The European Bank for Reconstruction and Development (EBRD), a top backer of capital markets development, is debating new expansion into sub-Saharan Africa and new parts of the Middle East and raising its lending by as much as a third from some EUR9.5 billion euros ($11.7 bn) at present. According to this story on Reuters.
Sir Suma Chakrabarti, President of the EBRD since 2012, said in an interview: “The debate is starting with our shareholders: ‘Would you like us, gradually, incrementally to go to a few more places maybe in sub-Saharan Africa in particular?’” He stressed that it was only the start of a discussion and no decision would be made soon.
The Bank is owned mainly by Western governments and was set up in 1991 to invest in the ex-communist economies of eastern Europe but has expanded rapidly since 2008 and operates in more than 30 countries from Morocco to Mongolia. If shareholders approve at a meeting in May in Jordan, he said analysis could take a year and a final green light could be given at its 2020 annual meeting.
New countries of operation would have to be democracies or at least committed to becoming a democracy, and they must also aim for the kind of market-based economies that the development bank has always focused its efforts on.
The plan to move deeper into Africa meanwhile could dovetail with going into more countries in the north of the continent such as Algeria, or in the Middle East such as Iraq or Libya.
One motivation for expansion is to reduce concentration risks, with much of EBRD investment currently going into 5 countries, led by Turkey, Egypt and Ukraine, all of which have economic and political challenges. According to the interview, even in EBRD “traditional heartlands like Hungary and Poland attitudes are shifting away from its principles”.