‘Poor country debt burdens worsening’

World Bank says ADB is pushing billions of dollars into fiscally challenging situation in Pakistan

WASHINGTON: World Bank President David Malpass has chided other development banks for lending too quickly to heavily indebted countries, saying some were helping worsen already-challenging debt situations.

Malpass said at a World Bank-International Monetary Fund (IMF) debt forum in Washington that the Asian Development Bank (ADB), 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, tend to lend too quickly and to add to the debt problem of the countries,” Malpass said.

He said the ADB 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 ADB could not immediately be reached for comment.

Pakistan unlikely to meet debt reduction targets

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 the Belt and Road infrastructure projects, which pushed Pakistan to turn to the IMF for a $6-billion loan programme in 2019.

Malpass said there needed to be more coordination among international financial institutions to coordinate lending and maintain high standards of transparency. “And so we have a very real problem of the IFIs themselves adding to the debt burden and there’s pressure then I think on the IMF to sort through it and look at the best interest for the country,” he stated.

The World Bank president said 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 the Belt and Road programme, 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 and to eliminate non-disclosure clauses that have hidden liens and contingent liabilities that could hamper economic growth.

Pakistan’s economy battling a host of challenges

In an interview, Malpass cited liens against Angola’s oil revenues associated with the Chinese debt that were hidden by non-disclosure agreements, convenient for politicians and contractors. “Let the people of the country see what the terms of the debt are as their government makes commitments,” Malpass remarked.

The World Bank’s fund for the poorest countries, the International Development Association, is implementing a new set of lending rules on July 1 as it unlocks a new round of funding expected to make some $85 billion in loans and grants available.

These are aimed at setting new standards of transparency and require coordination with other multilateral lenders working with the same country.

Published in The Express Tribune, February 12^th, 2020.

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