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AfDB, Asian Bank, others worsen poor nations’ debt problem – World Bank
World Bank has alleged that African Development Bank (AfDB), Asian Development Bank, and the European Bank for Reconstruction and Development worsen the debt burden of Nigeria and other countries.
World Bank has alleged that African Development Bank (AfDB), Asian Development Bank, and the European Bank for Reconstruction and Development worsen the debt burden of Nigeria and other countries. This was disclosed by the President of the global lender, David Malpass, at a forum in Washington.
In some cases, he argued that the development banks hide terms of debt from citizens of these countries through non-disclosure of agreement.
Contributing to debt problem: Malpass said these international financial institutions were lending too fast, ignoring lending standards and transparency when offering loans to Nigeria, South Africa, Pakistan and other debt-ridden countries. It was learnt that the international financial institutions were using loans for infrastructure projects to further burden the countries.
He said, “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, have a tendency to lend too quickly and to add to the debt problem of the countries.”
Nigeria’s debt problem: Meanwhile, the National Bureau of Statistics (NBS) reported that the nation’s total debt rose from N25.70 trillion in March 2019 to N26.14 trillion by the end of September 2019. Quarter on quarter, Nigeria’s total debt stock rose by 1.71% or N440 billion.
Despite the rise, the Finance Minister, Zainab Ahmed has continued to state that the debt increase isn’t the problem. This has led to the Nigerian government initiating a tax reform, increasing VAT from 5% to 7.5%, in order to mobilise revenue. To the Nigerian government, if revenue problem is solved, financing debt won’t be a problem.
[READ MORE: World Bank to lower global growth forecast over Coronavirus outbreak)
Malpass doesn’t see it that way: The World Bank chief said African Development Bank contributed to the debt problem by pushing billions into Nigeria and South Africa, while Asian Development Bank also ignored the risk by lending to fiscally-challenged Pakistan.
One of the instances was the approval of $1.3 billion, in December, by Asian Development Bank for Pakistan, which included $1 billion for budget support. The bank also approved $300 million for Pakistan to reform its energy sector. Reuters reported that Pakistan was heavily indebted to China, compelling the country to turn to the IMF for a $6 billion loan programme in 2019.
He added that, “And so we have a very real problem of the IFIs themselves adding to the debt burden and, and there’s pressure then I think on the IMF to sort through it and look at the best interest for the country.”
Countries hiding details from citizens: Malpass was worried about the non-disclosure of agreement that often accompanies these loans from international financial institutions. He said there’s need for transparency in order for citizens of each country to see the terms of the debt their government agreed to.
Malpass gave the example of Angola’s oil revenues associated with Chinese debt that were hidden by non-disclosure of agreements. He said this non-disclosure favours politicians and contractors.
“Let the people of the country see what the terms of the debt are as their government makes commitments,” Malpass said.
What needs to be done: Compared to the aforementioned international financial institutions, Malpass said the new Beijing-led Asian Infrastructure Investment Bank was not contributing to the debt problem, stating that it was willing to develop lending standards that were equal to those of the World Bank. He, however, said China was also seeking methods to level up its debt contracts with international norms.
[READ ALSO: World Bank, IMF forecast sluggish growth for Nigeria in 2020)
He added that in the lending contract, international financial institutions need to improve transparency, eliminate non-disclosure clauses that have hidden liens and contingent liabilities that could hamper economic growth.
New set of lending rules coming: By July 1, the World Bank intends to introduce new lending rules as it plans to make about $85 billion in loans and grants available. The loan will be made available through World Bank’s fund for the poorest countries, the International Development Association. The new set of rules will ensure new standards for transparency and require coordination with other multilateral lenders working with the same country.
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US government to ban WeChat and TikTok from app stores
Chinese-owned social media apps are facing a ban in the US over national security concerns.
The United States government says it will ban the services of Chinese tech giants, WeChat and TikTok, from online mobile application stores in the U.S. It also plans to prohibit any funds transfer/payment services through the WeChat mobile application.
This was announced by the U.S Commerce Secretary, Wilbur Ross, in a statement on Friday, following President Donald Trump’s Executive Orders (E.O.) 13942 and E.O. 13943, on the 6th of August.
“In response to President Trump’s Executive Orders signed August 6, 2020, the Department of Commerce (Commerce) today announced prohibitions on transactions relating to mobile applications (apps) WeChat and TikTok to safeguard the national security of the United States,” said Wilbur Ross.
He added that the Chinese Communist Party (CCP), has proven it has the means and the motive to use Chinese tech apps, to threaten America’s national security foreign policy, and the economy of the U.S.
He said the following transactions will be prohibited from September 20th for WeChat and November 12th for TikTok
- Any provision of service to distribute or maintain the WeChat or TikTok mobile applications, constituent code, or application updates, through an online mobile application store in the U.S.
- Any provision of services through the WeChat mobile application, for the purpose of transferring funds or processing payments within the U.S.
Mr. Ross said that with the Executive Order, the US government has taken a ‘significant action’ in fighting China’s malicious personal data breach on American citizens, and also promote democratic rule-based norms, and aggressive enforcement of U.S. laws and regulations.
