Nature’s high returns

The mega-challenges engulfing the world today – from COVID-19 to climate change – have environment_hero.jpghighlighted the interdependencies between people, planet, and the economy.  As we chart a course to reignite global growth and drive green, resilient, and inclusive development, we must not ignore these interlinkages. Nature – meaning biodiversity and the services that healthy ecosystems provide – is central to this endeavor, especially in developing countries, where poor people in rural areas tend to rely heavily on nature’s services and are the most vulnerable to its depletion.

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Keeping Ukraine’s Private Sector Afloat—and Ready for Reconstruction

IFC’s Economic Resilience Action

In over a decade as a fitness instructor in Kyiv, Marina Smal has led nearly every kind ofphoto_2022-06-01_16-38-27-002-1280x960 workout, from kids’ yoga to power stretching to strength training.  At the fitness studio she and her partner established in 2019, she coordinated scores of classes and personal training sessions.  It was exactly the kind of hectic, rewarding schedule she envisioned when the couple decided to invest in their own business.

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Remittances are a critical economic stabilize

This piece originally appeared in Barron’s on December, 2  2022 remittances1440x600shutterstock_2083444420.jpg


At a time when the world faces an extremely challenging outlook, remittances are a vital lifeline for households in developing countries, especially the poorest.  Remittances are primarily money that migrants send home to support their family. They alleviate poverty, improve nutritional outcomes, and are associated with increased birth weight and higher enrollment rates for children in disadvantaged households. Studies show that remittances help recipient households build resilience, for example, through financing better housing and recovering from losses in the aftermath of disasters. 

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Debt-Service Payments Put Biggest Squeeze on Poor Countries Since 2000

IDA Countries’ Debt-Service Payments Projected to Top $62 Billion in 2022

WASHINGTON, Dec. 6, 2022—The poorest countries eligible to borrow from the World Bank’s International Development Association (IDA) now spend over a tenth of their export revenues to service their long-term public and publicly guaranteed external debt—the highest proportion since 2000, shortly after the Heavily Indebted Poor Countries (HIPC) initiative was established, the World Bank’s new International Debt Report shows.

The report highlights rising debt-related risks for all developing economies—low- as well as middle-income economies. At the end of 2021, the external debt of these economies totaled $9 trillion, more than double the amount a decade ago. During the same period, the total external debt of IDA countries, meanwhile, nearly tripled to $1 trillion. Rising interest rates and slowing global growth risk tipping a large number of countries into debt crises. About 60% of the poorest countries are already at high risk of debt distress or already in distress.

At the end of 2021, IDA-eligible countries’ debt-service payments on long-term public and publicly guaranteed external debt totaled $46.2 billion—equivalent to 10.3% of their exports of goods and services and 1.8% of their gross national income (GNI), according to the report. Those percentages were up significantly from 2010, when they stood at 3.2% and 0.7% respectively. In 2022, IDA countries’ debt-service payments on their public and publicly guaranteed debt are projected to rise by 35 percent to more than $62 billion, one of the highest annual increases of the past two decades. China is expected to account for 66% of the debt-service payments to be made by IDA countries on their official bilateral debt.

“The debt crisis facing developing countries has intensified,” said World Bank Group President David Malpass. “A comprehensive approach is needed to reduce debt, increase transparency, and facilitate swifter restructuring—so countries can focus on spending that supports growth and reduces poverty. Without it, many countries and their governments face a fiscal crisis and political instability, with millions of people falling into poverty.”

On the surface, debt indicators seem to have improved in 2021, the report shows. As economic growth resumed following the global recession in 2020, public and publicly guaranteed external debt as a share of GNI returned to pre-pandemic proportions. However, this was not the case for IDA countries, where the debt- to-GNI ratio remained above the pre-pandemic level at 25%. Moreover, the economic outlook has deteriorated considerably.

In 2022, global growth is slowing sharply. Amid one of the most internationally synchronous episodes of monetary and fiscal policy tightening the world has seen in 50 years, the risk of a global recession next year has been rising. Currency depreciations have made matters worse for many developing countries whose debt is denominated in U.S. dollars. The 2021 debt-to-GNI improvement, as a result, is likely temporary.

Over the past decade, the composition of debt owed by IDA countries has changed significantly. The share of external debt owed to private creditors has increased sharply. At the end of 2021, low- and middle-income economies owed 61% of their public and publicly guaranteed debt to private creditors—an increase of 15 percentage points from 2010. IDA-eligible countries owed 21% of their external debt to private creditors by the end of last year, a 16-point increase from 2010. Also, the share of debt owed to government creditors that don’t belong to the Paris Club (such as China, India, Saudi Arabia, United Arab Emirates, and others) has soared. At the end of 2021, China was the largest bilateral lender to IDA countries, accounting for 49% of their bilateral debt stock—up from 18% in 2010. These developments have made it much harder for countries facing debt distress to quickly restructure their debt.

