The independent review, commissioned by the World Bank’s president, Jim Yong Kim, questioned the way in which the loan was handled by Beijing after the bank’s treasurer, Madelyn Antoncic, raised concerns about its processing.
This tangled transaction was questioned by Ms Antoncic and her staff, prompting the review
Created by the International Development Association and International Finance Corporation, two arms of the World Bank, the loan was part of a 2013 fundraising exercise for the IDA to fund work with poor countries. Rather than taking the $1bn straight into the fund, a complex transaction took place with the IFC, which raised suspicion.
As the Chinese government did not have a formal system for granting concessional loans to an institution, the People’s Bank of China offered the loan at market rates. Beijing then added a $300m grant, $179m of which was to cover the interest payments for the loan, and the World Bank created a structure for the IDA by combining the Chinese funds and buying a $1.179bn bond issued by the IFC. This tangled transaction was questioned by Ms Antoncic and her staff, prompting the review.
In the report Locke Lord Edwards, the investigating law firm, wrote: “We found no evidence of fraud or dishonesty in connection with the IDA-IFC transaction or the China concessional loan, and found that IDA was authorized to enter into each of them.”
The law firm’s review only highlighted a lack of communication between the World Bank’s financial departments. They concluded: “Working to improve communications between the groups would help reduce the risk of issues such as these arising in the future.”