The U.S government announced that further prohibitive measures, relating to both companies may be announced in the future.
“Should the U.S. Government determine that WeChat’s or TikTok’s illicit behavior is being replicated by another app somehow outside the scope of these executive orders, the President has the authority to consider whether additional orders may be appropriate to address such activities.”
President Trump has given until November 12, to resolve the TikTok security concerns of the US. He added that the prohibitions may be lifted, if they are addressed.
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WTO: Okonjo-Iweala still in contention as 3 candidates depart race for DG
Okonjo-Iweala and the remaining 4 other candidates hope to succeed the current DG, Mr Roberto Azevêdo.
Three candidates running for the post of the Director-General of the World Trade Organisation have fallen out of the race after failing to secure enough votes in the first rounds of voting, leaving only 5 candidates left, including Nigeria’s Ngozi Okonjo-Iweala.
This was disclosed by Bloomberg on Thursday, before the meeting on Friday. The Candidates that are out of the race are Jesus Seade (Mexico), Tudor Ulianovschi (Moldova), and Hamid Mamdouh (Egypt). The candidates were not able to secure the support needed for the first round of 3 rounds of voting.
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Dr. Ngozi Okonjo Iweal joins 4 other candidates for the next round of voting. The candidates are; Liam Fox (UK), Amina Chawahir Mohamed Jibril (Kenya), Yoo Myung-hee ( South Korea), and Mohammad Maziad Al-Tuwaijri ( Saudi Arabia).
Ngozi Okonjo-Iweala disclosed last month some of her plans for the Organization if made President. Nairametrics reported she noted that part of her vision is to build a trade institution where there is greater trust among its members. She also stressed that the WTO, at this critical time, is needed to ensure that trade and global markets remain open.
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On healing the rift between the US and China, Okonjo-Iweala admitted that it is going to be challenging and not be easy. She said:
“Well, this is not going to be easy, if it was easy, it could have been done a long time since. So it would be very challenging but it is not an impossible job. It is very clear that both the US and China have been helped and benefitted from the multilateral trading system in the past. Hundreds of millions have been lifted out of poverty. They have experienced shared prosperity in the economies and their countries.’’
She added she would listen to both countries to find out what really are the issues causing distrust among them. She said that she will not want to be involved in the larger political problems, but will rather separate the trade issues and focus on them and build this trust.
READ: Amaechi pleads with NASS to halt questioning of loan agreement with China
“You need to begin to find areas where there can be confidence-building and trade. Building trust is not talking about it, you have to have areas where both can work together and agree and we have a golden opportunity in the fisheries subsidies negotiations that are going on now because the US is a party to it, China is a party, the EU, all other members,’’ she said.
Okonjo-Iweala and the 4 other candidates will present themselves to the members of the global trade body for the later stages of voting in the hopes of securing the highest number of votes to succeed the current DG, Mr. Roberto Azevêdo.
Around the World
WTO: Selection of new DG might be tied to the upcoming US presidential election
The eventual winner could be dependent on the outcome of the November 3 US Presidential elections.
The WTO’s effort to select a new leader entered a new stage this week, as the ambassadors from 164-member countries met for private consultations, on who they would support.
Six former WTO officials and trade experts revealed that the politicking in Geneva, Switzerland – WTO headquarters, could be a wild goose chase, as the decisive developments that will shape the future of the embattled global trade organization, are unfolding miles away in Washington, ahead of the November 3 presidential elections.
Although, the support of a particular candidate by the United States is critical; 4 trade experts, including former WTO employees, believe that the Trump administration is unlikely to breathe life into a multilateral body that he once threatened to leave. Donald Trump launched a trade war with China, repeatedly imposed tariffs on US allies, and destroyed WTO’s ability to intervene in disputes, by blocking the appointment of members to its Appellate Body.
David Tinline, a former adviser to Azevedo said, “I find it hard to imagine that the Trump administration would shift tack and do something very positive for the system.’’
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The US Trade Representative (USTR), Robert Lighthizer, had in June told US lawmakers that, “the WTO needed a reform-driven leader and that he would veto any candidate who showed any whiff of anti-Americanism.”
The former WTO officials and trade experts said that the US-China economic conflict is a further divisive factor, as both countries will likely reject any candidate backed by the other.
The 8 candidates in contention for the top job, are expected to be trimmed down to 5 after the first confessional meetings on September 16. This will be further cut down to 2, and the final decision designed to be taken by convention before the November 7 deadline – just four days after the US elections.
READ: Where next for oil prices?
Aside from the two influential African women vying for the role, Liam Fox, Britain’s former Trade Secretary, is a force to reckon with. If a favorite candidate does not emerge, some WTO members might prefer to wait until after the US election in case Joe Biden wins the US presidential election; especially, as Voting, seen as a last resort, has never occurred in WTO’s history.
A former member of WTO, Peter Van Den Bossche said, “They could play a waiting game, but that would push the decision until at least February or March 2021.”
Even though WTO is member-led, a strong leader who can facilitate decision making, and galvanize its 164 member nations, is crucial to reviving a severely embattled global organization.
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