Updated June 21, 2022
European Bank for Reconstruction and Development (EBRD)
The European Bank for Reconstruction and Development
Membership
(EBRD), the first international financial institution of post-
The EBRD’s Articles of Agreement limit membership to
Cold War Europe, was founded in 1991 to ease the path of
European countries; non-European countries that are
the former communist countries of Central and Eastern
members of the IMF; the European Community (EC) (now
Europe (CEE) and the former Soviet Union from planned to
the European Union [EU]); and the European Investment
free-market economies. Its geographic area has expanded
Bank (EIB). The Articles also require that EC members, the
over time and, today, the EBRD finances projects in 37
EC, and the EIB hold a majority of the institution’s capital
countries throughout Europe, the Middle East, and Central
stock and a majority of the vote. EBRD membership has
Asia. In October 2021, Algeria became the 73rd member of
grown in recent years as the Bank has expanded its
the EBRD. The United States is a founding member of the
geographic range. Libya became a member in July 2019,
EBRD and is the single largest shareholder with a 10%
marking an expansion of the Bank’s presence in the
share of the Bank’s capital. U.S. membership in the EBRD
Mediterranean region. Other new members include
is authorized by P.L. 101-513, the European Bank for
Lebanon and the United Arab Emirates. At the beginning of
Reconstruction and Development Act (22 U.S.C. §290l et
2016, China became a non-borrowing member of the
seq.).
EBRD, and contributes a small share (0.097%) of the
Bank’s capital.
The EBRD is headquartered in London, United Kingdom.
The Bank was originally designed to function differently
Operations and Select Policy Issues
than other multilateral development banks in two key ways:
It has been over ten years since the EBRD’s last capital
first, it was given a political mandate to support democracy;
increase. In May 2010, the Board of Governors approved a
and second, it was designed to support the development of
request from the EBRD’s president for a €10 billion
the private sector in the former communist countries.
($11.05 billion) increase in authorized capital to €30 billion
Changes in Europe over the past two decades were viewed
($33.15 billion), a 50% rise from 2009 levels. Of the total
to make both mandates less pressing, leading the Bank to
authorized amount, €6.2 billion ($6.85 billion) is paid-in
expand its membership. Russia’s expanded war on Ukraine,
capital and €23.5 billion ($25.97 billion) is callable capital.
some argue however, underscores the importance of the
The Bank’s portfolio of operations increased from €48.4
EBRD maintaining robust operations in Eastern and Central
billion ($50.74 billion) in 2020 to €50.2 billion ($52.64
Europe. EBRD President Odile Renaud-Basso, former
billion by the end of 2021.
Director General of the French Treasury, was elected in
October 2020 for a four-year term.
While the EBRD continues disbursements on older projects,
as of 2021, the EBRD’s exposure to Russia accounted for
Political Mandate
2.9% of total EBRD operating assets, compared to around
Other multilateral development banks (MDBs) and the
26% in 2013. At the same time as it reduced its Russian
International Monetary Fund (IMF) have mandates to
exposure, the EBRD expanded its lending south into the
promote economic development and economic stability.
Balkans, the Caucasus, and the Southeastern Mediterranean
The EBRD’s mandate, in contrast, also includes political
(Figure 1). In April 2008, Turkey, a founding shareholder
factors, specifically to foster democracies and free-market
of the EBRD, applied to become a recipient country and
economies. Article 1 of the EBRD’s Articles of Agreements
now accounts for 19% of EBRD operations, despite its
states:
status as an upper-middle income country. Moving forward,
the EBRD will likely need to develop a more robust
In contributing to economic progress and
strategy to “graduate” high-income member countries. To
reconstruction, the purpose of the Bank shall be to
date, the Czech Republic is the only country that has
foster the transition towards open market-oriented
graduated from EBRD borrowing.
economies
and
to
promote
private
and
entrepreneurial initiative in the Central and Eastern
European countries committed to and applying the
principles of multiparty democracy, pluralism and
market economics.
In contrast, the other major MDBs have Articles asserting
their members’ political independence, stating that the
MDB shall not interfere in the political affairs of any
member; nor shall they be influenced in their decisions by
the political character of the member or members
concerned.
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European Bank for Reconstruction and Development (EBRD)
Figure 1. EBRD Lending by Region, FY2021
undermine the institutions’ ability to operate constructively
in Russia if there is a change of government in the future.
