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<title>G20 press conference analysis Spring Meetings 2024: Concrete actions fail to materialise despite strong Brazilian push</title>
<link>https://www.brettonwoodsproject.org/2024/04/g20-press-conference-analysis-spring-meetings-2024-concrete-actions-fail-to-materialise-despite-strong-brazilian-push/</link>
<dc:creator><![CDATA[Luiz Vieira]]></dc:creator>
<pubDate>Wed, 24 Apr 2024 21:03:44 +0000</pubDate>
<guid isPermaLink="false">https://www.brettonwoodsproject.org/?p=50087</guid>
<description><![CDATA[In the absence of a G20 Communiqué or Chair statement, Brazilian minister of finance, head of the central bank and other senior officials took questions at a short press conference, with discussion focused on the impact of continued restrictive US monetary policy on the global debt and development finance and the need for more responsive and better capitalised MDBs.
The post <a href="https://www.brettonwoodsproject.org/2024/04/g20-press-conference-analysis-spring-meetings-2024-concrete-actions-fail-to-materialise-despite-strong-brazilian-push/">G20 press conference analysis Spring Meetings 2024: Concrete actions fail to materialise despite strong Brazilian push</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
]]></description>
<content:encoded><![CDATA[The G20 meeting of finance ministers and central bank governors during the Spring Meetings of the World Bank and International Monetary Fund closed the Spring meetings (see Dispatch <a href="https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-wrap-up-despite-mounting-crises-persistent-lack-of-political-will-to-match-rhetoric-with-action-remains/">Springs 2024</a>), as planned, without a communiqué or chair statement. Instead, Brazilian Minister of Finance Fernando Haddad and Central Bank President Roberto Campos Neto and other senior officials took questions at a brief <a href="https://www.imf.org/en/Videos/view?vid=6351182221112">press conference</a> leaving us with more questions than answers.
Urgent BWIs governance and other reforms to the international financial architecture urgently required to tackle the globe’s interrelated crises, such as a new IMF quota formula, increased concessional finance, delivering on debt restructuring, and tackling inequality and food insecurity – continue to be hindered by lack of political will, largely from the Global North. Despite Brazil’s strong efforts to push a progressive reform agenda, the G20 failed to deliver agreement on any of these key issues during the Meetings. In this fragmented geopolitical situation, Brazil – arguably one of the most progressive governments to hold the G20 presidency lately – is working hard to spearhead proposals to increase public revenue and advance discussions on debt restructuring. Brazil’s ambition for its G20 presidency is much needed, however divergent priorities within a group challenged by severe power imbalances and geopolitical tensions prevented substantive progress. Alas, Brazilian aspirations outlined in the press release, that this year’s G20 should be a “moment of harmonization, systematizing knowledge and building a portfolio of benchmark public policies,” remained more aspiration than reality.
The questions at the press conference focused strongly on the impact on the persistence of inflationary pressures in the US and the corresponding reluctance of the US central bank to lower interest rates – a step necessary to alleviate the strained conditions faced by middle- and low-income countries. Brazilian officials underscored that elevated debt vulnerabilities and subdued long-term capital flows and related high capital costs to emerging markets and developing economies (EMDEs) make evident the need for urgent concessional financing and for multilateral development bank reforms (MDBs). There was a clear implication that the drive for more responsive and well-capitalised MDBs must go beyond the current focus on the World Bank. The G20 February <a href="http://www.g20.utoronto.ca/2024/240229-finance.html">communiqué</a>, the last issued, noted the group is looking at a range of financing options including development assistance, domestic resource mobilisation, technical cooperation and private capital mobilisation, but no particular agreement was reached on any of these revenue mobilisation topics. As noted, the press conference implicitly highlighted the imbalances of power in the global economy, as evidenced by the role of the dollar and corresponding impact of US monetary policy well beyond its domestic borders (see Observer <a href="https://www.brettonwoodsproject.org/2022/10/monetary-power-and-sovereign-debt-crises-the-renewed-case-for-a-sovereign-debt-restructuring-mechanism/">Autumn 2022</a>). Brazilian Finance Minister Fernando Haddad highlighted that current US interest rates “are making debt service unpayable” and called for greater speed of action by MDBs and increased concessional lending.
<h2>Brazil leading the way on efforts to increase public revenue through taxing the rich</h2>
Mainstreaming inequality was highlighted as a key policy concern in the February communiqué. As G20 president, Brazil <a href="https://www.reuters.com/world/americas/brazil-sees-proposal-tax-super-rich-gaining-momentum-will-seek-g20-declaration-2024-04-17/">aims</a> to advance this goal and to build international consensus on the taxation of wealth this year highlighting, “International taxation is not merely the favorite theme of progressive economists; it is an issue of key concern that is at the heart of the global macroeconomic issue.” This idea is slowly gaining momentum among G20 members, with France <a href="https://www.reuters.com/world/france-backs-global-minimum-tax-billionaires-g20-2024-02-28/">expressing support</a> for the Brazilian proposal, highlighting that the G20 should reach an agreement on taxing the rich by 2027. The proposals put forward include a wealth tax of 2 per cent for the world’s 3000 billionaires as well as advancing implementation of the 15 per cent global minimum corporate tax on the biggest multinational companies, following African state’ successful proposal for a tax convention at the UN (see Observer <a href="https://www.brettonwoodsproject.org/2023/12/civil-society-urges-governments-to-agree-on-a-un-tax-body-as-a-high-priority-matter/">Winter 2023</a>). Brazil will push for a joint declaration at a meeting of G20 finance ministers and central bankers in July.
The IMF’s newly reappointed Managing Director, Kristalina Georgieva (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/undemocratic-gentlemans-agreement-will-further-challenge-next-imf-managing-director/">Spring 2024</a>) supports this idea noting that closing tax loopholes and ensuring that the richest paid their fair share would mobilise funds urgently needed for sustainable and inclusive growth. A <a href="https://www.reuters.com/world/france-backs-global-minimum-tax-billionaires-g20-2024-02-28/">study</a> by EU Tax Observatory showed that ending tax avoidance by corporations could generate an additional $200 billion a year in revenue – equivalent of 2 per cent of the nearly $13 trillion in wealth owned by the world’s billionaires, while implementation of a global corporate minimum tax would result in an additional $150 billion. If successful, this would be a significant milestone in global wealth redistribution, however the proposal remains rather modest, with Oxfam <a href="https://oxfamilibrary.openrepository.com/bitstream/handle/10546/621477/bp-survival-of-the-richest-160123-summ-en.pdf">estimating</a> that an annual wealth tax of more than 8 per cent across all countries would have been needed to keep billionaires’ wealth constant over the last two decades.
<h2>Debt restructuring: Doing what we can with what we have</h2>
Brazil was also keen during the Meetings to progress discussions on the debt restructuring process during the Global Sovereign Debt Roundtable convened at Springs. The 17 April co-chair <a href="https://www.imf.org/en/News/Articles/2024/04/17/press-release-global-sovereign-debt-roundtable-2ndcochairs-progress-report">statement</a> outlined progress in some sovereign debt cases, including agreements reached by Zambia, Ghana and advanced discussions in the cases of Suriname and Sri Lanka. Some agreements were reached on transparency and coordination amongst creditor groups, as well as improving the timeline for more efficient and predictable debt restructuring processes. In the context of the current <a href="https://www.google.com/url?q=https://unctad.org/news/un-warns-soaring-global-public-debt-record-92-trillion-2022&sa=D&source=docs&ust=1713805351388356&usg=AOvVaw2oxm3JHYJmXRczJ2L2Mq1J">debt crisis</a>, in which half of the world’s population live in countries that pay more on debt service than education or health, these conclusions are just tinkering at the margins, far from delivering the much needed debt relief for low- and middle- income countries (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/better-ways-to-reduce-the-pain-of-debt-crises-for-developing-countries/">Spring 2024</a>).
As G20 president, Brazil will organise another workshop with the Paris Club in June in the hope of making progress on the issue of comparability of treatment – the key obstacle in debt restructuring talks for both Zambia and Ghana. More still needs to be done, with current restructuring deals unlikely to deliver on long-term debt sustainability as they include contingency clauses with bondholders to increase payments if countries reach positive economic results showing yet again that creditor’s profits are prioritised above all else, hampering countries abilities of economic sustainable recovery.
Civil society organisations (CSOs) following the trials and tribulations of Brazil’s efforts to facilitate concrete steps on its progressive agenda discussed how they can best support Brazil’s initiatives while recognising that the G20 remains an undemocratic and unrepresentative group of rich nations, and calling for deliberations to take place within the UN system. CSO discussions also focused on how to best ensure continuity of a progressive agenda during the South African G20 presidency that begins next year.
