By Chris Humphrey, Overseas Development Institute
As officials prepare to fly to Washington for the IMF and World Bank’s 2016 fall Annual Meetings, the financial capacity of the World Bank and other multilateral development banks (MDBs) will be at the forefront of their thoughts.
The two topics of the October 8 Development Committee meeting — proposed changes to World Bank capital structure and a vision for how the Bank can remain relevant in the next 15 years — both revolve around the Bank’s financial resources.
Governments around the world are grappling with how to meet the July 2015 UN Conference on Financing for Development’s call to move from “billions to trillions” of investing to put our planet on an environmentally and socially sustainable growth path. Read more
By Wiebke Schloemer, International Finance Corporation
There’s no doubt that the recent influx of refugees has strained the European Union, both politically and, in some cases, logistically. But fewer people are aware that in the Middle East and North Africa, which still hosts the majority of refugees, the crisis has pushed fragile infrastructure systems to breaking point, highlighting an issue vital to the region’s future.
The five-year Syrian conflict has so far forced more than 11m people from their homes, including nearly 5m who have left the country. In neighboring Iraq, some 3.5m people have been displaced. Read more
This year’s Ebola outbreak has been a heart-wrenching humanitarian tragedy. Almost 6,000 people, all but a handful in West Africa, are dead, according to the WHO.
But it has also been an economic catastrophe for the three main affected countries of Guinea, Liberia and Sierra Leone, as the World Bank lays out today in its latest update on the situation. Read more
By Dalibor Rohac of the Cato Institute
In some media outlets, the publication of the 2015 Doing Business report by the World Bank gave birth to exuberant headlines. Russia Today, for example, reported jubilantly: “Russia jumps record 30 places in Doing Business ranking”. The sentiment was echoed by the Wall Street Journal’s Emerging Europe blog, which reported that the report “showed Russia moved up 30 places to 62nd compared with its 92nd position last year and number 111 two years ago.”
Has Russia’s business environment taken a radical turn for the better over the past year? Probably not. The truth is that constant revisions to the Doing Business report risk making it useless. Read more
The World Bank’s annual “Doing Business” rankings have long been a favourite grousing point for policymakers in the developing world and a regular source of tension between the bank and its member countries.
So much so that China – disenchanted with its persistently low place in the rankings – tried to kill them altogether in 2013.
The rankings’ defenders argue there is a good reason for why the annual Doing Business report is the bank’s most popular: It offers an unvarnished assessment of economies’ relative standings in the world when it comes to bureaucratic barriers to business. And that, the defenders contend, makes it a valuable policy tool Read more
What links a middle-income powerhouse growing at 5 per cent a year with a failed state limping in with a $2.6bn economy and a jihadi insurgency? The answer is: a border. Kenya and Somalia are among the two most extreme bedfellows in the Horn of Africa, a region that is home to 240m people in eight countries, the prospect of economic riches, oil exports and – worryingly – four conflicts.
That’s one of the reasons five sets of donors, from the European Union to the Islamic Development Bank, have today said they will put $8.1bn towards the region over the next few years. Read more
By Matt Gamser and Paul Lee
A new wave of financing innovations is democratising access to capital, especially for those most vulnerable among small, medium and micro-enterprises (SMMEs). Are governments and large financial institutions ready to embrace these innovations and enable the necessary regulatory reforms to support the growth of entrepreneurs across Asia?
Raising capital has always been one of the greatest challenges for the growth and sustainability of SMMEs. The International Finance Corporation estimates that the total unmet need for credit by SMMEs globally ranges from US$2.1tn to US$2.5tn. In East Asia alone, the credit gap is a massive US$900bn to US$1.1tn. Read more
South America’s economies are slowing. US interest rates are rising and commodity prices are starting to drop. The region will grow a mere 1.2 per cent this year, according to the World Bank’s latest forecasts. Worse, “it is not clear whether the slowdown is bottoming out,” the bank suggests. That is bad enough, and South America has been through such cycles before. But adding to the gloom is what this might mean for the region’s recent reduction in inequality – which, by the way, has been a globally unique phenomenon. Is it all about to go into reverse? Read more
The nerdier parts of Washington DC have been riveted over the last week by a fight over one of the duller institutions in the city: the Exim Bank, the US’s export credit agency. The battle threatens the very existence, at least in its current form, of the agency that promotes US exports by insuring foreign buyers.
The battle is generally portrayed as a domestic ideological affair that pits true believers in unregulated markets (at least on this issue) against true believers in business. Yet the context inescapably includes other exporting economies, particularly in emerging markets. The stakes for the Exim Bank’s defenders have only been raised by the aggressive use of similar export credit agencies (ECAs) by emerging economies and most particularly China. It remains remarkable that the same US Congress that regularly inveighs against unfair Chinese export competition is also contemplating abolishing the agency that may help redress the balance.