In April 2022, the EBRD Board of Governors formally
suspended Russia’s access to resources and closed its
offices in Moscow. Russia continues to be a shareholder of
the Bank. As the institution moves beyond its original
clientele of the more advanced, early transition economies
in Eastern Europe, to countries in North Africa and the
Caucasus, it will be a challenge for the EBRD to
successfully engage in substantially less democratic
countries (such as Egypt) that may be more reluctant to
introduce pro-democracy reforms than were the first wave
of post-Communist EBRD borrowers.
Source: EBRD 2021 Annual Review.
Expansion to Sub-Saharan Africa
In recent years, EBRD management has expressed interest
Ukraine
in expanding into sub-Saharan Africa (SSA). In 2020, the
Ukraine is one of the EBRD’s largest borrowers, with
Bank’s membership agreed that in 2022 they would
cumulative lending of more than €16 billion (about $17.58
consider offering membership and lending services to sub-
billion) in 511 projects since 1996, including more than €1
Saharan Africa, as well as Iraq. At the May 2022 annual
billion (about $1.2 billion) in 2021. Following Russia’s
meeting, Members decided to prioritize the Bank’s response
expanded invasion of Ukraine in 2022, the EBRD
to Russia’s war on Ukraine and postpone expansion.
announced a €2 billion (about $2.2 billion) support package
Members agreed to a limited amendment underscoring their
for the Ukrainian private sector. According to the Bank,
intention to expand to sub-Saharan Africa and agreed to
funding will be made available to support Ukrainian
revisit the issue by the 2023 annual meeting.
companies through several mechanisms, such as deferred
loans, liquidity support, and trade finance. Additional
According to Devex, a news source, EBRD members
assistance is expected to follow, including assistance for
stressed that “any limited and incremental expansion to sub-
relocating Ukrainian companies and rebuilding the
Saharan Africa and Iraq would not in itself impair the
Ukrainian economy once the war ends.
Bank’s ability to support its existing countries of
operations, compromise the Bank’s triple-A credit rating, or
The Biden Administration requested $500 million for the
lead to a request for additional capital contributions.”
EBRD in the FY 2022 Additional Ukraine Supplemental
Daniel Runde, a senior fellow at the Center for Strategic
Appropriations Act, which became law on May 21, 2022
and International Studies, argues that the EBRD should not
(H.R. 7691). At the EBRD’s May 2022 annual meeting,
expand to Africa, and instead should refocus its attention on
Acting U.S. Treasury Under Secretary for International
its original mandate, and “help Ukraine and other post-
Affairs, Andy Baukol, argued that the additional funding
will “s
Soviet states diversify their economies away from Russia.”
upport EBRD interventions to counteract economic
In contrast, analysts at the UK’s Overseas Development
vulnerabilities caused by the war, including on the ground
Institute write the expansion to SSA is “welcome news”
in Ukraine now and for reconstruction.” The Biden
and that the EBRD’s “longstanding expertise in private
Administration has not yet nominated an individual to serve
sector development and green economy transition” would
as the U.S. Executive Director (ED) at the Bank.
be beneficial for SSA.
Russia
Looking Ahead
For much of the EBRD’s history, Russia was the Bank’s
Over the past 30 years, the EBRD has been viewed as an
largest borrower. However, the G-7 countries decided to
important component of U.S. foreign and economic policy
oppose EBRD projects (as well as World Bank projects) in
Russia following its annexation of Ukraine’s Crimea
in Eastern Europe and Central Asia. Russia’s aggression in
Ukraine has underscored for many policymakers the
region. Some analysts found EBRD’s involvement in
continuing importance of the EBRD’s work in promoting
Russia controversial even before the crisis in Ukraine,
multiparty democracy and market economies. Some
questioning whether Russia had met the democracy and
questions Members of Congress may consider include:
pluralism criteria for EBRD projects.
Are EBRD resources sufficient?
On March 1, 2022, EBRD directors began procedures to
suspend Russia’s and Belarus’s access to EBRD finance,
Should Russia continue as a member of the EBRD? and
and on April 4, EBRD members approved an operational
suspension of Russia’s access to EBRD resources. This
What role should the EBRD have in the Middle East and
required approval of members holding three-quarters of
SSA?
EBRD voting power and two-thirds of all members. Going
further, a senior European official, for example, told
Reuters that “there is on ongoing discussion to kick Russia
Martin A. Weiss, Specialist in International Trade and
out of all international financial institutions.” Such actions,
Finance
some argue, would have little benefit to Ukraine and could
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European Bank for Reconstruction and Development (EBRD)
IF11419
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