The post <a href="https://www.brettonwoodsproject.org/2024/04/g20-press-conference-analysis-spring-meetings-2024-concrete-actions-fail-to-materialise-despite-strong-brazilian-push/">G20 press conference analysis Spring Meetings 2024: Concrete actions fail to materialise despite strong Brazilian push</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
]]></content:encoded>
<post-id xmlns="com-wordpress:feed-additions:1">50087</post-id> </item>
<item>
<title>V20 communiqué analysis Spring Meetings 2024: Climate vulnerable countries issue call to action, as net-negative flows result in ‘millions in, billions out’ amid growing debt burdens</title>
<link>https://www.brettonwoodsproject.org/2024/04/v20-communique-analysis-spring-meetings-2024-climate-vulnerable-countries-issue-call-to-action-as-net-negative-flows-result-in-millions-in-billions-out-amid-growing-debt-burdens/</link>
<dc:creator><![CDATA[Jon Sward]]></dc:creator>
<pubDate>Wed, 24 Apr 2024 09:37:34 +0000</pubDate>
<guid isPermaLink="false">https://www.brettonwoodsproject.org/?p=50012</guid>
<description><![CDATA[V20 members are expected to pay $904.7 billion in debt service between 2022-2030, as debt, lack of financing and low projected growth hampers prospects for green economic transformation.
The post <a href="https://www.brettonwoodsproject.org/2024/04/v20-communique-analysis-spring-meetings-2024-climate-vulnerable-countries-issue-call-to-action-as-net-negative-flows-result-in-millions-in-billions-out-amid-growing-debt-burdens/">V20 communiqué analysis Spring Meetings 2024: Climate vulnerable countries issue call to action, as net-negative flows result in ‘millions in, billions out’ amid growing debt burdens</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
]]></description>
<content:encoded><![CDATA[The V20 Group of Finance Ministers met on 16 April on the side-lines of the World Bank Spring Meetings, issuing a <a href="https://www.v-20.org/v20-ministerial-dialogue-xii-communique">communiqué</a> shortly after their ministerial dialogue. Official statements at the ministerial were glum, reflecting the mood set on the eve of the Spring Meetings by US Under Secretary for International Affairs, Jay Shambaugh, who <a href="https://home.treasury.gov/news/press-releases/jy2247">noted</a> in comments at the Peterson Institute for International Economics on 11 April that “net outflows from low- and middle-income countries, particularly to official bilateral and private sources, are at multi-decade highs.”
At the ministerial, Chris Sinckler of Barbados, an <a href="https://www.worldbank.org/en/about/people/c/christopher-sinckler">alternate executive director</a> to the World Bank who was representing Barbados’s incoming V20 presidency in place of Prime Minister Mia Mottley, made no qualms about this reality being unsustainable for V20 Group members, lamenting that there are “considerable outflows going to the institutions designed to help us get out of the development traps that we find ourselves in.” Similarly, Mahmoud Mohieldin, currently an executive director at the IMF for the Arab States and Maldives constituency and previously the World Bank’s Senior Vice President for the 2030 Development Agenda, noted in his intervention that although when he was with the Bank his team had coined the term ‘Billions to Trillions’ in reference to the hoped-for scaling up of private finance into development efforts, given the current reality, it’s “now it’s millions in, billions out” from the V20’s members.
The V20’s communiqué noted that in this context, progress towards global climate and development goals hangs by a thread: “In developing countries, the United Nations (UN) Sustainable Development Goals (SDGs) are off track with 30 percent of targets stalled or reversed and 50 percent categorised as insufficient or weak, including hunger and poverty targets.” It added, “our ability to help win…[the] global fight against climate change is increasingly impaired due to Nationally Determined Contributions (NDCs) that are not aligned to achieve 1.5℃ by 2030. This misalignment reflects a financial architecture that does not correspond with the realities of climate change.”
<h2>Debt, cost of capital and climate action: Untangling a twisted knot?</h2>
Given this conundrum, the V20 included extensive discussion of the growing debt distress within its membership in its communiqué, and urged the G21 to “overhaul the Common Framework,” including via “inclusive participation to involve all creditor classes and debtor governments including middle-income countries”. The V20 also noted the need for quicker disbursement of financing from the World Bank and its multilateral development bank peers, “as no country can afford to wait the usual 18-36 months for MDB financing,” and called for “affordable financing – and if it is on a case-by-case program – then each country’s funding needs to be tailored where its interest rate is lower than the projected medium-term growth rate.” This was an apparent nod to the IMF’s newly released World Economic Outlook, which predicted historically low future growth rates over the coming five-year period (see Dispatch <a href="https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-wrap-up-despite-mounting-crises-persistent-lack-of-political-will-to-match-rhetoric-with-action-remains/">Springs 2024</a>), as well as the V20’s new debt <a href="https://www.v-20.org/resources/publications/v20-debt-review-2nd-edition">review</a> of its members released on 17 April, which found that “V20 members are expected to pay $904.7 billion in debt service over 2022-2030.”
Against this backdrop, the V20 called for the IMF in particular to take a more holistic approach to debt sustainability, in order to enable its members to pursue green economic transformation, in the face of multiple, escalating crises. The communiqué noted, “We reiterate the need for the IMF to “make debt work for the climate” including for their Debt Sustainability Analysis (DSA) to incorporate real climate and development investment and spending needs and the full range of climate risks, and determine what it takes for each country to achieve them, thus moving away from conventional austerity-based measures towards resource mobilization-driven prosperity approaches.”
The communiqué added, “We look forward to South-South economic and trade cooperation…in order to invest in green industrialization opportunities with high-quality, fully climate-adapted, correctly priced, and on-time delivery of climate-resilient development projects for more job creation and revenue generation.”
<h2>After unequally distributed 2021 SDRs allocation, V20 calls for reform of the Resilience and Sustainability Facility</h2>
In parallel to a civil society <a href="https://www.actionaidusa.org/publications/adapting-our-financial-architecture-in-a-crisis-prone-worlda-civil-society-proposal-for-special-drawing-rights-reform/">proposal</a> at the Spring Meetings led by ActionAid USA and Bretton Woods Project that called for reform of IMF Special Drawing Rights (SDRs) to make future allocations more predictable and needs-based, the V20 welcomed ongoing efforts to rechannel SDRs through the IMF and MDBs, while noting “the uneven distributions of SDR allocations.”
Reflecting on the IMF’s new Resilience and Sustainability Facility (RSF), which is intended to on-lend rechannelled SDRs to ameliorate potential ‘balance of payments’ impacts related to climate change, the V20 urged the Fund “to remove the requirement for a concurrent IMF program to access the RSF” (see Observer <a href="https://www.brettonwoodsproject.org/2022/04/new-imf-resilience-and-sustainability-trust-rst-how-to-make-it-work-for-the-global-south/">Spring 2022</a>). The V20 argued, “The RSF should be accessible to members determined to mitigate prospective balance of payment shocks by investing in climate action. Noting that IMF conditionalities emphasise fiscal consolidation as [a] precondition which could jeopardise a country’s ability to lay the groundwork for a meaningful structural transformation and for building climate resilience.”
The V20 also called for the rechannelling of SDRs through regional MDBs – which so far IMF shareholders have yet to <a href="https://www.cgdev.org/blog/imfs-shareholders-disappoint-sdrs">agree to</a>, despite relatively conservative proposals for SDR-backed hybrid capital facilities at the African Development Bank and Inter-American Development Bank.
The V20 also called for an ambitious 21st replenishment this year for the low-income country lending arm of the Bank, the International Development Association (IDA21; see Dispatch <a href="https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-wrap-up-despite-mounting-crises-persistent-lack-of-political-will-to-match-rhetoric-with-action-remains/">Springs 2024</a>), and noted that it expects to finally receive official observer status at the World Bank and IMF by October’s Annual Meetings, in order to participate in meetings of the Development Committee and the International Monetary and Finance Committee.
The post <a href="https://www.brettonwoodsproject.org/2024/04/v20-communique-analysis-spring-meetings-2024-climate-vulnerable-countries-issue-call-to-action-as-net-negative-flows-result-in-millions-in-billions-out-amid-growing-debt-burdens/">V20 communiqué analysis Spring Meetings 2024: Climate vulnerable countries issue call to action, as net-negative flows result in ‘millions in, billions out’ amid growing debt burdens</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
]]></content:encoded>
<post-id xmlns="com-wordpress:feed-additions:1">50012</post-id> </item>
<item>
<title>IMFC chair’s statement analysis Spring Meetings 2024: Tinkering at the margins while global crises unfold  </title>
<link>https://www.brettonwoodsproject.org/2024/04/imfc-chairs-statement-analysis-spring-meetings-2024-tinkering-at-the-margins-while-global-crises-unfold/</link>
<dc:creator><![CDATA[Robert Bain]]></dc:creator>
<pubDate>Wed, 24 Apr 2024 09:28:31 +0000</pubDate>
<guid isPermaLink="false">https://www.brettonwoodsproject.org/?p=50025</guid>
<description><![CDATA[IMFC chair’s relatively sanguine view of the global economy does not reflect the IMF’s own projection that the five-year global economic growth forecast is “at its lowest in decades”.
