DEVELOPMENT FINANCE INSTITUTIONS AND ECONOMIC GROWTH IN CENTRAL ASIA: A PANEL DATA ANALYSIS OF WORLD BANK AND AIIB FINANCING, 2010–2024
Keywords:
Keywords: development finance institutions; World Bank; Asian Infrastructure Investment Bank; Central Asia; economic growth; panel data; foreign direct investment; Fixed Effects; CADEI index.Abstract
Abstract
This article examines the statistical association between development finance
institution (DFI) lending, foreign direct investment (FDI) inflows, and economic
growth in the five Central Asian countries — Kazakhstan, the Kyrgyz Republic,
Tajikistan, Turkmenistan, and Uzbekistan — over the period 2010–2024. Using a
hand-verified panel of 282 individual financing operations of the World Bank and the
Asian Infrastructure Investment Bank (AIIB) totalling approximately USD 28.4 billion
(World Bank: USD 22.8 billion; AIIB: USD 5.62 billion), the study estimates Pooled
OLS, Fixed Effects (FE), and Random Effects (RE) models, selects the preferred
specification through the Hausman test, and subjects the results to a battery of panel
diagnostics (Levin–Lin–Chu unit-root test, Pesaran CD test, Wooldridge
autocorrelation test, variance inflation factors, and clustered robust standard errors).
No confirmed New Development Bank (NDB) projects were identified in the region
for 2010–2024. The results show that FDI inflows (measured through a signed
logarithmic transformation, SLOG_FDI_MLN) are positively and consistently
associated with GDP growth across all specifications (FE: β = 0.52, p = 0.0024),
whereas World Bank financing shows no statistically significant association in any
specification, and AIIB financing shows only borderline significance (p = 0.073) under
robust estimation. Building on these findings, the study proposes an author-developed
Central Asia Development Effectiveness Index (CADEI), disaggregated into an
infrastructure module (CADEI-I) and a policy/crisis-response module (CADEI-P), and
an integrated framework for selecting development institutions and financing
instruments differentiated by country. The findings are intended to inform evidence-
based decision-making by government bodies engaged in external financing
negotiations.
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