By Masood Ahmed
WASHINGTON DC, Mar 18 2019 (IPS)

All incoming World Bank presidents bring a public record of their views about the bank and about development more generally. David Malpass, who is on track to become the bank’s next president, has not been shy in criticizing the role and management of the institution he now plans to lead.

The commentary on his nomination has detailed how his vision of the World Bank’s role and his reservations about multilateral solutions to global development challenges are at odds with the views of the bank’s shareholders and staff and—most importantly—with the needs of its clients, developing countries.

Past statements need not predetermine the direction of the Malpass presidency. Through his initial pronouncements and actions, Mr. Malpass can demonstrate that he is now the leader and guardian of an organization of 189 member countries acting together to achieve shared goals and promote common interests.

A good starting point would be for Mr. Malpass to acknowledge that the 2030 Sustainable Development Goals and the Paris climate agreement provide a framework for action that most of the bank’s members have endorsed.

Recognizing the value added by multilateral, regional, and national development finance institutions acting as a system, not just in their own narrow interests, would also be an important step.

Here are the seven priorities for the World Bank that Mr. Malpass should consider endorsing in his initial statements and actions:

1. Support Africa’s development and integration into the world economy.

The central development challenge for the next two decades will be to help low-income Africa deal with its demographic, environmental, and developmental challenges. The success or failure of this endeavor will determine the future of the 2.5 billion people who will inhabit the continent by 2050—with major spillovers for every other region in an increasingly interconnected world.

The World Bank is already the largest multilateral financier of Africa’s development, but it can play an even stronger role to facilitate a more coherent approach by Africa’s other large development partners—including the European Union and China. In doing so, it needs to promote and finance country platforms for joined up development support and recognize that much of this development will come from private sector initiative.

2. Target the people left behind.

Development progress is always uneven. Even as countries move up to middle-income status, women, minorities, and disadvantaged regions disproportionately suffer from disease that is simple to prevent; struggle with basic numeracy and literacy, which is simple to teach; and lack human security that is taken for granted elsewhere.

And the transition from below to just above the poverty line is both fraught with challenges and easily reversed. More broadly, two billion people live in countries where sustainable development outcomes are affected by fragility, conflict, and violence, making delivering on the SDGs an intellectual and operational challenge.

Jim Kim—Mr. Malpass’s immediate predecessor—helpfully pushed the bank further into these spaces and Mr. Malpass would do well to confirm the institution’s continued focus on this agenda.

3. Help middle income developing countries make the right development choices.

Emerging markets and middle-income developing countries will increasingly drive global growth. The sustainability of their new infrastructure will define how livable our planet will be for the next century. Their economic success will provide markets for global exports and jobs around the globe.

The policy and investment decisions they make will impact our collective financial and environmental future. It would be a missed opportunity of historic proportions for the World Bank to watch these developments from the sidelines. It has a critical advisory and financing role in middle-income countries—not least as a catalyst for private finance.

Working with these countries also provides the bank with hands-on knowledge of development progress on the ground—knowledge that is essential for the bank to be a credible intellectual interlocuter for its low-income members.

So, it is important for Mr. Malpass to signal that focusing the bank’s financial support on where it has the most impact is not shorthand for pulling back from the vibrant partnership it enjoys with middle-income countries.

4. Mainstream work on global public goods.

Any number of knowledgeable observers, including a high-level group convened by the Center of Global Development (CGD) and an Eminent Persons Group set up by the G-20, have convincingly articulated why the challenge of development cannot be met without addressing problems—and opportunities—that span across countries in an increasingly interconnected world.

Whether it is preparing for the next pandemic; dealing with climate change; managing the ever-increasing flow of refugees; establishing an international tax regime that limits avoidance through tax havens; or coping with the regulatory and ethical challenges posed by big data, AI, and digital technology; action will need to be coordinated across countries and regions.

The Bank for good reasons, the bank has progressively become a major player in a number of these areas, but it still does this as an add-on to its main business, which continues to be organized around country-by-country lending.

Shareholders have not helped by creating a plethora of special facilities and trust funds that the bank manages on their behalf, which sometimes subvert the very priorities that they set for the institution when they meet in its the board to set strategy.