The post <a href="https://www.brettonwoodsproject.org/2024/04/imfc-chairs-statement-analysis-spring-meetings-2024-tinkering-at-the-margins-while-global-crises-unfold/">IMFC chair’s statement analysis Spring Meetings 2024: Tinkering at the margins while global crises unfold  </a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
]]></description>
<content:encoded><![CDATA[The 2024 Spring Meetings is now the fifth occasion in a row in which the IMFC chair has issued a <a href="https://www.imf.org/en/News/Articles/2024/04/19/pr24122-Chairs-Statement--Forty-Ninth-Meeting-of-the-IMFC">statement</a>, after tensions over geopolitics prevented the committee from agreeing on a joint communiqué. The statement was cautiously positive, noting that the global economy was heading for a “soft landing” after years of turbulence, but that downside risks remained. However, this relatively sanguine view does not reflect the IMF’s own <a href="https://www.imf.org/en/Publications/WEO/Issues/2024/04/16/world-economic-outlook-april-2024">projection</a> that the five-year global economic growth forecast is “at its lowest in decades” – or the reality that those living in many low-income countries (LICs) face: Economies have yet to <a href="https://www.theguardian.com/business/2024/apr/15/covid-pandemic-made-poorest-countries-even-worse-off-world-bank-warns">recover</a> from the Covid-19 pandemic, a growing <a href="https://catholicherald.co.uk/cafod-blames-imfs-devastating-role-in-global-debt-crisis/">debt crisis</a> and <a href="https://www.policycircle.org/opinion/climate-change-inaction-inertia/">disproportionate</a> impact from the world’s failure to address the growing climate crisis (see Dispatch <a href="https://www.brettonwoodsproject.org/2023/04/spring-meetings-2023-preamble-threats-to-multilateral-system-and-to-achievement-of-development-goals-mount-as-hopes-of-substantive-reform-at-world-bank-and-imf-wane/">Springs 2023</a>).
The IMFC’s new chairperson, Minister of Finance of Saudi Arabia Mohammed Al-Jadaan, stressed the IMFC’s priorities were to achieve price stability and safeguard financial stability, mentioning in his press briefing that the IMF’s precautionary balances, which provide its membership with a buffer against shocks, were expected to reach its medium-term target of $33 billion in Special Drawing Rights (SDRs) this month. Jadaan also mentioned the IMF’s efforts to strengthen its work on capacity development and improve domestic resource mobilisation (taxation) of member states to increase their capacity to govern effectively – however this is at odds with its <a href="https://www.hrw.org/news/2023/09/25/imf-austerity-loan-conditions-risk-undermining-rights">enforcement</a> of harsh austerity measures on states experiencing financial crises. The minister also noted that committee members would continue to strengthen the global financial safety net and address global debt vulnerabilities, welcoming the progress on debt restructurings under the G20 Common Framework (CF) on Debt.
<h2>Political considerations stifle solutions to systemic risks</h2>
However, the CF has arguably failed LICs (see Observer <a href="https://www.brettonwoodsproject.org/2022/07/highly-indebted-countries-face-further-cuts-to-public-spending-to-service-debts/">Summer 2022</a>, <a href="https://www.brettonwoodsproject.org/2020/12/g20-debt-proposal-continues-to-favour-creditors/">Winter 2020</a>). Established in November 2020, it was meant to <a href="https://www.lowyinstitute.org/the-interpreter/g20-s-approach-debt-has-failed">accelerate</a> the process of debt relief, but the restructurings that have happened under it have taken three times as long as before, with private creditors only <a href="https://www.theguardian.com/business/2024/apr/21/world-bank-chief-economist-indermit-gill-g20-debt-relief-mechanism-common-framework">brought</a> into the process at the end of negotiations – which gives them leverage to hold out for a better deal, as they did recently in <a href="https://www.savethechildren.org.uk/blogs/2024/new-year-new-opportunities-preventing-debt-crises">negotiations</a> with Zambia. The World Bank has strongly <a href="https://www.afronomicslaw.org/category/african-sovereign-debt-justice-network-afsdjn/sixty-second-sovereign-debt-news-update-chad">criticised</a> the deal Chad reached under the CF, raising concerns about the country’s longer-term ability to repay its debts. In an interview with The Guardian during the Spring Meetings, World Bank chief economist Indermit Gil <a href="https://www.theguardian.com/business/2024/apr/21/world-bank-chief-economist-indermit-gill-g20-debt-relief-mechanism-common-framework">noted</a> the CF hadn’t provided any actual debt relief, adding that “The common framework won’t deliver what leaders say it will.”
The United Nations Conference of Trade and Development (UNCTAD) has <a href="https://unctad.org/news/un-warns-soaring-global-public-debt-record-92-trillion-2022">noted</a> that debt is at record levels, with many LICs in <a href="https://www.worldbank.org/en/programs/debt-toolkit/dsa">debt distress</a> or at high risk of debt distress, and that almost half of humanity lives in countries that spend more on debt servicing than on education or health (see Observer <a href="https://www.brettonwoodsproject.org/2023/12/new-data-show-global-south-is-in-worst-debt-crisis-ever-with-another-lost-decade-looming/">Winter 2023</a>). “While a systemic debt crisis…looms on the horizon, a development crisis is already underway,” <a href="https://unctad.org/news/unctad-urges-reforms-global-debt-architecture-amid-rising-distress">said</a> Anastasia Nesvetailova, Head of UNCTAD’s macroeconomic and development policies branch. “A new, development-centred <a href="https://unctad.org/publication/trade-and-development-report-2023">approach</a> to debt is needed,” she stressed. Relieving the debt burdens of LICs is essential if they are to effectively <a href="https://www.wri.org/insights/debt-climate-action-developing-countries">manage</a> the green transition and adapt to climate change, which the chair’s statement recognised as a pressing structural challenge.
<h2>Questions remain about willingness of key actors to constructively engage in critical reform</h2>
In his statement, Jadaan said that IMF member states were working to approve the 50 per cent increase in quota share ratified by its Executive Board last December as part of the 16th General Review of Quotas in their domestic legislatures by mid-November this year. He noted that members have made interim arrangements to increase bilateral borrowing if the quota increase was delayed for any reason. He also mentioned the committee’s members called on the IMF’s executive board to deliver possible approaches for further quota realignment by June 2025, as part of the 17th General Review of Quotas, which civil society has urgently called for to ensure quota shares reflect changes in the world economy and are more representative (see Observer <a href="https://www.brettonwoodsproject.org/2023/12/civil-society-calls-for-a-meaningful-quota-reform-that-accurately-reflects-the-changes-in-the-global-economy-to-ensure-a-fair-representation-of-all-member-countries/">Winter 2023</a>). However, geopolitical tensions and reluctance to embrace reform make expectations for a fair realignment of quotas overly optimistic (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/undemocratic-gentlemans-agreement-will-further-challenge-next-imf-managing-director/">Spring 2024</a>, Observer <a href="https://www.brettonwoodsproject.org/2023/12/civil-society-calls-for-a-meaningful-quota-reform-that-accurately-reflects-the-changes-in-the-global-economy-to-ensure-a-fair-representation-of-all-member-countries/">Winter 2023</a>, Observer <a href="https://www.brettonwoodsproject.org/2023/10/clock-is-ticking-will-imfs-16th-quota-review-mean-a-further-loss-of-legitimacy-for-the-fund/">Autumn 2023</a>; Dispatch <a href="https://www.brettonwoodsproject.org/2023/10/imfc-chairs-statement-analysis-spring-meetings-2023-fine-words-but-little-of-substance-as-critical-decisions-kicked-down-the-road/">Annuals 2023</a>).
The IMFC chair said he looked forward to welcoming Sub-Saharan Africa’s third chair, which is intended to improve the continent’s voice and overall regional representation.
<h2>Geopolitical division is the new normal</h2>
It appears that the geopolitical tensions that have prevented the IMFC agreeing on a joint communiqué for the last two years have to a significant extent become routinised. This year’s chair’s statement, issued in lieu of a joint communiqué, came out promptly after the committee’s <a href="https://www.imf.org/en/News/Articles/2024/04/19/tr041924-transcript-of-april-2024-imfc-press-briefing">press briefing</a>, without the delays of the last two years.
