Nearly a year ago, Makhtar Diop became the International Finance Corporation’s managing director, joining in the midst of a pandemic and taking the helm of an organization that had been undergoing reforms.
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We were curious about what his first year was like and whether Diop has followed through on some of his key priorities — and we imagined you might be, too. So Adva interviewed Diop and had a wide-ranging conversation about new areas of focus, internal changes, and some of the challenges that development finance institutions face today.
• While experts have previously been critical of IFC for failing to invest enough in times of crisis, Diop says the institution has been able to play a “nearly” countercyclical role in the past year, maintaining its level of commitments and directing billions of dollars to health-related investments.
• “We have been responding to the [COVID-19] crisis but looking at areas where traditionally IFC was not very present,” he tells Adva. One example is the health sector, in which IFC has been “aggressively” investing, including around vaccine production in Africa.
• One surprise, he says, was that he didn’t find a “deal culture” resistant to a development focus, which some had warned was characteristic of IFC. Instead, he says, staffers have embraced the upstream strategy, and one of his goals has been to promote more mobility among employees to work on different regions, income levels, and sectors.
• As he pledged at the start of his tenure, Diop is bringing an Africa focus to his work at IFC, with new targets for spending on the continent (ramping up to $10 billion a year) and plans to increase investment in several key areas — some of which have not been big priorities in the past. Those new sectors of focus include housing, trade finance, health finance, climate finance, and the creative industries.
• What do others think of how he’s done? Several experts tell me that it’s a bit too early to say but that there are some positive signs. Still, many would like to see him focus more on accountability and use his voice and platform to push more on key issues related to energy and vaccine production in Africa.
• An Atlantic Council report released last week found evidence that IFC-supported companies “are active participants” in repression against the Uyghur minority in China. Released after Adva spoke with Diop, the report indicates there may be tests for the managing director. (An IFC spokesperson tells us that the organization does not tolerate forced labor and when allegations are brought to its attention, it works to verify and address them “with urgency.”)
Taking stock: Makhtar Diop’s first year leading IFC
For Pro subscribers: Want to know where Diop stands on IFC’s risk appetite, its role amid growing interest in ESG investing, and more? Read this full interview with Diop on how to “think in a context of uncertainty.” Not yet a Pro subscriber? Sign up now and start your 15-day free trial.
NTZO no more?
During COP 26, we covered the launch of a U.N.-backed and climate-focused exchange-traded fund with the ticker NTZO, short for “net-zero.” But the fund has failed to attract assets under management, which remain below $2 million, and there are signs that it might soon be wound down. According to the Financial Times, the lack of inflows has meant the big banks backing the project are not willing to put in more cash or take on excessively large stakes in the fund.
While the fund had stricter ESG criteria than many other ETFs, its largest holdings are some of the usual U.S. big caps, including Microsoft, Apple, and Alphabet. In a statement emailed to Devex, the U.N. Capital Development Fund, a partner in the fund, says it will continue to seek “innovative finance solutions.”
ICYMI: UN and partners launch climate-focused ETF
Partners in tech
Our colleague Catherine Cheney reports on the intersection between tech and global development. Tomorrow she is hosting a conversation to explore successful models of partnership, and how these two worlds can work together more effectively to maximize impact. Join her in this Devex Pro Live event at 11:00 a.m. ET (5:00 p.m. CET).
Mission creep
What role does IMF play in climate finance? This was one of the key issues debated during a hearing last week at the U.S. House Committee on Financial Services during a rare session on the fund. Echoing sentiment among his Republican colleagues, Rep. Andy Barr from Kentucky said there was a sense of “mission creep” toward becoming a “politicized” development aid organization.
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On the other hand, Democratic lawmakers and several witnesses argued that climate change is a threat to macroeconomic stability. “The world is taking on climate change as an economic risk in their operations,” said Stephanie Segal, a nonresident senior associate at the Center for Strategic and International Studies, citing recent warnings from insurers such as Swiss Re. She cautioned that IMF risks becoming “irrelevant” if it does not play a role.
Meanwhile, aid advocates hoping that last week’s summit between African and European leaders in Brussels would provide an opportunity for further SDR reallocation pledges to low-income countries were disappointed. The final declaration merely called for “ambitious voluntary contributions” and noted contributions from EU member states have so far made up $13 billion of the $55 billion pledged from the new allocation. Oxfam EU called the result “sorely disappointing.”
Delaying debt
Experts are worried about a distinct lack of urgency at the G-20 around the growing debt crisis, with the wealthiest nations likely to escape a major economic contraction.
“We are going to see a wave of defaults,” Eric LeCompte, executive director at the Jubilee USA Network, tells Shabtai.
While IMF and the World Bank are also concerned, the sense emerging from last week’s meeting of G-20 finance ministers is that we won’t see serious movement on an international debt relief framework until at least the leaders’ summit in Indonesia toward the end of the year — if at all.
“The concern is that the G-20 is not identifying the steps forward that would deal with this debt overhang,” World Bank President David Malpass said Friday. One of the holdups seems to be China reportedly refusing to take a haircut on the debt it is owed from lower-income nations.
ICYMI: China is owed 37% of poor countries' debt payments in 2022
What we’re reading
Argentina’s president is working to sell his congress on an IMF deal restructuring $4.4 billion in debt. [Financial Times]
Australia will shutter its biggest coal-fired power plant in 2025. [Reuters]
Wind energy could fall victim to supply chain issues in a “perfect storm.” [Bloomberg]
Low-income countries brace for U.S. Federal Reserve rate increases, which could destabilize their economies. [Wall Street Journal]
About the authors
Shabtai Gold
Shabtai Gold is a Senior Reporter based in Washington. He covers multilateral development banks, with a focus on the World Bank, along with trends in development finance. Prior to Devex, he worked for the German Press Agency, dpa, for more than a decade, with stints in Africa, Europe, and the Middle East, before relocating to Washington to cover politics and business.
Adva Saldinger@AdvaSal
Adva Saldinger is a Senior Reporter at Devex where she covers development finance, as well as U.S. foreign aid policy. Adva explores the role the private sector and private capital play in development and authors the weekly Devex Invested newsletter bringing the latest news on the role of business and finance in addressing global challenges. A journalist with more than 10 years of experience, she has worked at several newspapers in the U.S. and lived in both Ghana and South Africa.