Mr. Malpass has the opportunity to rationalize the bank’s work on global public goods and to make this a core part of the Bank’s regular operations.

5. Be an active player in the debate on development pathways for the 21st century.

Every retrospective evaluation of the World Bank’s value add emphasizes the intellectual contribution it has made to furthering development thought and practice. That role is even more important given the widespread questioning of so much of what was taken as “good practice” in development cooperation.

Many countries are looking to China as the new model for shaping their own economic development strategy, and, no doubt, there is much to learn from China’s extraordinary journey over the past 50 years.

However, it is the World Bank as a global organization that should provide the home for discussing which of those lessons can be usefully emulated by others. Learning from China should be part of the World Bank’s intellectual agenda—not an alternative to it.

6. Engage actively with the other players who finance development.

Regional development banks are sometimes bigger players in their regions, national development banks are an underestimated force, and private foundations are major actors for driving innovation and a results-focus.

Private finance will be the key for making real the aspiration of ‘billions to trillions’ for development finance. Civil society provides ideas and holds the system accountable. The WB has a special role in making the development finance system be more than the sum of its parts. Mr Malpass needs to approach this task with serious commitment and a degree of humility. The results will be well worth the effort.

7. Don’t move around the boxes!

Every incoming president is tempted to reorganize the bank—partly to make it “their bank” and partly out of a genuine desire to make the machine work better. While no organizational structure is without its shortcomings, the cost of reorganization is often grossly underestimated.

The dust is only just beginning to settle on Jim Kim’s badly implemented and long drawn out reorganization; the last thing that an incoming president should do is embark on another round of moving boxes around.

Nor is this the moment for a wholesale changing of the guard at the senior leadership level just to show there is a new sheriff in town. The organization will deliver more and better with a bit of stability and continuity, albeit with the nudges that Mr. Malpass will want to give to align it better with his own vision.

The World Bank’s role as a multilateral development organization cannot be completely insulated from tensions among its major shareholders. Mr. Malpass comes from an administration that sees the World Bank as an instrument in a broader stand-off with China’s growing influence.

Perhaps the greatest challenge facing him will be to demonstrate that he has now moved to lead a multilateral organization that can be a “zone of mutual interest” where, with the cooperation and trust of all shareholders, he can advance global development goals that are in the interest of all.

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By Masood Ahmed
WASHINGTON DC, Apr 18 2018 (IPS)

When the world’s finance ministers and central bank governors assemble in Washington later this month for their semi-annual IMF meeting, they will no doubt set aside time for yet another discussion of the lingering debt problems in the Eurozone or how impaired bank debt could impact financial stability in China.

Masood Ahmed

Nearly two decades ago, an unprecedented international effort—the Heavily Indebted Poor Countries (HIPC) Debt initiative—resulted in writing off the unsustainable debt of poor countries to levels that they could manage without compromising their economic and social development.

The hope was that a combination of responsible borrowing and lending practices and a more productive use of any new liabilities, all under the watchful eyes of the IMF and World Bank, would prevent a recurrence of excessive debt buildup.

Alas, as a just-released IMF paper points out, the situation has turned out to be much less favorable. Since the financial crisis and the more recent collapse in commodity prices, there has been a sharp buildup of debt by low-income countries, to the point that 40 percent of them (24 out of 60) are now either already in a debt crisis or highly vulnerable to one—twice as many as only five years ago.

Moreover, the majority, mostly in Sub-Saharan Africa, have fallen into difficulties through relatively recent actions by themselves or their creditors. They include, predictably, commodity exporters like Chad, Congo, and Zambia who have run up debt as they adjusted (or not) to revenue loss from the collapse in oil and metals prices.

But they also include a large number of diversified exporters (Ethiopia, Ghana, and the Gambia among others) where the run-up in debt is a reflection of larger-than-planned fiscal deficits, often financing overruns in current spending or, in a few cases, substantial fraud and corruption (the Gambia, Moldova, and Mozambique).

The increased appetite of sovereign borrowers has been facilitated by the willingness of commercial lenders looking for yield in a market awash with liquidity, and by credit from China and other bilateral lenders who are not part of the Paris Club.

It is striking that between 2013-16, China’s share of the debt of poor countries increased by more than that held by the Paris Club, the World Bank and all the regional development banks put together.

