Odile Renaud-Basso
Odile Renaud-Basso, new EBRD president, said the bank made an impact by upholding governance and anti-corruption safeguards in its projects © Ludovic Marin/AFP/Getty

The new head of the European Bank for Reconstruction and Development has defended its lending practices in autocratic countries despite its mandate to operate in nations committed to multi-party democracy and pluralism.

Some of the EBRD’s biggest markets, including Turkey, Egypt and Belarus, have taken an authoritarian turn in recent years. But Odile Renaud-Basso, former head of the French treasury, who took over as EBRD president last month, said the bank’s focus on private-sector lending helped strengthen civil society against repressive regimes.

“If you cut off all financing I’m not sure that you will support the evolution of the country — and the democratic evolution of the country,” she said in an interview with the Financial Times when asked about the bank’s activities in Egypt. The bank, she said, wanted to “help countries move in the right direction.”

According to the EBRD’s founding statutes, its purpose is to operate in “countries committed to and applying the principles of multi-party democracy, pluralism and market economics”.

“The EBRD is clearly breaching its mandate . . . in a number of places,” said Fidanka Bacheva-McGrath of CEE Bankwatch, a campaign group. “The bank claims that through its investments it can promote transparency and better governance. However, the evidence from the ground is scarce.”

The EBRD was set up in 1991 to promote the transition to a market economy in former Soviet-bloc countries, marrying private-sector lending with policy advice. It has expanded its activities to the Middle East and north Africa and is planning a push into sub-Saharan Africa.

Its biggest and third-largest markets in 2019 were Egypt and Turkey, where civil rights and freedom of expression have been curtailed in recent years. Two of its traditional countries of operation, Hungary and Poland, are at loggerheads with Brussels over alleged backsliding on the rule of law and democratic standards.

The EBRD also lends to private-sector projects in Belarus, where President Alexander Lukashenko claimed a landslide victory in a contentious election in August and has subsequently sought to crush opposition protests.

The bank argues that nurturing the private sector reduces the power of a state over its population. It is no longer lending to the government in Minsk or to Belarus state-owned enterprises. The vast majority of its lending in Egypt and Turkey is also to the private sector, it says, although one of its biggest projects in 2020 was a €250m loan paid to the Egyptian government for an oil refinery upgrade.

A police officer confronts an anti-government protester in Minsk. Belarus is among a number of EBRD markets where autocracy has gained ground © Tut.By/AP

“We have a strategic framework to address this kind of situation, which is generally summed up as more for more and less for less,” Ms Renaud-Basso said. “Developing the private sector is also a way to support the development of the economy and civil society.”

With tens of billions of euros in EU funding at stake in the stand-off between Brussels and Budapest and Warsaw, Ms Renaud-Basso said the bank by comparison did not have “a lot of leverage” with Hungary. But it did have an impact in upholding governance and anti-corruption safeguards in its lending projects, she said.

Ms Renaud-Basso is the third French national to take the helm of the EBRD. She has done so at a time of economic crisis and doubts in some EU capitals about the EBRD’s expansion from its original European mission and overlap with the much bigger European Investment Bank. 

EU capitals have been considering whether to throw their weight behind one institution to serve as the bloc’s development lender and enhance its “strategic autonomy”. The EBRD is not an EU institution and includes China and the US among its shareholders.

Ms Renaud-Basso said a global shareholding “geopolitically . . . makes a lot of sense for the EU”.

The EBRD had an advantage in that it operated closer to the ground, with more staff in the field, than the EIB, which focuses on big-ticket infrastructure projects, she said. “When you think about development impact, what we are doing is much stronger.”

She said she supported the plan to expand into sub-Saharan Africa, where the EIB also operates. Africa’s stability was such a big challenge for Europe that “we should use all available means, all options”, she added.

The change of administration in the US would help the bank focus more of its financial firepower on low-carbon projects in line with the Paris accord on carbon emissions, which was repudiated by President Donald Trump, she said, adding: “This will create a new dynamic.”

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