The new head of the European Bank for Reconstruction and Development has defended his lending practices in autocratic countries despite his mandate to operate in countries committed to multi-party democracy and pluralism.
Some of the EBRD’s biggest markets, notably Turkey, Egypt and Belarus, have taken a turn of the assertive in recent years. But Odile Renaud-Basso, former director of the French treasury, who took over as EBRD chairman last month, said the bank’s focus on lending to the private sector has helped strengthen civil society against repressive regimes.
“If you cut all funding, I’m not sure you will support the evolution of the country – and the democratic evolution of the country,” she said in an interview with the Financial Times when asked about the bank’s activities in Egypt. The bank, she said, wanted to “help countries move in the right direction.”
According to the founding statutes of the EBRD, its objective is to operate in “countries committed and applying the principles of multi-party democracy, pluralism and a market economy”.
“The EBRD is clearly violating its mandate. . . in a number of places, ”said Fidanka Bacheva-McGrath of CEE Bankwatch, a campaign group. “The bank says that through its investments, it can promote transparency and better governance. However, evidence on the ground is scarce.
The EBRD was created in 1991 to promote the transition to a market economy in the countries of the former Soviet bloc, combining private sector loans with policy advice. It has expanded its activities into the Middle East and North Africa and plans to Sub-Saharan Africa.
Its largest and third largest markets in 2019 were Egypt and Turkey, where civil rights and freedom of expression have been restricted in recent years. Two of its traditional countries of operation, Hungary and Poland, disagree with Brussels on claims of a decline in the rule of law and democratic standards.
The EBRD is also lending to private sector projects in Belarus, where President Alexander Lukashenko won a landslide victory in a controversial election in August and subsequently sought to crush opposition protests.
The bank argues that feeding the private sector reduces a state’s power over its people. He no longer lends to the Minsk government or Belarusian state-owned enterprises. The vast majority of its loans in Egypt and Turkey are also to the private sector, he says, although one of his biggest projects in 2020 was a € 250 million loan to the Egyptian government for modernization. of an oil refinery.
“We have a strategic framework to deal with this type of situation, which generally boils down to more for more and less for less,” said Ms. Renaud-Basso. “Private sector development is also a way to support the development of the economy and civil society.”
With tens of billions of euros in EU funding at stake in the standoff between Brussels and Budapest and Warsaw, Ms Renaud-Basso said the bank in comparison did not have “much weight” with the Hungary. But it had an impact on maintaining governance and anti-corruption safeguards in her lending projects, she said.
Mrs. Renaud-Basso is the third French national take the direction of the EBRD. It did so at a time of economic crisis and doubts in some EU capitals about the EBRD’s expansion from its original European mission and overlap with the much larger European Bank of investment.
The capitals of the EU have reflected on the advisability of putting their weight behind a single institution to serve as a lender for the development of the bloc and to strengthen its “strategic autonomy”. The EBRD is not an EU institution and includes China and the United States among its shareholders.
Ms. Renaud-Basso declared a global participation “geopolitically. . . makes a lot of sense for the EU ”.
The EBRD had an advantage in that it operated closer to the ground, with more staff on the ground, than the EIB, which focuses on large-scale infrastructure projects, she said. “When you think of the impact on development, what we do is much stronger.”
She said she supports the expansion plan in sub-Saharan Africa, where the EIB also operates. Africa’s stability was such a challenge for Europe that “we should use all available means, all options,” she added.
The change of administration in the United States would help the bank to focus more of its financial power on low-carbon projects in line with the Paris agreement on carbon emissions, which was repudiated by President Donald Trump, has she said, adding: new dynamic. ”