As the global Democracy Index recorded a historic low in 2024, institutions tasked with upholding democratic values are under increasing pressure to adapt. Civil liberties have notably deteriorated, and public trust in governments is eroding, fuelling disengagement and instability. In this context, the role of international financial institutions with a democratic mandate has never been more vital.

The European Bank for Reconstruction and Development (EBRD) was established with a dual mission: to foster market-based economies and support countries transitioning to multi-party democracy and pluralism. This democratic mandate is enshrined in Article 1 of the EBRD’s founding agreement and continues to distinguish its position within the international financial architecture.

Measuring the EBRD’s transition impact

The EBRD still operates in authoritarian and hybrid regimes where governance continues to deteriorate. From Egypt to Uzbekistan, the EBRD disburses billions in financing every year, yet offers limited transparency on how it upholds its democratic mandate.

The question is not whether the EBRD should remain present in such contexts, but whether its presence meaningfully reinforces democratic transition – and what changes are needed to ensure it does.

To measure its transition impact, the EBRD uses six "review-process" transition qualities that define a sustainable market economy: competitive, well-governed, green, inclusive, resilient, and integrated. But how does the EBRD capture democratic progress or, indeed, its own contribution to it? Currently, it attempts to do so through the well-governed indicator, which mainly reflects institutions that support economic activity and corporate governance, rather than broader democratic transformation.  

Although this indicator includes assessments of perceived corruption, political stability, adherence to the rule of law, press freedom, and transparency, it does not explicitly account for the state of civic space. And while the EBRD’s country diagnostics and political assessments include information on civil society, it's unclear how – or if – this informs project selection, design, or policy dialogue.

Democratic backsliding: an alarming trend

In recent years, governments in many of the EBRD’s countries of operation have introduced or proposed regulations restricting civil society organisations. These include Russia, Belarus, Hungary, Slovakia, Romania, Kyrgyzstan, Kazakhstan, Georgia, Bosnia & Herzegovina, Bulgaria, Serbia, Turkey, Uzbekistan and Azerbaijan, among others. 

In 2024 alone, at least six countries proposed or adopted foreign agent-style laws. Several studies cited by Bankwatch in its latest report demonstrate a strong correlation between shrinking civic space, escalating restrictions on civil society organisations, and the erosion of democratic institutions.

Assessing the EBRD’s contribution to the democratic transition remains a challenge. While its Corporate Scorecard presents a ‘composite performance assessment’ of transition qualities at the project level, with ‘well-governed’ consistently rated as ‘good’ over in recent years, its country-level governance scores have deteriorated or produced mixed results in many EBRD regions. Additionally, there is little clarity on how such findings influence investment decisions, conditionality, or the EBRD’s broader strategy. For instance, a recent independent evaluation of the EBRD’s policy dialogue performance underscores the institution’s difficulty in demonstrating transition impact.

A strategic opportunity awaits

The EBRD is currently drafting its next Strategic and Capital Framework, a key document that will define its strategic direction until 2030. Priority themes are expected to include economic governance, the green economy, and economic inclusion, with digitalisation and mobilisation. 

But as vital as these priorities are, this preparation period also presents a crucial opportunity for the EBRD to precisely articulate how its economic investments will support the democratic transition, especially in countries with fragile or regressing governance.

The EBRD has a critical role to play in supporting reform-minded bodies, strengthening institutions, and protecting civic space, even in constrained environments. To be effective, its strategies must be grounded in a clearer vision of how economic development and political transformation are interlinked. 

As the EBRD expands its operations into new regions, including sub-Saharan Africa and Iraq, it must stay true to its founding mission. That’s why the upcoming Strategic and Capital Framework is such a timely opportunity to reaffirm that mission, placing democracy and civic participation at the heart of its approach.

Rights holders deserve concrete actions

First, the EBRD should develop clear benchmarks to assess democratic commitment, including civic space indicators, and report regularly on actions taken to support democratic transition. 

Second, meaningful civic and citizen engagement – at both project and country levels – should be recognised as a development objective, not merely a risk mitigation measure. This requires sustained investment of time and resources to establish and maintain institutional infrastructure that ensures meaningful engagement with rights holders. To increase transparency, the EBRD should systematically report on how it upholds the right to public participation in decision-making across its operations.

Third, the EBRD must jointly commit with other multilateral development banks to supporting enabling conditions for engagement with rights holders by addressing the multiple barriers that restrict civic participation in investment-related decision-making.

Finally, the EBRD should ensure its Corporate Scorecard reflects its democratic mandate, capturing both its operational impact and its contribution to the broader democratic transition.

During these times of increasing uncertainty, commitment to open societies, accountable institutions, and inclusive governance is more important than ever. The EBRD has the mandate, the expertise, and the credibility to honour its pledge. 

The impending Strategic and Capital Framework offers an opportunity to cement and build upon the EBRD’s legacy, and to categorically demonstrate that democratic values remain fundamental to sustainable development and lasting stability.

Nina Lesikhina is a policy officer at the CEE Bankwatch Network. She specialises in environmental and human rights advocacy with international financial institutions.