Over half of the World Bank's emergency funding to tackle the Coronavirus crisis goes to the private sector
- Almost 60 per cent of the Bank’s fast track Covid-19 Facility (US$ 8 billion) is being allocated through its private sector arm, the International Finance Corporation (IFC)
- Publicly available information indicates that as of June 2020, 68 per cent of IFC Covid-19 projects targeted financial institutions
- It also shows that 50 per cent of IFC-supported companies are either majority-owned by multinational companies or are themselves international conglomerates
The World Bank’s Covid-19 response is prioritising financial institutions and large companies, most of them owned by multinational corporations, instead of investing directly in better public services in developing countries.
According to a new briefing paper, published by the European Network on Debt and Development (Eurodad) and researchers from the Economics Department at SOAS, University of London, the Bank has continued its ‘Maximising Finance for Development (MFD)’ approach during its Covid-19 response and places the private sector at the centre of the recovery phase. This approach is being pursued despite multiple calls for stronger public systems.
The briefing calls for the Bank to restore a balance between public and private sector support and to deliver more concessional funding to strengthen health, education and social protection systems in developing countries.
World Bank figures suggest that by 2021 an additional 110 to 150 million people will have fallen into extreme poverty, living on less than US$ 1.90 per day. The IMF’s World Economic Outlook, due to be published today (Tuesday 13 October), is also likely to present a depressing future for countries in the global south if urgent action is not taken.
María José Romero, co-author of the briefing paper, said: “Today, the focus of the Annual Meetings will be the World Economic Outlook and its predictions for citizens in developing countries are likely to be negative. At the same time the World Bank Group – a development institution with a mandate to deliver for the public good – is prioritising the private sector, and in particular the commercial financial sector and large companies. The Bank claims that it is supporting the financial sector to assist Micro, Small and Medium Enterprises (MSMEs) in navigating the fallout from the pandemic, but this strategy is yet to produce results. Despite the rapid WBG Covid-19 response, it risks not reaching the countries, sectors and companies that need support the most.”
The idea of the MFD approach is for traditional Official Development Assistance (or ‘aid’) to catalyse private finance for development, including in the poorest countries.
The briefing calls for the World Bank to rethink its priorities in its Covid-19 response and calls on the IFC in particular to increase the transparency of the recipients of its support and what the support is used for. It goes on to call for an end to support for commercial private health facilities that undermine public system building and that has pernicious implications for women, lower-income and vulnerable populations.
Romero added: “If the Bank wishes to “build back better”, it needs to rethink its priorities and move towards a human rights-based approach that builds resilience and strengthens public systems.”
Read the full briefing paper, titled Never let a pandemic go to waste: How the World Bank’s Covid-19 response is prioritising the private sector.