Published On: Wed, May 1st, 2019

EBRD’s Africa expansion plans yet to convince some shareholders: sources

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The sun is reflected off the windows of headquarter of the European Bank for Reconstruction and Development (EBRD) in central London
FILE PHOTO: The sun is reflected off the windows of headquarter of the European Bank for Reconstruction and Development (EBRD) in central London, Britain, November 22, Britain 2016. REUTERS/Stefan Wermuth

May 1, 2019

(This April 29 story corrects to remove reference to German and French resistance to Africa plans, removes reference to redrafting of meeting agenda and adds details on shareholder vote.)

By Marc Jones

LONDON (Reuters) – Several shareholders of the European Bank for Reconstruction and Development, including the United States, have reservations about its plans to expand into sub-Saharan Africa, three sources at the London-based development bank told Reuters.

Set up in 1991, originally to help ex-communist countries of eastern Europe shift to market economies, and majority owned by G7 top economic powers, the EBRD has spread rapidly over the last decade to more than 35 countries from Morocco to Mongolia.

Ambitions to continue that into sub-Saharan Africa were laid out last year. But some governments including its biggest shareholder, the United States, and some eastern European members have reservations about a possible overreach of the bank’s aims, two of the three sources said.

The issue will be on the agenda at the bank’s annual meeting in Bosnia next week, all three of the sources said. Despite the tensions, the final agenda for the meeting, including the wording on Africa, was backed by around 95 percent of shareholders at a vote early this month, the sources said.

The reservations revolve partly around whether the EBRD should expand into a geography where other institutions, including the African Development Bank and World Bank, are already active, particularly given the cost of setting up operations, the sources said.

The eastern European countries have expressed misgivings over whether resources will be directed away from them, the sources said.

The EBRD declined to comment when asked whether there was disagreement among shareholders over its Africa plans. The U.S. representative at the EBRD also declined to comment.

An internal analysis published in March showed only a fraction of a proposed 3 billion euros-a-year ($3.3 billion) increase to the EBRD’s near 10 billion euro annual lending could be deployed in its existing bloc. That has focused attention on where the bank might expand its operations.

There would be continued emphasis on more lending in existing EBRD member states as well as potential expansion into countries including Algeria and Libya should their political situations allow, the sources said.

Any final vote on the EBRD’s plans for Africa would come in May 2020 at the earliest.

Sixty-seven countries are EBRD shareholders and previous expansion plans have required a unanimous vote.

But the bank has been discussing with shareholders changing its procedures to allow approval by a qualified majority – a system which would weight the vote according to each member’s stake. The United States is the biggest shareholder, with 10 percent of EBRD shares, while Britain, Germany, France, Italy and Japan each hold 8.5 percent.

A raft of other issues are on the agenda for the annual meeting in Bosnia, the sources said.

Among the topics is that the EBRD has yet to quantify a potential increase to its financial buffers to give it additional protection if a European and global slowdown worsens and causes losses on its loans.

Shareholders will also discuss disbursing some of the bank’s identified surplus capital to governments for the first time, a possibility the bank had promised to review after it received a 10-billion-euro capital increase in 2011.

In addition, one of the sources said some of the EBRD’s Turkish investments were on an internal watchlist after the country’s slump into recession. The EBRD declined to comment. Turkish Finance Minister Berat Albayrak is due to give a presentation at the meeting.

(Editing by Janet Lawrence)

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