The days of debt crises and the World Bank telling African nations what to do are over, according to the lender’s president.
“One of the things we will never go back to is the bad old days where countries were in debt crises,” World Bank Group President Jim Yong Kim said in an interview in Tanzania’s commercial capital, Dar es Salaam, on Monday. “Another thing that we will never go back to is the bad old days when the World Bank and other organizations told countries what to do. We don’t do that anymore.”
The Washington-based lender last week announced $57 billion in financing for sub-Saharan African countries over the next three years. A portion of $45 billion will come from the International Development Association, the World Bank Group’s fund for the poorest countries. The financing will include an estimated $8 billion in private-sector investments from the International Finance Corp., the lender’s private-sector arm.
Delegates at last week’s G20 meeting in Germany discussed the need to rethink development finance, Kim said. Developing government institutions benefit more from foreign direct investment than from aid, he said.
Nobody wants to go back to the days where the “debt ratio was so high that countries were paying much more in debt repayment than they were receiving,” Kim said. The World Bank is trying to find win-win situations “so that countries will take out less sovereign guaranteed debt,” he said.
Eritrea’s debt to gross domestic product ratio of 126 percent was the highest in sub-Saharan Africa last year, according to International Monetary Fund estimates. For Mozambique, where $1.4 billion of hidden loans were discovered last year, the ratio was 113 percent.
Kim was in Tanzania to meet President John Magufuli and commission the start of a World Bank-financed interchange in Dar es Salaam, one of three infrastructure projects the lender is helping fund in the East African nation.