Commercial finance for development: A back door for financialisation

The global COVID-19 pandemic has accelerated a trend underway for the last decade: the enlistment of private-sector commercial finance for development. This finance can be brought in through (1) regular cross-border flows, (2) blended finance, and (3) impact bonds. This briefing argues that intensified foreign financial inflows are likely to draw African economies further into financialization, which increases financial instability and can undermine the democratic process, jeopardizing just socio-economic development. Specifically, the short-termism of portfolio flows requires costly reserve accumulation; FDI exposes firms to demands for shareholder value generation; and external debt introduces exchange rate risk for domestic borrowers.