May 8, 2018 / 1:47 PM / 5 months ago

REFILE-PREVIEW-EBRD floats Africa expansion with heartland in flux

(Restores dropped word “to” in quote)

* EBRD holds first annual meeting in Middle East

* To float further expansion in North and Sub Saharan Africa

* Reservations from some quarters

* Some of the bank’s traditional heartland drifting away from democracy

By Marc Jones

DEAD SEA RESORT, Jordan, May 8 (Reuters) - The European Bank for Reconstruction and Development starts its two-day annual meeting in Jordan on Wednesday, a symbol of a sprawling, decade-long expansion that its management now wants to extend into Africa.

That expansion means there will be a more varied mix of governments, central bankers and company executives than ever, though the push for new territory will be offset by growing uncertainty in the EBRD’s original heartlands.

Western sanctions mean it has not lent in Russia since 2014. Investments in Poland and Hungary have been begun to drop off amid clashes with the European Commission over the rule of law, immigration and press freedom.

Turkey, which has become the EBRD’s biggest market in recent years, is seeing its currency tip towards crisis as worries mount about inflation and what its upcoming elections could mean for democracy there.

For the EBRD’s head, Suma Chakrabarti, though, the main aim of the meeting is to test the appetite of its shareholder governments, of which there are now more than 60 from the G7 to China and India, for another big expansion drive.

Set up in 1991 to help former Soviet states transition to free-market capitalism, the EBRD now operates in more than 30 countries from north Africa to central and eastern Asia.

The new expansion plan would promote moving deeper into Africa and into more countries in the north of the continent, such as Algeria, or in the Middle East.

“I would be surprised if we didn’t get some positive noises because there are quite a lot of countries who have very strong commercial links into the neighbouring countries of the Maghreb and Sahel,” Chakrabarti told Reuters last month, referring to the area from northern Africa to the Sahara desert.

The bank currently lends around 9.5 billion euros ($11.30 billion) a year, but Chakrabarti thinks it could rise to as much as 13 billion euros without the need for fresh capital.

He is facing some resistance, however. Some of the bank’s eastern European and Baltic members as well as some others would like it to refocus on its original countries of expertise.

That could lead to more phased approach, where it first increases lending in existing countries from the start of next year. Then it would carry out feasibility work regarding Algeria, Libya and then sub-Saharan Africa.

“The aim is to have an open discussion.” EBRD director of communications Jonathan Charles said. “We want to get a sense of how shareholders would like us to proceed with this.”

The stresses emerging in key markets like Turkey, Russia and Ukraine, where the stamina for reforms seems to be flagging, are likely to show up in other areas.

Russia is sending its deputy finance minister and will hold its own individual session at the meeting. Ukraine’s finance minister hosts its session amid speculation its president is considering bringing forward elections to this year.

New EBRD economic forecasts will also be published and are expected to see another overall upgrade thanks to faster global growth.

$1 = 0.8408 euros Reporting by Marc Jones, editing by Larry King

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