The leader of one of the world”;s most prominent development banks today accused the United States –; its biggest shareholder –; of a lack of leadership, and called for a new global agreement for development financing to help repair economic damage from the Covid-19 pandemic.
Speaking at a joint POLITICO-Atlantic Council virtual event, European Bank for Reconstruction and Development (EBRD) President Suma Chakrabati said the amount of private and public financing now required to fix economies battered by coronavirus is a quantum leap beyond the current capacity of multilateral financial institutions. “;We need to go back to the drawing board,”; Chakrabati said.
He wants to rewrite a series of 133 infrastructure and sustainable development pledges made by national governments in 2015 –; known as the Addis Ababa Action Agenda –; which was negotiated by then-Ethiopian Foreign Minister and current World Health Organization Director General Tedros Adhanom Ghebreyesus.
Rewriting those pledges would require “;strong leadership”; from richer nations, which has been lacking from the United States government, in particular, Chakrabati said. The U.S. holds a 10 percent share of the bank”;s capital, with joint U.S-EBRD investments amounting to around $20 billion. In total, 69 national governments hold shares in the EBRD, including all of Europe”;s biggest countries, the U.S., Japan and Russia.
EBRD was set up in 1991 to foster markets and multiparty democracy in the former Soviet Union and Warsaw Pact states, but now also operates in the Middle East and North Africa.
“;It”;s really important for the United States to have a positive agenda,”; Chakrabati said, noting that the U.S. is “;not speaking up as much as it used to”; in global development discussions. That”;s allowed others, including China, to fill the gap.
Chakrabati said the U.S. was a leading force behind “;nearly all of the big initiatives”; in his four-decade development career, including his bank”;s expansion into the Middle East and North Africa, adding that “;I would love to see the United States back in that sort of mood.”;
While Treasury Secretary Steven Mnuchin is officially the U.S. EBRD board governor, the U.S. is represented on a day-to-day basis by an “;executive director”; based in London. That post is currently vacant, after the resignation of Judy Shelton, who was nominated to the U.S. Federal Reserve Board in 2019. President Trump”;s new nominee, J. Steven Dowd, is awaiting Senate confirmation. Until then the U.S. is represented by Colin Mahoney, a U.S. Treasury official who was an intern as recently as 2012, according to his LinkedIn profile.
While EBRD pushes for policy reforms in the 38 countries it operates in –; often toward higher social and environmental standards –; Chakrabati said the bank doesn”;t want its shareholder governments calling the shots. “;I am very much in favor of moving away from [the] tying of any development assistance to national agendas, be they commercial agendas or political agendas,”; he said.
Chakrabati says a new generation of leaders will need to come to the fore to help guide development banks”; agenda in the wake of the pandemic. He singled out French President Emmanuel Macron and New Zealand Prime Minister Jacinda Ardern, in particular, praising their multilateral approach.
Chakrabati also said that to scale up financing, development banks need to “;tap into sovereign wealth funds, pension funds, much better than we”;ve been doing.”;
He argued that governments”; Covid-19 investments are imbalanced today –; weighted too much toward immediate domestic needs, without enough global coordination.
For its part, the EBRD is devoting all its 2020-21 funding –; $21 billion total –; to a “;solidarity package”; to finance projects that will help national economies quickly recover from the Covid-19 pandemic. In parallel, the bank is promising a “;tilt to green”; within its investment portfolio, nearly half of which it already classifies as green investment. The bank”;s current big investment is the huge Benban solar project in Egypt.
Equality of opportunity is Chakrabati”;s other mantra, and he fears those left behind by globalization are also being hit hardest in the Covid-19 pandemic. “;Many of them are young people who will no longer accept that their futures are going to be affected for a generation,”; he said.
Chakrabati said the leaders of multilateral financial institutions have been meeting “;every couple of weeks”; instead of “;two or three times a year”; to avoid duplication in their pandemic reactions, and cited the International Monetary Fund as EBRD”;s strongest partner.
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