The rising debt vulnerabilities underscore the urgent need to improve debt transparency and provide more complete debt information to strengthen countries’ ability to manage debt risks and use resources efficiently for sustainable development. 

“Poor debt transparency is the reason so many countries sleepwalk into a debt crisis,” said Indermit Gill, Senior Vice President and Chief Economist of the World Bank Group. “Complete, transparent debt data improves debt management. It makes debt sustainability analyses more reliable. And it makes debt restructurings easier to implement, so that countries can return quickly to economic stability and growth. It is not in any creditor’s long-term interest to keep public debt hidden from the public.”

The new International Debt Report reflects an advance in debt transparency. It draws from the World Bank’s International Debt Statistics database—the most comprehensive source of comparable cross-country information on the external debt of low- and middle-income countries. It improves on the earlier International Debt Statistics reports by adding substantive analysis and expanding both the breadth and specificity of the data in it.

Over the past five years, the International Debt Statistics database has identified and added $631 billion of previously unreported loan commitments, and an additional $44 billion were identified in 2021. The total of these newly documented additional loan commitments over the past five years is equivalent to more than 17% of the total outstanding public and publicly guaranteed debt stock in 2021.

 
PRESS RELEASE NO: 2023/035/DEC

 

Introducing the new representative at the Inter-American Development Bank: Jesse Willem d’Anjou

On September 12, Jesse Willem d’Anjou started as Counselor at the Board of the Inter-d' Anjou Jesse Willem JESSED@IADB.ORGAmerican Development Bank, having previously held the position of senior policy officer at the Netherlands Ministry of Foreign Affairs since February 2019. 

“My surf explorations in many parts of the world after finishing secondary school opened my eyes with regards to the unequal distribution of assets and opportunities, among people as well as countries. Reorienting (global) financial flows only marginally or structuring them differently, public and private, can have massive effects in this respect. This is what I have passionately focused on throughout my career in the private, academic and public sector. Development finance can play a critical role for many of the current global challenges we face, climate change, but also rising inequalities, migration, food security and even wars. However, only if organized effectively and in partnership with others, all stakeholders in their own role whereby everybody gains.”     

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Success Story: Development Finance International Inc. (DFI)

Bridging Business and Development with Netherlands’ Partners

Among DFI’s proudest accomplishments are our long-term partnerships with Dutchdfintl_newblue organizations to address development needs and support sustainable business in emerging markets globally. 

Since DFI’s inception 30 years ago, and continuing through this day, DFI has worked closely with several Dutch corporate clients, The Netherlands Embassy in Washington, DC (and around the globe) and international funders such as the World Bank, the Inter-American Development Bank and other public, private and Civil Society Organizations (CSOs) to tackle the most pressing challenges in critical areas including food security and sustainability, healthcare, climate change, and science and technology, among others.  

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Success Story: DEVOTRA

OPPORTUNITIES WITH CHALLANGES?

Devotra was founded in 1994 whose activities are mainly focused on engineering projectshome-Slider_logo in developing countries and upcoming markets. The company offers turn-key services for any kind of education improvement project from primary up to higher education, with a major specialization in Technical Vocational Education and Training (TVET). What started originally as mainly supply of equipment only, has evolved to a turn-keys service offering their customers tailor made solutions from project identification or formulation up to project implementation. These services include; consultancy, supply of state of the art training equipment, infrastructure improvement, innovative learning methods and teacher training. Based on the company’s professional experience and worldwide network, the solutions provided, can meet all stakeholders requirements.  The company has its office and warehouse facilities in the Netherlands, where they organise can full order handling and provide door to door logistic services. A network of professional local partners ensure successful installation and commissioning of the supplied equipment, training and after sales.

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Success Story: BearingPoint

Tax compliance as a tool for development of small-sized countries

Dutch headquartered BearingPoint Caribbean were recently awarded a World Bank funded19 project to modernize the tax administration on the Caribbean island of Grenada. The Grenada Inland Revenue Department (IRD) will be the 15th tax administration to use BearingPoint’s innovative software.

Grenada, like many other Small Island Developing States (SIDS), is highly vulnerable to climate change, natural disasters, and the economic dependence on tourism. In the post-Covid-19 era, the government of Grenada therefore wants to develop more resilience by improving fiscal sustainability. Domestic resource mobilization is now more important than ever.

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