At the press briefing Jadaan stressed that, despite <a href="https://www.reuters.com/world/imf-committee-acknowledges-conflicts-risk-opts-against-joint-communique-2024-04-19/">disagreements</a> over conflicts in the Middle East and Ukraine, all members of the IMFC were committed to supporting the IMF, and while it was not the forum to resolve geopolitical and security issues like the war in Ukraine, the humanitarian crisis in Gaza and shipping disruptions in the Red Sea, members were cognisant of the effects these conflicts could have. The difference in tone between the new Saudi chair’s carefully apolitical statement and the approach of the previous Spanish chair, Nadia Calviño, was noticeable. Her last <a href="https://www.imf.org/en/News/Articles/2023/10/14/pr23353-chairs-statement-forty-eighth-meeting-of-the-imfc">statement</a> called on all states “to uphold the principles of international law including territorial integrity and sovereignty, international humanitarian law, and the multilateral system that safeguards peace and stability” and stressed the importance of peacefully resolving conflicts, calling for “a comprehensive, just and durable peace in Ukraine.”
Jadaan also stressed the commitment of IMFC members to avoid protectionist measures, which flies in the face of the recent <a href="https://www.ft.com/content/bd60c55e-110c-454e-a9f6-be9233bcc2eb">call</a> by the president of the US, a committee member, to triple tariffs on Chinese steel and aluminium, and the <a href="https://www.bloomberg.com/news/newsletters/2024-04-22/supply-chain-latest-raimondo-defends-us-industrial-policies">US</a> and <a href="https://www.greeneuropeanjournal.eu/the-return-of-industrial-policy-in-the-european-union/">EU</a>‘s recent embrace of industrial policy.
The post <a href="https://www.brettonwoodsproject.org/2024/04/imfc-chairs-statement-analysis-spring-meetings-2024-tinkering-at-the-margins-while-global-crises-unfold/">IMFC chair’s statement analysis Spring Meetings 2024: Tinkering at the margins while global crises unfold  </a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<title>G24 communiqué analysis Spring Meetings 2024: Calls for reform, not protectionism</title>
<link>https://www.brettonwoodsproject.org/2024/04/g24-communique-analysis-spring-meetings-2024-calls-for-reform-not-protectionism/</link>
<dc:creator><![CDATA[Amy McShane]]></dc:creator>
<pubDate>Wed, 24 Apr 2024 09:27:34 +0000</pubDate>
<guid isPermaLink="false">https://www.brettonwoodsproject.org/?p=50023</guid>
<description><![CDATA[The Spring 2024 G24 communiqué puts pressure on the BWIs to use their influence where it’s needed, including calls to suspend and review surcharges, offer the biggest ever IDA replenishment, suppot the UN Tax Convention, and avoid protectionist policies. 
The post <a href="https://www.brettonwoodsproject.org/2024/04/g24-communique-analysis-spring-meetings-2024-calls-for-reform-not-protectionism/">G24 communiqué analysis Spring Meetings 2024: Calls for reform, not protectionism</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<content:encoded><![CDATA[The <a href="https://www.g24.org/wp-content/uploads/2024/04/ENG-G-24-2024-Spring-Meetings-Final-Communique.pdf">communiqué</a> of the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development (G24) for the 2024 International Monetary Fund (IMF) and World Bank Group (WBG) Spring Meetings was released on 16 April. While maintaining an encouraging attitude, the communiqué stressed the woeful inadequacy of multilateral responses to compounding crises and apparent repeating of harmful protectionist policies, including increased, costly lending to low-income countries. Aligned in many ways with reactions from civil society this Springs Meetings (see Dispatch <a href="https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-wrap-up-despite-mounting-crises-persistent-lack-of-political-will-to-match-rhetoric-with-action-remains/">Springs 2024</a>), the document is a vital indicator of how borrowing countries are feeling.
The communiqué asked for global development actors including the World Bank and IMF to lead “a strong and united international effort to restore peace, stability, and rebuild livelihoods” amidst a bleak economic landscape. The tone of concern was notable, with the G24 framing “risks from persistent core inflation [which] could trigger additional monetary policy tightening, further compounding already high levels of debt, fiscal and current account imbalances” as “trade-offs in policy choices” and highlighted that Sustainable Development Goals would not be met if action wasn’t taken.
<h2>IMF’s time to step up</h2>
The G24 had much to say on the IMF, both signalling approval and discontent over various avenues of change at the ‘lender of last resort’. On the Resilience and Sustainability Trust (RST), the group called the IMF to “consider expanding the RST beyond climate change and pandemic preparedness to include other sources of Balance of Payments (BOP) vulnerabilities” ahead of the facility’s review. The group welcomed an increase in access limits for the Poverty Reduction and Growth Trust (PRGT) facilities, “as it would better support LICs amid the challenging global economic environment.” It however stressed the long-term sustainability of PRGT finances should be prioritised and suggested the increasingly popular possibility of IMF gold sales (see Dispatch <a href="https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-wrap-up-despite-mounting-crises-persistent-lack-of-political-will-to-match-rhetoric-with-action-remains/">Springs 2024</a>). The group summarised calls for increased resources by asking more well-off countries to re-channel unused Special Drawing Rights (SDRs) to those struggling, as <a href="https://www.eurodad.org/csos_call_on_g7_to_bring_an_end_to_surcharge_policy">called</a> for by civil society.
On the topic of surcharges, the G24 put its support behind calls for a review, noting, “we are of the view that IMF’s robust financial performance does not warrant burdening members with high rates at this time,” and demanded that surcharges should be suspended until such a review happens. Elsewhere, they welcomed ongoing efforts to review the joint IMF-World Bank Debt Sustainability Framework for Low-Income Countries (LIC-DSF) and noted the recent equiproportional increase in quotas as a “step towards a more quota-based IMF.” The group congratulated the approval of a third chair for sub-Saharan Africa, something they called for in their last communiqué following the 2023 Annual Meetings in Morocco (See Dispatch <a href="https://www.brettonwoodsproject.org/2023/10/g24-communique-analysis-annual-meetings-2023-scramble-for-last-resort-support-to-struggling-countries/">Autumn 2023</a>), and took a step further to encourage the creation of a fifth deputy managing director post for Emerging Markets and Developing Economies (EDMEs). The group also called for a quota realignment that “reflects the evolving economic realities of member countries”, and a stronger voice and representation for EMDEs, with a caveat that such a realignment should not come at the expense of other EMDEs and LICs members.
<h2>Bigger Bank sets bigger expectations</h2>
Turning to the World Bank, the G24 started off by noting that while they “look forward to a bigger, better, and more efficient bank”, the “focus should be on supporting the structuring and bankability of projects to ensure the mobilization of resources” which should include a “realistic assessment of the remaining agenda to provide a clear understanding of the trade-offs, risks, and net budgetary implications”, alluding to the previously mentioned protectionist policies.
On the newly released ‘Global Challenges’, the communiqué suggested that the World Bank should strengthen country ownership and demand-driven engagement, and “support all eight global challenges in a balanced manner, while providing additional and new concessional financing along with upfront grants to incentivize clients’ demands.” This call for a more holistic approach to supporting countries whilst operationalising WBG president Ajay Banga’s streamlining approach of operations (see Dispatch <a href="https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-wrap-up-despite-mounting-crises-persistent-lack-of-political-will-to-match-rhetoric-with-action-remains/">Springs 2024</a>) highlights the caution many borrowing countries are feeling over the possibility that a more ‘efficient’ Bank could translate to a Bank that is less accountable, transparent and supportive to borrowing countries in achieving poverty and inequality reduction (sere Observer <a href="https://www.brettonwoodsproject.org/2024/04/opportunity-lost-world-banks-roadmap-fails-to-chart-path-to-better-development-outcomes/">Spring 2024</a>, <a href="https://www.brettonwoodsproject.org/2023/12/a-proposal-for-ajay-no-evolution-without-remedy/">Winter 2023</a>).
On the International Development Association’s 21st replenishment happening this year, the G24 called for the “strongest-ever replenishment of the IDA21” – a hope that is unlikely to be met following the helpless tone on donor mobilisation during the Springs Meetings. Funding levels aside, the group called for “IDA management and contributor countries to avoid hardening funding terms for the most vulnerable members”, once again stressing the importance of not making times tougher for already struggling countries (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/moving-beyond-a-focus-on-historic-replenishment/">Spring 2024</a>).
