The recent, precipitous decline in oil prices (35 percent so far this year) has revived the question of how oil-exporting countries should manage their budgets. These countries’ governments rely on oil revenues for 60-90 percent of their spending. In light of the price drop, should governments cut expenditures, including growth-promoting investment expenditures? Or should they dip into the money they saved when oil prices were high, and keep expenditures on an even keel? Since oil prices fluctuate up and down, governments are looking for rules that guide expenditure decisions, rather than leaving it to the politicians in power at the time to decide whenever there is a price shock. The successful experience of Norway and Chile, which used strict fiscal rules to make sure that resource windfalls are saved and not subject to the irresistible temptation to spend, is often contrasted with countries such as Nigeria and Cameroon, which didn’t.
Latin America & Caribbean
At times, I ask my friends in Nepal, why they would not launch a business, especially when they have funds. A common obstacle for everyone is that they say you have to bribe government officials to even open a business.
Turns out, this isn’t unique to Nepal. According to Drivers of Corruption, a report recently published by the World Bank,
. These charts are based on surveys of more than 13,000 firms in 135 countries, by World Bank Enterprise Surveys.
Check out these charts and tell us if you are surprised.
Penicillin was discovered almost 90 years ago and heralded the beginning of a revolutionary era in medicine. As the first antibiotic drug in existence, it was used to treat what had previously been severe and life-threatening illnesses, such as meningitis, pneumonia, and syphilis.
Concerns about the so-called “middle-income trap” have recently emerged among many middle-income countries, particularly after the term was coined in 2007 by two World Bank economists. Worried that they may become “trapped” at the middle-income level, these countries are seeking a set of policies that can help them achieve strong and sustained growth and eventually help them join the league of high-income countries.
In our recent paper, we try to shed some light on both issues. First, we do not find that countries are trapped at middle income. “Escapees” – countries that escaped the middle-income trap and obtained a per capita income higher than 50% of the U.S. level – tend to grow fast and consistently to high income, and do not stagnate at any point as a middle-income trap theory would suggest. In contrast, “non-escapees” tend to have low growth at all levels of income. In other words, while the existence of a middle income trap implies that growth rates systematically slow down as countries reach middle-income status, no such systematic slowdown is apparent in the data. Second, we provide some descriptive and econometric evidence for a different set of “fundamentals” that enable middle-income countries to grow faster than their peers. We find that faster transformation to industry, low inflation, stronger exports, and reduced inequality are associated with stronger growth.
- Middle Income Trap
- Middle Income Countries
- Global Economy
- South Asia
- Middle East and North Africa
- Latin America & Caribbean
- Europe and Central Asia
- East Asia and Pacific
- Korea, Republic of
- Hong Kong SAR, China
- Taiwan, China
- Puerto Rico
- United States
How can we get much more private sector funds to infrastructure financing? The infrastructure gap is enormous and growing; governments are just not be able to go it alone. Innovation here is key.
The World Bank, the Multilateral Investment Guarantee Agency (MIGA), and the State of São Paulo just completed an innovative deal that blends the power of state funds, World Bank lending, and private-sector banking participation for a successful (and replicable!) result. Read this blog to learn more.
Infrastructure bottlenecks have created seemingly perpetual traffic jams in and around São Paulo. Photo credit: Marcelo Camargo/ABr.
There’s a lot of time for innovative thought when you’re stuck in traffic in São Paulo.
Perhaps that’s why, in the words for Deborah L. Wetzel, World Bank Country Director for Brazil, “São Paulo has continuously innovated to overcome its infrastructure bottlenecks, often becoming a model to other states in Brazil.”
With a loan signed last month between the state and Banco Santander, and insured by the Multilateral Investment Guarantee Agency (MIGA), the state is at the vanguard of infrastructure financing.
Forty-one million people use the state’s transportation networks. While the network is one of the most developed and modern in Brazil, it is still insufficient for the state’s needs.
The State of São Paulo has sought to address the situation for some time, and the World Bank has played an important role through lending and technical assistance. An important component of this work is the São Paulo State Sustainable Transport Project that aims to rehabilitate roads in several key corridors and to reconstruct two bridges.
Yet, with a total cost estimated at $729 million, this project has faced a major financing hurdle. In September 2013, the World Bank approved a $300-million loan toward the initiative. But with growing demand for loans from Brazil’s poorest states, the bank was unable to commit additional funds. The State of São Paulo itself committed $129 million. That left a shortfall of $300 million.
How was the state going to mobilize these funds at a cost that would be acceptable to taxpayers?
A partnership with MIGA was a natural answer. In addition to political risk insurance, MIGA provides credit-enhancement products that protect commercial lenders against non-payment by a sovereign, sub-sovereign or state-owned enterprise.
In an unprecedented move, the State of São Paulo bid out the project to commercial banks with a requirement that their loans be backed by MIGA’s credit-enhancement instrument.
The result: MIGA issued guarantees to Banco Santander on a $300-million loan. With MIGA’s credit enhancement, the cost of the commercial loan was lower, and the length of the loan was longer, than São Paulo could have achieved on its own. The additional financing will be used to increase the scope of the project’s activities.
But the quest for greater yields and profits has compromised soil health, mining soils for nutrients, over-using fertilizers, and creating over 4 billion hectares of man-made deserts.
Informed decision-making is crucial to the success of policies and reforms that foster growth and prosperity. So, how can we help decision makers make better decisions?
- anti-corruption; politics; open government; accountability; transparency; collaborative governance; collaboration; inclusive development; open contractring; open contracting data standard; open data;
- Public Sector and Governance
- Latin America & Caribbean
- Europe and Central Asia
- The World Region
- United Kingdom
- Costa Rica
I’ve lived in cities famed for their gridlock: 1990s Bangkok (gridlock was as bad as it could be); Los Angeles (gridlock + pollution); New Delhi (gridlock + pollution + honking galore); Nairobi’s gridlock is surely up there.
But is traffic “bad”? What sort of question is that you ask? Surely, the answer is 'yes', you say: time wasted stuck in traffic, the frustration, the needless idling of vehicles which creates both local (and global) pollution and so on. But let me suggest this: traffic congestion is also a sign of development. In fact, the more vibrant and dynamic the city as Nairobi surely is, the more traffic congestion you might expect...to paraphrase Gordon Gekko from the movie Wall Street, “Traffic is…good”!
Why should the world—and Africa in particular—care about resilience?
The importance of resilience as an imperative for development is nowhere as obvious as in Africa. Fragile natural resources—at the core of livelihoods and economic opportunities—are under increasing pressure from unsustainable use, population pressure, and the impacts of climate change.
It will only be possible if their resilience to shocks such as climate change is improved. Resilient landscapes—where natural resources and biodiversity thrive in interconnected ecosystems that can adapt to change and protect people from losses—are important to the work of ending poverty and boosting prosperity.