THE PRIVATE SECTOR
HOW THE PRIVATE SECTOR CAN ADVANCE DEVELOPMENT
Neoliberal concerns about state interference in the economy have long since been replaced by the realization that the state’s resources are limited, and not just financially. But the private sector can only become a white knight in times of need if the conditions are right By Angus Downie, Senior Economist, OPEC Fund
O ne of the most famous quotes by the late US President Ronald Reagan (1981-1989) encapsulates neoliberal doctrine like a grain of sand cast in amber: “The nine most terrifying words in the English language are: ‘I’m from the Government, and I’m here to help,’” he said in 1986. Since then, the role of the state in the economy has changed dramatically. This also had a profound impact on development. The World Bank and IMF Spring Meetings in mid-April 2024 contemplated how more funds can be allocated to debt-strapped nations and their development goals as global crises stretch aid budgets. Unique to 2024, a record number of development organizations and programs, including the World Health Organization, the vaccine alliance Gavi and the Global Partnership for Education, are also aiming to replenish contributions from advanced countries. Hard already at peaceful times, this task is even harder at times of global geopolitical tensions, open war, constrained public finances in the aftermath of the COVID-19 pandemic,
political uncertainty around the US presidential election and slowing global growth. Meanwhile, lending by China, the biggest bilateral creditor to developing countries over the past decade, has slowed: over 40 low- and middle-
income countries are now repaying more compared to what China is lending. While some of the development organizations and programs can tap alternative sources of funding, such as philanthropies and charities, most legally cannot. Additionally, relatively few development organizations and programs have records (or knowledge) of tapping capital markets to raise money. This leaves the private sector as an important source of funds to support sustainable economic development. World Bank Group President Ajay Banga summed up the challenge pointedly: “No amount of money from just multilateral development banks (MDBs) can cover all
“No amount of money from just multilateral development banks can cover all of the anticipated costs of adapting to climate change and slowing global warming.” Ajay Banga, President, World Bank Group
of the anticipated costs of adapting to climate change and slowing global warming. The reality is that government money and multilateral bank money alone will not get to those trillions of dollars… that’s
why the private sector is really important.”
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Photo: World Bank
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