Some de­vel­op­ment banks ‘worsen’ poor coun­tries debt

The Citizen (KZN) - - Business -

World Bank pres­i­dent David Mal­pass on Mon­day chided other de­vel­op­ment banks for lend­ing too quickly to heav­ily in­debted coun­tries, say­ing some were help­ing worsen al­ready chal­leng­ing debt sit­u­a­tions.

At a World Bank-In­ter­na­tional Mon­e­tary Fund (IMF) debt fo­rum in Washington, Mal­pass said that the Asian De­vel­op­ment Bank, the African De­vel­op­ment Bank, and the Euro­pean Bank for Re­con­struc­tion and De­vel­op­ment were con­tribut­ing to debt prob­lems.

“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,” Mal­pass said.

He said 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.

A spokesper­son for the Asian De­vel­op­ment Bank could not im­me­di­ately be reached for com­ment.

The Manila-based de­vel­op­ment lender in De­cem­ber ap­proved $1.3 bil­lion in loans for Pak­istan, in­clud­ing $1 bil­lion for im­me­di­ate bud­get sup­port to shore up the coun­try’s public fi­nances and $300 mil­lion to help re­form the coun­try’s en­ergy sec­tor.

The loans came as the coun­try is strug­gling with bil­lions of dol­lars in debt to China from Belt and Road in­fra­struc­ture projects, which helped cause Pak­istan to turn to the IMF for a $6 bil­lion loan pro­gramme last year.

Mal­pass said there needed to be more co­or­di­na­tion among in­ter­na­tional fi­nan­cial in­sti­tu­tions to co­or­di­nate lend­ing and main­tain high stan­dards of trans­parency.

“We have a very real prob­lem of the in­ter­na­tional fi­nan­cial in­sti­tu­tions them­selves adding to the debt bur­den and there’s pres­sure then on the IMF to sort through it and look at the best in­ter­est for the coun­try.”

Mal­pass also said that the new Beijing-led Asian In­fra­struc­ture In­vest­ment Bank was seek­ing to de­velop lend­ing stan­dards that were equal to those of the World Bank and was caus­ing fewer prob­lems than some of the more tra­di­tional de­vel­op­ment lenders.

Although China of­ten gets blamed for bur­den­ing some de­vel­op­ing economies through Belt and Road, Mal­pass said the coun­try was look­ing for ways to bring its debt con­tracts in line with in­ter­na­tional norms.

One way to do this is to im­prove trans­parency in lend­ing con­tracts. –

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