On a capital increase, the group called for faster progress in the implementation of the recommendations of the Group of Twenty (G20) Independent Experts Group. They noted that “recent progress under the G20 Common Framework (CF) is a positive step towards addressing some of these challenges” and added, “early and effective engagement of both creditors and debtors with Credit Rating Agencies can prevent a short-term liquidity challenge from escalating into a debt crisis.”
Finally, the G24 ended its communiqué on a note that will be celebratory for many in civil society. The group joined the Brazil G20 presidency in supporting the ongoing discussion at the United Nations towards establishing a Framework Convention on International Tax Cooperation, and in fact called on the IMF and World Bank to lend their support and collaborate in the effort, undoubtedly a helpful political message to add to the chorus of calls for the institutions to put their weight behind viable alternative sources of financing during trying times.
The post <a href="https://www.brettonwoodsproject.org/2024/04/g24-communique-analysis-spring-meetings-2024-calls-for-reform-not-protectionism/">G24 communiqué analysis Spring Meetings 2024: Calls for reform, not protectionism</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<title>Spring Meetings 2024 Wrap Up: Despite mounting crises, persistent lack of political will to match rhetoric with action remains</title>
<link>https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-wrap-up-despite-mounting-crises-persistent-lack-of-political-will-to-match-rhetoric-with-action-remains/</link>
<dc:creator><![CDATA[Luiz Vieira]]></dc:creator>
<pubDate>Wed, 24 Apr 2024 09:26:16 +0000</pubDate>
<guid isPermaLink="false">https://www.brettonwoodsproject.org/?p=50003</guid>
<description><![CDATA[Urgent BWIs reforms remain hostage to lack of political will in Global North as the G20 failed to deliver on important issues within a fragmented geopolitical situation. 
The post <a href="https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-wrap-up-despite-mounting-crises-persistent-lack-of-political-will-to-match-rhetoric-with-action-remains/">Spring Meetings 2024 Wrap Up: Despite mounting crises, persistent lack of political will to match rhetoric with action remains</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<content:encoded><![CDATA[Governors of the IMF and World Bank met in Washington DC from 17-19 April for a streamlined version of Spring Meetings, amidst a recognition of the deepening crises facing the global economy. The IMF’s Spring 2024 World Economic Outlook (WEO) <a href="https://www.imf.org/en/Publications/WEO/Issues/2024/04/16/world-economic-outlook-april-2024">report</a> stressed that, “The forecast for global growth five years from now…is at its lowest in decades,” highlighting, “modest slowdown in emerging market and developing economies…in both 2024 and 2025.” Discussions at the meetings were contextualised by a fear of the consequences of continued geopolitical and trade fragmentation.
The WEO’s pessimistic forecast – from an institution often <a href="https://erlassjahr.de/wordpress/wp-content/uploads/2020/12/Focus-Paper-4-From-growth-optimism-to-a-lost-development-decade.pdf">criticised</a> for its overly optimistic projections (see Observer <a href="https://www.brettonwoodsproject.org/2022/10/imf-debt-sustainability-analysis-in-times-of-compounding-crises-still-unfit-for-purpose/">Autumn 2022</a>) – made for an even more troubling read when considered alongside a <a href="https://openknowledge.worldbank.org/server/api/core/bitstreams/fae248b6-9f96-4a13-83b9-01bbd2bab47e/content">report</a> by the International Development Association (IDA), the Bank’s low-income country arm, titled The Great Reversal, which stressed that, “one in three IDA countries is poorer now than on the eve of the pandemic,” adding that stagnation could become more entrenched, creating further reversals. The report cautions, “Any further weakening in long-term global growth prospects would likely weigh heavily on the already subdued outlook for IDA countries.” However, these stark projections did not dent the IMF’s insistence that the debt crisis is not systemic and that countries face a liquidity, rather than a solvency, crisis. Ignoring its own global growth projections and betting on miraculous growth to solve the liquidity crisis, seems to be the Fund’s current political position (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/sri-lankas-continued-debt-crisis-highlights-urgent-need-for-wider-reform/">Spring 2024</a>, <a href="https://www.brettonwoodsproject.org/2022/10/imf-debt-sustainability-analysis-in-times-of-compounding-crises-still-unfit-for-purpose/">Autumn 2022</a>).
While the IMF continues to disregard Development Finance International’s <a href="https://www.development-finance.org/files/DSW_Data_Summary.pdf">research</a> showing that “citizens of the Global South now face the worst debt crisis since global records began,” the Vulnerable 20 (V20) Group’s 68 countries stressed in their 16 April <a href="https://www.thecvf.org/blog/v20-finance-ministers-call-for-concessional-capital-and-debt-solutions-to-achieve-development-and-climate-goals/">statement</a> that, “High levels of external sovereign debt and debt service across the V20 economies are crowding out the ability of governments to…achieve their climate change and development goals” (see Dispatch <a href="https://www.brettonwoodsproject.org/2024/04/v20-communique-analysis-spring-meetings-2024-climate-vulnerable-countries-issue-call-to-action-as-net-negative-flows-result-in-millions-in-billions-out-amid-growing-debt-burdens/">Spring 2024</a>).
Indeed, despite much discussion at the Spring Meetings about the obstacles to climate action, despite its urgency and the need to address growing inequality, the IMF’s Spring 2024 <a href="https://www.imf.org/en/Publications/FM/Issues/2024/04/17/fiscal-monitor-april-2024">Fiscal Monitor </a>highlighted the need for fiscal consolidation, once again ignoring its detrimental <a href="https://www.hrw.org/news/2023/09/25/imf-austerity-loan-conditions-risk-undermining-rights">human rights</a> and soial effects and available <a href="https://www.project-syndicate.org/commentary/austerity-returns-threatening-recovery-and-billions-of-people-by-isabel-ortiz-and-matthew-cummins-2022-12?barrier=accesspaylog">alternative</a> policy options.
<h2>Brazil’s G20 presidency and civil society look to stimulate international financial architecture reform</h2>
In the context of these overlapping crises, the Spring Meetings didn’t pass without <a href="https://www.commondreams.org/news/bike-protest-world-bank-fossil-fuel-financing">protests</a> and demonstrations. Civil society marched in protest on 19 April <a href="https://debtgwa.net/debtandclimate">demanding</a> debt cancelations to address the climate crisis, elimination of IMF surcharges, and ending harmful conditionalities and investments that promote fossil fuels and push countries into austerity (see Report, <a href="https://www.brettonwoodsproject.org/2024/04/gambling-with-the-planets-future-world-bank-development-policy-finance-green-conditionality-and-the-push-for-a-private-led-energy-transition/">Gambling with the planet’s future</a>). Civil society organisations (CSOs) engagement this time around stood in stark contrast to official events. <a href="https://thedocs.worldbank.org/en/doc/e447d6d16dc28a2cc7a4617d7023e9b1-0360012024/original/CSPF-Schedule.pdf">Civil Society Policy Forum</a> (CSPF) events were well attended by BWIs staff, often with malleable and accommodating statements recognising problems and openness towards cooperation while some protestors – by contrast – were questioned and subjected to extra security procedures at the IMF. Lack of political will to tackle the scale of current crises will likely result in more demonstrations and social unrest in the future, as CSOs will try to exert more pressure on officials to achieve meaningful reform of the international financial architecture.
CSFP panels on debt relief, the contradictions between the Bank’s energy sector development policy lending conditionalities and its stated commitment to Paris alignment, Special Drawing Rights (SDRs), and the IDA21 replenishment provided ample evidence to question the predominant approach of the Bank and Fund. Women’s rights and other organisations continued their critical engagement with the implementation of the Bank and Fund’s <a href="https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-preamble-bretton-woods-institutions-continue-to-sleepwalk-through-crises-as-80th-anniversary-of-bretton-woods-conference-approaches/">gender strategies</a>. Meanwhile several CSPF and parallel events also renewed calls for governance reform.
Providing a glimmer of hope in an otherwise bleak landscape, the recent victory of African states to begin the process of negotiating a tax convention at the UN (see Observer <a href="https://www.brettonwoodsproject.org/2023/12/civil-society-urges-governments-to-agree-on-a-un-tax-body-as-a-high-priority-matter/">Winter 2023</a>) was bolstered by current G20 president Brazil’s <a href="https://www.reuters.com/world/americas/brazil-sees-proposal-tax-super-rich-gaining-momentum-will-seek-g20-declaration-2024-04-17/">proposal</a> to tax the super-rich – with a report expected for the <a href="https://www.g20.org/en/tracks/finance-track">G20 finance track</a> meeting in July. Concerns about the democratic deficits at the IMF and World Bank and questions about how and where funds raised by this and other proposed global taxes would be administered are paramount.