Nor do traditional donors come out entirely blameless. Concessional funding for low-income countries from the (largely OECD) members of the DAC fell by 20 percent between 2013–16, precisely the period in which their other liabilities increased dramatically.

As for the IMF and World Bank, while it may have been wishful thinking to hope they could prevent a recurrence of excessive debt, it was not unreasonable to expect that they would have been more aware as this buildup was taking place and sounded the alarm earlier for the international community.

There is also a plausible argument that excessively rigid rules limiting the access of low-income countries to the non-concessional funding windows of the IMF and World Bank left no recourse but to go for more expensive commercial borrowing, with the consequences now visible.

How likely is it that these countries are heading for a debt crisis, and how difficult will it be to resolve one if it happens? The fact that there has been a near doubling in the past five years of the number of countries in debt distress or at high risk is itself not encouraging.

And while debt ratios are still below the levels that led to HIPC, the risks are higher because much more of the debt is on commercial terms with higher interest rates, shorter maturities and more unpredictable lender behavior than the traditional multilaterals.

More importantly, while the projections for all countries are based on improved policies for the future, the IMF itself acknowledges that this may turn out to be unrealistic.

And finally, the debt numbers, worrying as they are, miss out some contingent liabilities that haven’t been recorded or disclosed as transparently as they should have been but which will need to be dealt with in any restructuring or write-off.

The changing composition of creditors also means that we can no longer rely on the traditional arrangements for dealing with low-income country debt problems. The Paris Club is now dwarfed by the six-times-larger holdings of debt by countries outside the Paris Club.

Commodity traders have lent money that is collateralized by assets, making the overall resolution process more complicated. And a whole slew of new plurilateral lenders have claims that they believe need to be serviced before others, a position that has yet to be tested.

It is too late to prevent some low-income countries from falling into debt difficulties, but action now can prevent a crisis in many others. The principal responsibility lies with borrowing country governments, but their development partners and donors need to raise the profile of this issue in the conversations they will have in Washington.

There is also an urgent need to work with China and other new lenders to create a fit-for-purpose framework for resolving low-income country debt problems when they occur.

This is not about persuading these lenders to join the Paris Club but rather about evolution towards a new mechanism that recognizes the much larger role of the new lenders, and demonstrates why it is in their own interest to have such a mechanism for collective action.

Traditional donors also need to look at their allocation of ODA resources, which face the risk of further fragmentation under competing pressures, including for financing the costs in donor countries of hosting refugees.

Finally, the assembled policymakers should urge the IMF to prioritize building a complete picture of debt and contingent liabilities as part of its country surveillance and lending programs, and to base its projections for future economic and debt outcomes on more realistic expectations.

They should also commission a review to examine the scope for increased access to non-concessional IFI funding for (at least) the more creditworthy low-income borrowers.

It is the poor and vulnerable that pay the heaviest price in a national debt crisis. They have the right to demand action by global financial leaders to make such a crisis less likely.

*Masood Ahmed previously led the World Bank’s Heavily Indebted Poor Countries debt relief initiative, which has to-date brought relief from debt burdens to 36 of the world’s poorest nations.

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Somali migrants receiving assistance from US sailors. Credit: US navy

By Masood Ahmed and Kate Gough
WASHINGTON DC, Feb 14 2018 (IPS)

An increasingly common justification for European development assistance to Africa is the notion that it will reduce migration from the South. While this sounds intuitive and makes for an appealing argument, the research shows that it is highly unlikely.

As communities become less poor, more people gain the abilities and wherewithal to undertake an expensive journey to a better life elsewhere. Development often increases migration—at least initially.

The combination of demographic and economic imbalances means that migration flows between Africa and Europe will almost certainly increase in the coming decades. By 2050, sub-Saharan Africa will have 800 million new work force participants.

This population boom will be full of young, energetic job seekers, and local markets will not be able to absorb and provide meaningful livelihood opportunities for all of them.

At the same time, Europe will continue aging, with labor demand exceeding supply in critical sectors such as nursing and healthcare. By 2050, more than 34 percent of Europe’s population is expected to be age 60 or older.

Alongside these demographic realities is the continuing imbalance in living standards. Even if African average per capita incomes were to double in each of the next three decades, by 2050 the income gap with Europe will still be large enough to make migration a promising alternative for many.

