-Interest Loans for Poor CountriesPosted by Vijaya Ramachandran in Global Development, International Financial Institutions Tags: Gold, IMFOn April 29, U.S. House of Representatives Democrat, Rep. Barney Frank, said that he supports authorization by the U.S. Congress of gold sales by the International Monetary Fund, on the condition that $4 billion of the proceeds go to poor countries. He also said that the U.S. Treasury backs his position. This is all good news regarding the IMF’s sale of 1/8th of its gold reserves, approximately 403 tons. But the terms of the transfer to poor countries via the IMF’s Poverty Reduction and Growth Facility (PRGF) are critical and remain as yet undetermined. If the money is offered as loans at market-adjusted interest rates, it could result in a significant future debt burden for poor countries, especially if these rates rise sharply over time—as they well might. Read More… Comment »April 16, 2009Liberia Cuts its Debt with $1.2 Billion Buy-Back at 97 Percent DiscountPosted by Steve Radelet in Debt Relief, Economic Growth, Global Development, International Financial Institutions, Regions Tags: Ellen Johnson Sirleaf, Liberia, World Bank
6 Comments »April 7, 2009G-20 And IMF Rhythms: The Problem Is Not the Direction but the SpeedPosted by Nora Lustig in Capitol Flows/Financial Crisis, Global Development, International Financial Institutions Tags: Agriculture, G20, IMFIf the commitments made last week by the heads of state at the G-20 meeting materialize quickly, this is good news indeed. The increase in available IMF and MDB resources for middle- and low-income countries, along with IMF’s announcement of a Flexible Credit Line which will allow countries to borrow amounts without pre-determined limits or conditionality, are crucial for helping these countries cope with the impact of the financial crisis. Increased resources and the right instruments to deliver them can prevent lots of pain for millions of poor people. The mere existence of these options will give many developing country governments more leeway to make counter-cyclical policy responses and reduce the impact of the crisis on economic growth. Read More… 1 Comment »April 2, 2009G-20 Pledge $1 Trillion for Developing Country Crisis ResponsePosted by Lawrence MacDonald in Capitol Flows/Financial Crisis, Global Development, Globalization, International Financial Institutions Tags: G20, IMF
Comment »March 31, 2009At The G-20 Summit, Nothing for AfricaPosted by Vijaya Ramachandran in Aid Effectiveness, Global Development, International Financial Institutions, Regions Tags: Foreign Aid Reform, G20, IMF, UNFive years after Africa was centerstage at a meeting of the G7 heads of state in Gleneagles, it has all but vanished from the priorities of policymakers from the rich and emerging economies. At the G20 Summit in London this week, heads of state will debate new resources for the IMF, in the range of $250 billion. But these resources will likely be deposited in the New Arrangements to Borrow (NAB) facility, which will be far too expensive and out of reach of most African countries. Rather they will be used by Eastern European countries to bailout Western European banks—an arrangement that suits the large number of European countries participating in the Summit. Read More… Comment »April 23, 2004Saving Debt Relief From ItselfPosted by Nancy Birdsall in Debt Relief, Financial Crisis, International Financial Institutions, International Monetary Fund, World Bank Tags: Debt Relief, HIPC, IMF, World BankThis is a joint post with Brian Deese Whatever happened to debt relief for the world’s poorest countries? It’s back. Aficionados of World Bank and IMF affairs will remember the sighs of relief when those two institutions managed, by the close of the year 2000, to fulfill their promise to the donor governments and worldwide church-based Jubilee movement and approve debt relief for more than 20 of the poorest countries in the world. Debt relief will be back on the agenda this weekend at the semi-annual meetings of the two multilateral behemoths in Washington, D.C. This time there will be less fervor and more pain. The discussions will be arcane – about the right interpretation of complicated rules that govern the process, and their unpleasant implications for the United States and other donor countries that are being called upon to commit more funds to “complete” the process of debt relief for the now 42 eligible poor countries. Debt relief, in retrospect, turned out to be a good idea. The resources freed up from annual debt payments have helped boost education spending by as much as 55 percent in the 23 African countries currently receiving relief, and health expenditures are up by almost as much as well. For those poor countries at least relatively capable of national planning and sound economic management, the direct budget support provided by debt relief has offered a cheaper, quicker and more effective alternative than the status quo of negotiating thousands of different projects with 50-plus donors, each with their own standards and reporting requirements. But