The Brazilian G20 presidency was very active throughout the Meetings, hosting several events in which World Bank reform was discussed. At a high-level event on Brazil’s Sustainable Development Plan on 18 April, the panel – which included Secretary for Economic Policy, Guillerme Mello and Director of Infrastructure, Energy Transition and Climate Change Division of Brazil’s development bank, Luciana Costa – noted the need to move beyond discussions of World Bank reform to focus on wider multilateral development bank (MDB) reforms. The panel stressed the need for the Bank’s Roadmap to result on a much greater focus on national development plans, questioning why to date only states in the Global North seem able to rely on industrial policy.
During the same panel, Laura Carvalho, Open Society Foundations’ Global Director of Equity, stressed that a robust recapitalisation of the World Bank and MDBs by rich nations is essential to avoid borrowers having to choose between climate action and other urgent development needs. She underscored that such a choice has a high probability of leading to a backlash against climate action, as has been the case with Europe. Apropos of recapitalisation, several civil society partners raised the issue of the 2025 World Bank shareholding review and called for a fairer distribution of power within the institution.
<h2>IMF: Perpetuation of ‘gentleman’s agreement’ and resistance to reform</h2>
As the unopposed <a href="https://www.imf.org/en/News/Articles/2024/04/12/pr24113-imf-executive-board-selects-kristalina-georgieva-to-serve-a-second-term-as-managing-director">reappointment</a> of Kristalina Georgieva for a second mandate as IMF Managing Director on 12 April demonstrates, substantive IMF governance reform remains a significant challenge (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/undemocratic-gentlemans-agreement-will-further-challenge-next-imf-managing-director/">Spring 2024</a>). While the formal process for appointing a new managing director began on 13 March, European Union finance ministers endorsed Georgieva a day before the process started, effectively shutting the door to other candidates. Whatever her capabilities, her unopposed reselection sends a clear signal about the refusal of dominant shareholders to heed long-standing <a href="https://www.brettonwoodsproject.org/2024/03/civil-society-calls-for-an-end-to-the-gentlemans-agreement-and-a-merit-based-open-and-transparent-md-selection-process/">calls</a> for reform from the <a href="https://sdg.iisd.org/news/third-south-summit-calls-for-international-financial-architecture-reform/">Global South</a> and <a href="https://www.germanwatch.org/sites/default/files/germanwatch_ifa_reform_2023.pdf">civil society</a>. Those calls notwithstanding, the unwillingness to reform is also clearly seen in the Fund’s commitment for a new IMF quota formula by mid-2025, which appears to remain more an objective on paper, with discussions on formula review pending the implementation the 16th Quota Review reached at the end of last year and shareholder interests remaining as divergent as ever (see Observer <a href="https://www.brettonwoodsproject.org/2022/10/quota-reform-needed-at-imf-in-order-to-address-21st-century-challenges/">Autumn 2022</a>)
The tension between scaling up finance and governance reform at BWIs persists, with CSOs warning of the dangers of prioritising one over the other. However, it seems that even scaling up finance remains a difficult goal with reductions in New Arrangements to Borrow and Bilateral Borrowing Agreements failing to increase the Fund’s firepower despite the increase in country quotas. The funding constraints are evidenced in the lack of contributions to the Fund’s Poverty Reduction and Growth Trust Fund (PRGT) despite high demand.
The Fund <a href="https://www.bu.edu/gdp/2024/04/16/how-the-imf-can-strengthen-the-resilience-and-sustainability-trust-to-promote-a-just-global-climate-transition/">aims</a> to increase access to the Resilience and Sustainability Trust (RST) programme to 33 countries – compared to 18 currently. However, the requirement for a second IMF programme and the implications for borrowing beyond countries’ quota limits remain <a href="https://www.cgdev.org/blog/now-not-time-increase-funding-imfs-rst">challenges</a>, particularly given an apparent unwillingness to revisit <a href="https://www.cepr.net/report/the-case-for-more-special-drawing-rights/">eligibility</a> criteria, which currently limits current RST eligibility to 26 countries. Progress on the RST is also challenged by the limited scope of its current interim review, which will go to the board next month. Additionally, while the RST aims for balance of payment support for climate shocks and green transitions to foster resilient and sustainable growth, UTC loan conditionalities in many cases encourage contradictory policies such as the expansion of fossil fuels, as shown in a new <a href="https://re-course.org/newsupdates/new-report-analysing-initial-experience-with-imfs-resilience-and-sustainability-trust-shows-evidence-of-concern-austerity-privatisation-and-fossil-fuel-expansion/">report</a> from Belgium-based CSO Recourse launched at the Meetings.
The IMF expects demand for PRGT lending to reach nearly $40 billion this year, more than four times the historical average, but pledges from shareholders remain insufficient. A US bill <a href="https://www.reuters.com/world/us/treasurys-yellen-says-funding-bill-allows-lending-21-bln-imf-trust-2024-03-23/">passed</a> in March will allow the US to lend up to $21 billion to the PRGT loan account, but that still leaves a gap of $19 billion with no other contributions forthcoming. The loan account of the PRGT is not the only problem. In order to increase funding via the PRGT, the programmes subsidy reserve account, which covers SDRs interest rate payments on behalf of borrowing countries must be increased either through shareholder grants or earned income. With difficulties in fundraising from shareholders, the Fund seems to be resorting to its accumulated charges from its precautionary balances (i.e. surcharges). If this approach is pursued, the Fund would effectively be using surcharge payments from its most indebted middle-income countries (MICs), like Ukraine and Argentina, to provide concessional funding to low-income countries (LICs). This would effectively create a feedback loop created by the unwillingness of Global North shareholders to provide urgently needed funds where MICs bear the burden of supporting other countries in crisis. Throughout the Spring Meetings, civil society continued to <a href="https://menafemmovement.org/end-surcharges-campaign/">call</a> for an abolition of IMF surcharges, which now affect 22 countries, according to new <a href="https://cepr.net/report/a-broader-impact-than-ever-before-an-updated-estimate-of-the-imfs-surcharges/">analysis</a> from US-based CEPR.
While the Fund will conduct a review of its surcharges policy in the coming months, concerns remain that the PRGT funding gap will be a main roadblock to eliminating these harmful penalties. The IMF has <a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2021/12/16/Interim-Review-of-The-Adequacy-of-The-Funds-Precautionary-Balances-511081">argued</a> that surpluses driven by surcharges are important to build up the Fund’s precautionary balances ― i.e. its capital base. Equally, shareholders argue that the policy is there to deter countries from borrowing over their quota share, meaning the objective of the policy is for it not to be used at all. This highlights a problematic contradiction: While the Fund has the goal to eliminate surcharges by deterring countries from over-relying on the IMF, it also considers surcharges a key part of its capital base.
While the need for funding remains acute, the Fund’s main asset – SDRs – remains <a href="https://www.actionaidusa.org/publications/adapting-our-financial-architecture-in-a-crisis-prone-worlda-civil-society-proposal-for-special-drawing-rights-reform/">underutilised</a>. This Spring Meetings, there was no political will to re-channel SDRs through MDBs, and even less so for another SDR allocation, with the US Congress recently <a href="https://www.congress.gov/118/crpt/hrpt332/CRPT-118hrpt332.pdf">passing</a> a bill that prevents the Fund from providing any financial assistance, including SDRs, to Iran. Given that SDRs are allocated to all shareholders based on their quota share, if the bill passes the US Senate, the US will effectively close the door to further general SDR allocations – underscoring the barriers to effective multilateralism at one of the key institutions in the international architecture.
The IMF has another important ace up its sleeve – its gold reserves which are severely <a href="https://www.imf.org/-/media/Files/Data/IMF-Finance/Quarterly-Financial-Statements/2023/fy23-audited-financial-statements-web.ashx">undervalued</a> by over $172 billion. The IMF also <a href="https://www.cepr.net/no-more-excuse-for-surcharges-the-target-for-precautionary-balances-has-been-reached/">excludes</a> $5.8 billion in profits from past gold sales from its precautionary balances as they are currently accounted for in its “special reserve” (different from the precautionary balances reserves). Were the Fund to follow the statistical accounting <a href="https://www.elibrary.imf.org/display/book/9781484304228/ch002.xml">standards</a> it recommends to its member countries, its precautionary balances would immediately increase by $177.6 billion. This is a relatively easy way to break out of the current financing needs deadlock, but it remains to be seen whether the Fund will resort to this measure – despite the increasing number and severity of crises in LMICs.
<h2>World Bank: Many questions and concerns remain, despite some additional clarity</h2>
As anticipated, the operationalisation of the World Bank’s Roadmap and IDA21 replenishment were the focus of discussions about the World Bank during Springs (see Dispatch <a href="https://www.brettonwoodsproject.org/publications/world-bank-and-imf-spring-meetings-2024/">Springs 2024</a>).
