De Ferranti reflects on the World Bank’s future

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Recently-retired World Bank Vice President David de Ferranti believes that the World Bank must remain engaged in middle-income countries. Rather than disengagement, he preaches modernization. His prescription would include: (i) modern financial products, such as more structured finance; (ii) reducing the hassle of at-times unnecessary safeguards; (iii) more performance-based lending; (iv) changing the loan terms for richer countries; and (v) expanding intellectual partnerships.

He goes on:

Missing from the conservative critiques is any sense of the importance of complementarity between public agencies and private markets. To the critics, any public lending to a country with market access must of necessity supplant private lending dollar for dollar – they see a “zero-sum game”. Yet most economists today recognize that efficient private markets do not appear magically, but require supporting public infrastructure, institutional as well as physical. And much of what the World Bank actually does directly helps to improve the climate for private investment.

He ends with a discussion of whether we should just provide technical advice and who we should be allowed to lend to.

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