The European Bank for Reconstruction and Development (EBRD) agreed yesterday to begin the process of expanding lending to the Middle East and North Africa following a string of popular revolts in the Arab world.
The bank will explore how to direct funds to Egypt, where President Hosni Mubarak was toppled in February, and other Arab states in the same way it supported former Communist countries after the fall of the Iron Curtain more than two decades ago.
"We are witness to extraordinary times, and this calls for extraordinary measures," EBRD EU Alternate Governor Vassili Lelakis said at the bank's annual meeting in the Kaz-akh capital. But while supporting a principle backed by the US and Germany, others among the EBRD's 63 shareholders urged caution in entering a new region while political upheaval and violence persist.
Some critics have called for the EBRD to halt those plans because they say it is not yet clear what types of governments will emerge in the region, while the bank should also show more clearly it can help reduce poverty and gender inequality. "Keeping in mind the development level of civil society in many of the countries where expansion is taking place, we could be creating big problems for ourselves from the start," Russian Deputy Finance Minister Sergei Storchak said.
He said Russia supported the idea in principle, but that expansion should be gradual and best done through the creation of a specific fund. "As far as I know, we are not alone in this position," Storchak said.
Created after the Cold War to help ex-Communist countries' transition to market economies, the EBRD lends about €9 billion (Dh47 billion) a year to projects stretching from Croatia in central Europe to Kazakh-stan's frontier with China in the East.
The Board of Governors asked the EBRD's directors to come up with proposals by July 31 to extend the lender's operating area.
The bank is expected to approve a request this summer from Egypt, an EBRD shareholder, to become a country of operation. Egypt's military council is preparing for a September election.
Officials have said lending to Egypt could start at around €100 million to €200 million next spring. An EBRD spokesman said a team would go there in the next few weeks to identify infrastructure, agriculture and other potential projects.
EBRD President Thomas Mirow has said lending to the entire Middle East and North African region could grow to about €2.5 billion by 2015, although the Board of Governors stipulated the expansion should not require shareholders to raise the bank's capital or undermine its other operations.
"[The decision] was a very strong signal from our shareholders that they believe in the EBRD's expertise regarding transition, Mirow said.