While the ‘Bigger Bank’ narrative remained front-and-centre, substantial attention was devoted to the Bank’s new <a href="https://documents1.worldbank.org/curated/en/099121223173511026/pdf/BOSIB1ab32eaff0051a2191da7db5542842.pdf">Corporate Scorecard</a>, the eight Global Challenges Programs (GCPs), hybrid capital and Liveable Planet Fund. The last three received a significant boost with 11 rich nations <a href="https://www.ft.com/content/7cf9fd4c-58ca-48c9-8024-18f4c9a3892f">pledging</a> $11 billion to them on 19 April.
In light of persistent questions about the robustness of the Bank’s climate financing figures (see Observer <a href="https://www.brettonwoodsproject.org/2022/10/world-banks-failure-to-disclose-details-of-climate-finance-accounting-opens-its-claim-to-be-leading-green-financier-to-scrutiny/">Autumn 2022</a>), civil society – and, indeed, shareholders – welcomed the Bank’s commitment to measure development outcomes rather than inputs and outputs. The Bank’s stated commitment to transparency in data and methodology used to track progress against the Scorecard was likewise a positive development. As the Scorecard is more fully developed, global civil society and academia, particularly in the Global South, will continue to call for their inclusion in the process. The gender indicator’s focus on percentage of women using financial services is an example of the need for greater critical outside input – as evidenced by the Independent Evaluation Group’s damming 2023 <a href="https://elibrary.worldbank.org/doi/abs/10.1596/40282">report</a> on the effectiveness of the International Finance Corporation’s (IFC), the Bank’s private sector lending arm, financial inclusion initiatives to improve gender outcomes.
Despite numerous questions at diverse fora, such as the civil society roundtable with World Bank executive directors, questions about how the GCPs will work remain unaddressed, with no detail of their implications for, decision-making, staffing, funding and coherence with a stated focus to decentralise decision making.
Equally unclear is how the new Knowledge Compact for Action will be integrated into the development of the Bank’s Country Partnership Framework and other existing initiatives, particularly given the likely tension between a strong focus on a ‘faster Bank’, persistent complaints about current stakeholder engagement, and the time and resources required to go beyond perfunctory engagement with civil society and academia from the Global South.
Particularly in light of the Great Reversal <a href="https://openknowledge.worldbank.org/server/api/core/bitstreams/fae248b6-9f96-4a13-83b9-01bbd2bab47e/content">report</a>, IDA21 replenishment was a key discussion point at the Meetings, with the Bank pleading for unconditional civil society support, as the replenishment faces serious challenges in donor capitals. An indication of this could be seen in the Bank’s row-back from calls for a ‘historic’ replenishment and a focus on a $100 billion dollar target instead, which would amount to a smaller replenishment in real terms than IDA20’s $93 billion in 2021, given high inflation rates in the intervening years (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/moving-beyond-a-focus-on-historic-replenishment/">Spring 2024</a>).
In every fora where IDA21 was discussed, all parties acknowledged the importance of its grant and concessional lending, particularly given high debt burdens and high cost of capital. Nonetheless, persistent concerns were raised about the policy framework under development and whether it would contribute to the economic transformation required – as evidenced by the startling fact that only 18 of IDA’s 81 countries have graduated in the past 60 years (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/moving-beyond-a-focus-on-historic-replenishment/">Spring 2024</a>). The challenges faced internally in the development of IDA’s policy framework and the urgency of meeting the Bank’s commitment to the Knowledge Compact were made clear by remarks made by the Bank’s Chief Economist for Africa, Andrew Dabalen, in a CSPF event on IDA21 on 19 April, where he refused to admit the Bank had made any policy mistakes in the past, instead holding African states solely responsible for their fate.
The post <a href="https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-wrap-up-despite-mounting-crises-persistent-lack-of-political-will-to-match-rhetoric-with-action-remains/">Spring Meetings 2024 Wrap Up: Despite mounting crises, persistent lack of political will to match rhetoric with action remains</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<title>Development Committee chair’s statement analysis Spring Meetings 2024: Bank shareholder division hinders reforms required to address global challenges</title>
<link>https://www.brettonwoodsproject.org/2024/04/development-committee-chairs-statement-analysis-bank-shareholder-division-hinders-reforms-required-to-address-global-challenges/</link>
<dc:creator><![CDATA[Alizée Le-Lannou]]></dc:creator>
<pubDate>Mon, 22 Apr 2024 17:54:06 +0000</pubDate>
<guid isPermaLink="false">https://www.brettonwoodsproject.org/?p=49995</guid>
<description><![CDATA[Despite the Development Committee advocating for increased international cooperation, persistent geopolitical fragmentation constrains the much-needed reforms essential for addressing 21st-century challenges.
The post <a href="https://www.brettonwoodsproject.org/2024/04/development-committee-chairs-statement-analysis-bank-shareholder-division-hinders-reforms-required-to-address-global-challenges/">Development Committee chair’s statement analysis Spring Meetings 2024: Bank shareholder division hinders reforms required to address global challenges</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<content:encoded><![CDATA[As disagreements over the Middle East and Ukraine once again prevented the Development Committee from issuing a communiqué following its gathering at the 2024 Spring Meetings, a <a href="https://www.devcommittee.org/content/dam/sites/devcommittee/doc/statements/2024/DCS2024-0031-DC%20Chair-Spring%20Statement..pdf">chair’s statement</a> summarised the majority of shareholders’ views.
Mohamed bin Hadi Al Hussaini, finance minister of the United Arab Emirates and Development Committee Chair, stressed that, amidst developing economies facing heavy debt burdens and constrained fiscal space, “Immediate action is needed to address these multiple intertwined crises if the world is to eradicate poverty and reduce the inequality affecting many clients, including those in small states, while addressing the root causes of Fragility, Conflict and Violence (FCV).” Disappointingly, not defining the ‘root causes’ of FCV failed to offer a clear direction of travel. As it stands, the Bank’s <a href="https://au.int/sites/default/files/documents/39234-doc-184._world_development_report_2011.pdf">strategy</a> for FCV-ridden states operates in a political-economic vacuum, disconnected from the drivers of FCV worldwide – not least through the Bretton Woods Institutions (BWIs) support for the privatisation of social services that erode the social contract (see Observer <a href="https://www.brettonwoodsproject.org/2023/12/un-secretary-general-new-agenda-for-peace-calls-for-urgent-financial-architecture-and-policy-reform/">Winter 2023</a>).
As the Bank moves from Evolution Roadmap to Playbook, advancing towards becoming a ‘better and bigger Bank’, its gears are shifting from vision to speed and impact. Members welcomed these steps, including the WBG Scorecard and Knowledge Compact, the Global Challenge Programs, the Private Sector Investment Lab, and the expanded Crisis Preparedness and Response Toolkit. Yet, members emphasised that, “We must hold ourselves accountable more broadly as we become a better and bigger bank” – calling for enhanced partnerships between the Bank and global and regional actors and accelerated country engagement reforms to assist clients in domestic resource mobilisation (DRM).
While this is appreciated, it tiptoes around broader accountability required for a ‘better’ Bank. Civil society has urged an independent evaluation of the Bank’s lending practices and policy approaches, including its role in fiscal consolidation and constrained counter-cyclical state intervention. Doubling down on the Cascade approach, through the Private Sector Investment Lab, disregards <a href="https://www.devex.com/news/new-report-casts-doubt-on-world-bank-billions-to-trillions-agenda-94678">evidence</a> of the Bank’s failure to deliver promised development finance and its negative social impacts (see Observer <a href="https://www.brettonwoodsproject.org/2023/07/civil-society-calls-for-world-bank-to-reroute-evolution-roadmap-away-from-cascade/">Summer 2023</a>), making it crucial for the <a href="https://www.worldbank.org/en/news/press-release/2024/04/09/world-bank-group-announces-new-approach-to-measuring-impact">WBG Scorecards</a> to include human rights indicators (see Dispatch <a href="https://www.brettonwoodsproject.org/publications/world-bank-and-imf-annual-meetings-2023/">Annuals 2023</a>).
