NEW BUZZWORD: Could ‘sharp power lending’ reduce the need for further IMF bailouts? Sharp power lending is the latest buzzword for emerging powers handing out large bilateral loans to countries facing economic crises — and could be an alternative to traditional multilateral lending, sovereign debt analyst Timothy Ash writes in the Financial Times. Countries which have recently received bailouts by the big three lenders — China, Russia, Saudi Arabia and the UAE — have reduced both the risk of default and the need for the IMF to extend emergency credit, Ash writes.

Egypt itself has benefited from SPL: Between them Saudi Arabia and the UAE provided Egypt with USD 8 bn in loans after Morsi was removed from power in 2013. The loans signaled Egypt coming back in from the political cold of the Morsi era and were a critical factor in Egypt’s ability to raise the USD 12 bn extended fund facility from the IMF. Both the UAE and Saudi have stepped up direct investment in Egypt in the time since.

What does increased SPL mean for economic reform programs? Ash says the conditions that China, Russia and the Gulf states attach to their loans differ widely. One clear concern is economic: Assistance to Bahrain from Saudi Arabia was conditioned on Manama undertaking fiscal reforms and strengthening their economy. But conditions attached to Chinese loans have neither been uniform nor consistently monitored. The risk is that this will see countries accruing unsustainable debt loads — unsustainable debt that will eventually demand the IMF step in. The discussion comes amid warnings that Chinese funding is a “debt trap.”