In addition to economics, many migrants will be driven by conflict or by the already-evident impact of climate change on their home countries. The bottom line is that over the next three decades, it is highly likely that tens of millions of new workers will come to Europe to run factories, provide healthcare and education, and deliver the services that make modern economies functional and comfortable for their residents.

The policy choice for Europe is not whether there will be large scale migration, but how to manage it in a way that is economically beneficial and socially sustainable. Three policy imperatives flow from these realities.

Implement policies that maximize migration’s mutual benefits.

Migration can have immense mutual benefits if it is well-governed. Host country policies governing migrants’ access to labor markets and their ease of integration into local communities will determine how quickly these positive migration impacts can be realized. There are many good ideas—and examples—that can be scaled up.

Australia and Germany have successfully tested programs to train migrants in needed skills before they arrive, part of a model that CGD has proposed called Global Skill Partnerships. Engaging the private sector from the start is critical to ensuring that such models are sustainable, meet local needs, and maximize migrant contributions to economies.

Germany and Canada can provide valuable lessons on supporting the integration of migrants into host communities. Making migration work also requires explicitly and proactively addressing the needs of host communities.

When governments fail to step up help for schools and health facilities strained by additional demands, it only aggravates tensions and resentment that can spill over in ugly ways. Migrants almost always generate net positive economic benefits to the host country at large, but these benefits need to flow quickly and visibly to the local communities most directly impacted by migration.

Ultimately, the effect of migration is a policy decision, and policymakers need to implement legislation that allows robust migrant contributions to be realized, at the community level and beyond.

Support Africa’s development for the right reasons.

A vibrant, safe, and prosperous Africa is not just important to Europe but also to the world. And many countries in Africa are making admirable progress on economic and social development.

At the same time, the continent poses the central development challenge for the next generation—eradicating remaining extreme poverty; improving health and education outcomes; providing economic opportunities for the burgeoning young population; and dealing with conflicts, extremism, and failing states. Tackling these challenges will require leadership from the continent and sustained support from its partners.

For Europe, increasing support to economic and other development in Africa is imperative, not only as a neighbor, but also to equip Africa’s future workforce with the skills and education that will maximize their contributions at home and in Europe, should they choose to move.

That is why development engagement with Africa—through aid but equally through trade, investment, and other channels—remains an essential priority for European policymakers. But for this development assistance to be effective, it needs to focus on supporting broad-based development and not be distorted by ultimately futile programs linked to deterring migration.

There is some evidence that funding projects targeted to the supposed root causes of migration and tailoring development interventions too closely to those migration drivers may instead undermine development (and migration deterrence) “by neglecting the development needs of communities.”

Given demographic realities, large-scale migration will not significantly let up in the coming decades. In some circumstances, humanitarian or development assistance can relieve immediate pressures to leave a distressed environment, but deterrence efforts alone will not counter the multitude of factors driving these migrant flows.

Too narrow a focus on deterrence mechanisms also stacks the test of success for development assistance in a way that will come back to haunt us when we inevitably fail to meet it. Instead, states and international organizations must focus on partnerships and cooperation to shape how migrants will move and contribute.

Address the political discourse head-on and change the rhetoric around migration and development.

The politics around migration are as hard in Europe as they are everywhere. Dealing with the recent and rapid flows of refugees and migrants has brought out underlying tensions within societies and divisions among European states.

In this climate, it is expedient to focus on short-term goals rather than provoke a contentious debate about longer-term strategic choices. Expediency, however, can also become an excuse to postpone the necessary dialogue to prepare European societies for the choices they face and how best to manage them.

The future migration challenge Europe faces is an example of a so-called Gray Rhino—a highly probable, high-impact, yet neglected policy challenge. To neglect it may likely mean welcoming a cycle of migration “crises” reaching Europe’s borders for decades to come.

The responsibility for changing the discourse falls on more than political or public figures. In the development community, we also sometimes fall into the trap of referring to migration as a “problem” rather than acknowledging it as a potential opportunity.

With the right policies, migration offers huge improvements in human welfare, with significant contributions to host communities, migrants’ home communities, and migrants and their families. Let’s work together to put those policies in place so Europe and Africa will both be better for our children.

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