World Bank President, David Malpass’s outburst at a World Bank-International Monetary Fund debt forum in Washington, last Monday chiding other development banks for lending too quickly to heavily indebted countries, saying some were helping worsen already-challenging debt situations, was as unexpected as it was deeply puzzling.
According to his stated opinion, the Asian Development Bank, the African Development Bank (AfDB), and the European Bank for Reconstruction and Development were contributing to debt problems and in his words, “We have a situation where other international financial institutions and to some extent development finance institutions as a whole, certainly the official export credit agencies, have a tendency to lend too quickly and to add to the debt problem of the countries.”
In specific terms, the Asian Development Bank was “pushing billions of dollars” into a fiscally challenging situation in Pakistan while the African Development Bank was doing the same in Nigeria and South Africa.
As would be expected, the AfDB has put up a robust response, discounting the statement as “inaccurate and not fact based,” also stating that, “It impugns the integrity of the African Development Bank, undermines our governance systems, and incorrectly insinuates that we operate under different standards from the World Bank. The very notion goes against the spirit of multilateralism and our collaborative work.”
The AfDB went further to list supporting assertions, such as;
The World Bank, with a more substantial balance sheet, has significantly larger operations in Africa than the African Development Bank. The World Bank’s operations approved for Africa in the 2018 fiscal year amounted to $20.2 billion, compared to $10.1 billion by the African Development Bank. With regard to Nigeria and South Africa, the World Bank’s outstanding loans for the 2018 fiscal year to both countries stood at $8.3 billion and $2.4 billion, respectively. In contrast, the outstanding amounts for the African Development Bank Group to Nigeria and South Africa were $2.1 billion and $2.0 billion, respectively, for the same fiscal year. With reference to the countries described as “heavily indebted,” our Bank recognises and closely monitors the upward debt trend. However, there is no systemic risk of debt distress.”
The intent of this write-up, is not necessarily to shore up the AfDB’s integrity and corporate reputation, as it already speaks for itself, notably and not in the least, in the cutting-edge conceptualisation and successful kick-off in November, 2018 of the innovative African Investment Forum, with the second edition hosted last November once again, in Johannesburg, South Africa, that culminated in fifty six deals worth $67.6 billion making it to the boardroom discussions at the forum, a 44 percent increase on last year, and of which, 52 made it to approval.
The deals, from 25 countries, secured investor interest worth $40.1 billion – an increase on the $37.1 billion garnered in the first forum.
The question that would arise, therefore would be, what is the real intent of this loaded barb, judging from its timing and inappropriate nature, especially considering that all the institutions concerned are actually meant to be operating within the same development finance orbit, in inclusive synergy and should at all times be sharing knowledge and one another’s overlapping burdens?
It’s quite amazing that at a time, when all hands should be on deck to collaborate on global sustainable development, the Big Brother of DFIs deems it fit to muddy the waters, for no discernible or logical reason, or is there something here, to seriously begin to worry about?
Is the World Bank, for instance, trying to divert attention from ongoing internal challenges, such the worrisome turnover, of chief economists, the most recent of which is Penny Goldberg which was not unrelated, to the blocking of the publication of internal research showing a correlation between foreign aid to developing economies in the past (including World Bank aid) and jumps in their deposits in foreign financial havens ( re: the Economist Feb 13, 2020 edition).
Or, is the World Bank President simply trying to rock the boat, for latent strategic agenda, yet to unfold within these regional enclaves?
While his response, in the coming days will be expected to be more conciliatory and less pontifical, it is left to Malpass to tread carefully and desist, as much as possible from throwing stones from within his exquisite glass mansion.
Arogunmati is the executive director of African Incentive Partnerships