the debt relief initiative is now in trouble, and is at risk of failing to deliver on the larger benefits – of stability, increased investor confidence, investment and growth – that so many had hoped the initiative to provide. The reasons, contrary to the quibbling that will ensue this weekend, have less to do with how the initiative has been implemented, and more to do with the initial design. At its core, the debt relief initiative, which offers a one-time write-off of countries debt stocks, was designed to address a symptom – excessive debt in poor countries. Yet it did little to get at the root cause – too much lending by official donors, over two decades, even though countries failed to use the resources to invest and grow, and got deeper and deeper into unsustainable debt. Whether donors kept lending to refinance their own non-performing loans, out of fear of abandoning millions of poor people, or because they were ever-hopeful that the next loan to the next reforming government would work, is hard to know. But the outcome is clear and remains little changed – the official creditors are not sufficiently accountable for the loans they make. The root of the problem, say some critics, is that the HIPC initiative was designed by and for the real creditors – the rich country members of the IMF and World Bank. They developed rules and formulae to determine the amount of debt relief based in part on their own willingness to pay, rather than on poor countries’ long-term needs for health, education, roads, training, and institution building. They combined these rules with overly optimistic projections about countries’ future growth paths, near 6 percent growth for African countries that have averaged barely 3 percent growth (which is less than 1 percent per capita growth given population increases) over the past two decades. This increased the prospects for long-term debt sustainability on paper, but little more. The result was an initiative that should never have been expected to achieve all of the real long-term benefits that can come from putting a country on a sustainable debt path: increased investor confidence, more private investment, stability, and growth. While IMF and World Bank delegates toil away on the details this weekend, we should use the occasion to think about better ways to get at the issues behind debt relief. An important start is to shift more of the World Bank’s lending to the poorest countries into grants – to avoid piling up new debt. In addition, delegates should consider offering poor countries long-term “insurance” on their debt (more details on this proposal can be found here). Under such a plan, poor countries that demonstrated a commitment to sound economic policies and invested in the health and education of their citizens would be protected for a period as long as ten years, against shocks over which they have no control – weather and price fluctuations – which throw them into unsustainable debt situations. This would contribute to the kind of confidence in the stability of poor countries that is vitally important to private sector development and growth. At first blush it may sound difficult to determine whether external circumstances caused an increase in debt, the IMF has the history and the technical tools to make such a judgment and the technical soundness of its judgment could be encouraged through public disclosure. The difference with an insurance arrangement would be that the IMF, and its donor members, would finally be accountable for their projections and calculations. If their optimistic projections of growth, exports and commodity prices turn out to be wrong due to factors unrelated to mismanagement or corruption in poor countries, they should be prepared to step up to the plate. The needs of the world’s poor would not then take a back seat to rules and formulae dictated from afar. While some may worry about the cost of such a proposal, the delegates to these powerful institutions’ meetings need to think seriously about the economic and political costs of allowing for another embarrassing round of debt relief. Insuring against that risk, and finding ways to provide poor countries the full long-term benefits of sustainable debt, seems a far smaller price to pay. Nancy Birdsall is the president of the Center for Global Development. Brian Deese is a senior policy analyst at the Center for American Progress.
Comment » |
|
|
CENTER FOR GLOBAL DEVELOPMENT
1800 Massachusetts Avenue NW, Third Floor
Washington DC 20036
Tel 202.416.4000 | Fax 202.416.4050
|
|
|
Print
Share
Last week, the World Bank released the long-awaited 
CGD president Nancy Birdsall urged the United States to exercise leadership at the upcoming G20 Summit in Pittsburgh in a 
In a huge step forward, this week Liberia slashed its foreign debt by buying back $1.2 billion in commercial debt — about one-quarter of its foreign debt — from its private foreign creditors, including banks, hedge funds, and other “distressed debt” investment funds. President Ellen Johnson Sirleaf 
Leaders from more than 20 major nations announced Thursday (