How do you bank the “unbankable”? The question could hardly be of more importance to small businesses in emerging markets, an estimated 200m of which are starved of the finance they need to grow.
One somewhat unlikely – but increasingly popular – answer is through psychometric tests. By yielding profiles of loan applicants’ honesty, intelligence, aptitude and beliefs, the tests facilitate lending to otherwise “unbankable” borrowers who do not possess a credit history, collateral or accounts.
Artful questions are key to the tests’ efficacy, say finance executives and industry experts. For example, if you want to assess a prospective borrowers’ honesty, it would be naïve to simply ask if they are honest, or if they prize integrity. Read more
As a coordinated entity, the BRICS grouping of emerging markets has produced little except inspiring the name of a widely-read blog.
Next month, the five governments – Brazil, Russia, India, China and South Africa – are planning to erect an actual edifice amid the swirling mists of rhetoric with the launch of a development bank dedicated to filling some of the gigantic hole in the financing of infrastructure and growth in fast-growing emerging economies.
The BRICS are seeking to avoid some of what they say are the faults of the World Bank and regional development banks – too much rich country dominance and too many conditions attached to lending. But that leaves the exact function and operation of the BRICS bank open to a great deal of political jockeying and uncertainties over how it is run.
Several big risks – including China’s cooling property market, instability in Ukraine and the prospect of tighter global financial conditions over time – still stalk emerging markets (EM) in spite of a reduction in overall risk levels compared to last year, the World Bank said in a report on Tuesday.
In the 154-page report, Global Economic Prospects, the World Bank trims its global GDP forecast for this year to 2.8 per cent year-on-year, down from 3.2 per cent previously. But, it adds; “Despite the early weakness, growth is expected to pick up speed as the year progresses and world GDP is projected to expand by 3.4 per cent in 2015 and 3.5 percent in 2016.” Read more
The World Bank’s private sector lending arm has been very publicly rapped over the knuckles for its handling of an investment in Honduran palm oil company Corporación Dinant, which human rights groups allege has links with death squads and the killing and torture of peasant farmers who claim the land where it operates.
But if the shaming of the IFC in an independent audit by the Office of the Compliance Advisor/Ombudsman (CAO) were not bad enough, Peter Chowla, co-ordinator of the UK-based Bretton Woods Project, says: “Some of the most damaging findings from this case are yet to come.” Read more
The World Bank’s ease of doing business indicators are very important. If you are, say, the Macedonian trade minister, you will know your country’s ranking – and you will cite it at every opportunity to boost foreign investment. (It’s 25, by the way.)
But behind the scenes is a conflict between several countries over how these rankings are compiled. To some, the methodology is biased in favour of outright deregulation. To others it takes no account of levels of corruption. China is trying hard – with little success so far – to influence the process. Read more
The World Bank’s annual ease of doing business indicators were published on Tuesday – and they make a pleasant read for Russian policy makers.
In the last year, Russia has climbed 19 places to position 92, and is now the leading Bric nation. (That is, the country is 92nd out of 189 nations when it comes to the ease of doing business.) Ukraine – the country that has improved the most over the past year – rose 28 notches to 112. Read more
The World Bank slashed its growth forecast for India on Thursday, predicting GDP for the current fiscal year at 4.7 per cent.
Back in April, the Bank was predicting economic growth of 6.1 per cent in the current fiscal year – but a lot has happened since April. Read more
There is much worry among emerging market investors – and policy makers – that it is 1997 all over again. EM currencies have plunged since May. Investors have piled capital into these countries since 2008 and some now fear capital will rush the other way.
Is it 1997 redux? Not in East Asia, according to the World Bank’s East Asia And Pacific Economic Update: most economies here “are in a relatively strong position to face this shock, with significantly lower vulnerabilities than in the run-up to the 1997–98 Asian crises”. Read more
What’s the bigger risk for emerging Asia, the US tapering its QE programme, or the fall-out from years of over-investment in China? In the World Bank’s East Asia And Pacific Economic Update, they get a chapter each in a section titled “Selected Emerging Issues”, which could be better titled “what we should be worried about”.
And the conclusion? Read more
There was plenty of thinly-veiled gloom in the World Bank’s semi-annual update on the economies of East Asia. It expects the region to growth at 7.1 per cent this year, down from its projection of 7.8 per cent six months ago. Most of that is down to falling growth in China, though all the countries covered are experiencing problems of some sort.
All except one, that is: the Philippines. Read more
The World Bank has followed the International Monetary Fund’s lead by slashing its economic growth forecasts for Indonesia and urging the country to carry out “deep reforms” if it is to avoid a prolonged slump.
Just three months since it last updated its predictions, the development lender cuts its GDP projection for this year from 5.9 per cent to 5.6 per cent and for next year from 6.2 per cent to 5.3 per cent. Read more