<h2>Addressing the debt crisis: Is relief on the horizon?</h2>
The chair’s statement recognised debt sustainability as an important issue, with members calling for closer collaboration between the Bank and Fund, welcoming the review of the Low-Income Countries Debt Sustainability Framework. They also called for enhanced cooperation to support the implementation of the Common Framework for eligible countries by the Paris Club and other G20 creditors, emphasising the need to strengthen creditor coordination for debt restructuring processes. This call coincided with the grim economic forecast from the <a href="https://www.imf.org/en/Publications/WEO/Issues/2024/04/16/world-economic-outlook-april-2024">World Economic Outlook</a>, underscoring the urgency to address debt (see Dispatch <a href="https://www.brettonwoodsproject.org/2024/04/v20-communique-analysis-spring-meetings-2024-climate-vulnerable-countries-issue-call-to-action-as-net-negative-flows-result-in-millions-in-billions-out-amid-growing-debt-burdens/">Springs 2024</a>).
This echoes a previous call made by the chair of the Development Committee during the Annual Meetings in October 2023 (see Dispatch <a href="https://www.brettonwoodsproject.org/publications/world-bank-and-imf-annual-meetings-2023/">Annuals 2023</a>) – although still <a href="https://www.devcommittee.org/content/dam/sites/devcommittee/doc/documents/2024/Final_DC2024-0002.pdf">missing</a> from the Bank’s discussion paper “From Vision to Impact”. This slow progress is costing lives: Urgent action is needed to evaluate the Bank’s role in debt sustainability, integrating human rights and environmental considerations into its analyses (see Observer <a href="https://www.brettonwoodsproject.org/publications/autumn-2023/">Autumn 2023</a>). Countries in the Global South are <a href="https://www.development-finance.org/files/DSW_Data_Summary.pdf">averaging</a> 38 per cent of their government revenue on debt servicing, rising to 54 per cent in Africa. And there is little hope for relief: The G20 Common Framework – failing to hold private creditors accountable – is ineffective (see Observer <a href="https://www.brettonwoodsproject.org/2023/12/new-data-show-global-south-is-in-worst-debt-crisis-ever-with-another-lost-decade-looming/#:~:text=Indeed%2C%20a%20new%20database%20by,54%20per%20cent%20in%20Africa.">Winter 2023</a>). <a href="https://debtgwa.net/debtandclimate">Civil society</a> and <a href="https://www.thecvf.org/blog/v20-finance-ministers-call-for-concessional-capital-and-debt-solutions-to-achieve-development-and-climate-goals/#:~:text=Convening%20on%20the%20sidelines%20of,out%20the%20ability%20of%20governments">V20 finance ministers</a> have been vocal about the need for debt solutions to achieve development and climate goals (see Dispatch Springs 2024).
<h2>Doubling down on a private sector led approach: At what point will urgent, compounding crises pave the way for reform?</h2>
Members are committed to a successful 21st replenishment of the International Development Association (IDA), the Bank’s low-income arm, happening this year – calling for “steadfast efforts from existing and new donors, client countries, and the Bank to increase development impact”. While a historic a replenishment would be welcome, civil society has called for it to be accompanied by a clear policy framework for IDA21 – to drive green socio-economic transformations in the Global South, decreasing commodity dependence and increasing economic diversification. Currently, the emphasis on private-sector finance, via IDA’s Private Sector Window, redirects limited concessional finance by prioritising market development over human development and economic transformation (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/moving-beyond-a-focus-on-historic-replenishment/">Spring 2024</a>).
Members look “forward to the new WBG Gender Strategy, and its implementation, to strengthen work to end gender-based violence, elevate human capital, expand economic opportunities, and engage women as leaders.” Yet, this failed to address the delay in implementing the Strategy, leaving civil society anxious about watering-down of crucial issues like gender and disability inclusion into ‘lenses’ lacking policy commitments – exacerbated by the exclusion of gender as an IDA21 ‘special theme’ (see Dispatch <a href="https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-preamble-bretton-woods-institutions-continue-to-sleepwalk-through-crises-as-80th-anniversary-of-bretton-woods-conference-approaches/">Springs 2024</a>). The continued emphasis on women’s workforce participation, seen in the new WBG <a href="https://www.worldbank.org/en/news/press-release/2024/04/09/world-bank-group-announces-new-approach-to-measuring-impact">Scorecards,</a> perpetuates systemic problems underlying gender inequality (see Observer <a href="https://www.brettonwoodsproject.org/2023/10/wbg-gender-strategy-risks-undermining-new-human-rights-language-with-prevailing-private-sector-paradigm/">Autumn 2023</a>).
The statement welcomed the WBG’s COP28 comittment, “devoting 45 percent of its annual financing to climate by the end of FY25, balancing the priorities of adaptation and mitigation”. However, CSOs have <a href="https://www.brettonwoodsproject.org/2024/04/the-world-bank-and-climate-finance-success-story-or-a-new-era-of-green-structural-adjustment/">raised</a> concerns about the transparency of the Bank’s climate finance accounting, as well as its continued promotion of private capital mobilisation to tackle the climate crisis – highlighting the structural hurdles faced by institutional investors holding assets from low- and middle-income countries. This strategy <a href="https://www.versobooks.com/en-gb/products/3069-the-price-is-wrong">requires</a> substantial public subsidies to ensure predictable returns, especially in Global South economies <a href="https://www.climatepolicyinitiative.org/wp-content/uploads/2023/06/An-FX-Guarantee-Mechanism-for-the-Green-Transformation-in-Developing-Countries.pdf">where</a> the cost of capital is at an all-time high – exacerbating profit extraction from Global South to North (see Report, <a href="https://www.brettonwoodsproject.org/2024/04/gambling-with-the-planets-future-world-bank-development-policy-finance-green-conditionality-and-the-push-for-a-private-led-energy-transition/">Gambling with the planet’s future?</a>).
As Fernando Haddad, minister of finance for Brazil, <a href="https://www.devcommittee.org/content/dam/sites/devcommittee/doc/statements/2024/DCS2024-0015-Brazil.pdf">argued</a> in his statement: To address head on 21st century challenges, the BWIs urgently need to adapt “to the intricate tapestry of social, political, and economic challenges we face today.”
The post <a href="https://www.brettonwoodsproject.org/2024/04/development-committee-chairs-statement-analysis-bank-shareholder-division-hinders-reforms-required-to-address-global-challenges/">Development Committee chair’s statement analysis Spring Meetings 2024: Bank shareholder division hinders reforms required to address global challenges</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<title>Webinar – Financialisation, human rights and the Bretton Woods Institutions: An introduction for civil society organisations</title>
<link>https://www.brettonwoodsproject.org/2024/04/financialisation-human-rights-and-the-bretton-woods-institutions-an-introduction-for-civil-society-organisations-2/</link>
<dc:creator><![CDATA[Isabel Alvarez]]></dc:creator>
<pubDate>Fri, 12 Apr 2024 08:33:31 +0000</pubDate>
<guid isPermaLink="false">https://www.brettonwoodsproject.org/?p=49962</guid>
<description><![CDATA[On 11 April 2024 the Bretton Woods Project hosted a webinar to present its new report Financialisation, human rights and the Bretton Woods Institutions: An introduction for civil society organisations, followed by a discussion with CSOs and academics
The post <a href="https://www.brettonwoodsproject.org/2024/04/financialisation-human-rights-and-the-bretton-woods-institutions-an-introduction-for-civil-society-organisations-2/">Webinar – Financialisation, human rights and the Bretton Woods Institutions: An introduction for civil society organisations</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<content:encoded><![CDATA[On 11 April 2024 the Bretton Woods Project hosted a webinar to present its new report <a href="https://www.brettonwoodsproject.org/2024/04/financialisation-human-rights-and-the-bretton-woods-institutions-an-introduction-for-civil-society-organisations/">Financialisation, human rights and the Bretton Woods Institutions: An introduction for civil society organisations</a>, followed by a discussion with CSOs and academics, including Francisco Cantamutto (Universidad Nacional del Sur, Argentina), Bruno Bonizzi (University of Hertfordshire), Luisa Abbott Galvao (Friends of the Earth), and Karina Kato (Federal Rural University of Rio de Janeiro, Brazil).
Watch the webinar:
<div style="padding: 56.25% 0 0 0; position: relative;"><iframe style="position: absolute; top: 0; left: 0; width: 100%; height: 100%;" title="Webinar_ Financialisation, human rights and the Bretton Woods Institutions_ An introduction for civil society organisations-2024" src="https://player.vimeo.com/video/933621955?badge=0&autopause=0&player_id=0&app_id=58479" frameborder="0"></iframe></div>
<script src="https://player.vimeo.com/api/player.js"></script>
The post <a href="https://www.brettonwoodsproject.org/2024/04/financialisation-human-rights-and-the-bretton-woods-institutions-an-introduction-for-civil-society-organisations-2/">Webinar – Financialisation, human rights and the Bretton Woods Institutions: An introduction for civil society organisations</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<title>Spring Meetings 2024 Preamble: Bretton Woods Institutions continue to sleepwalk through crises as 80th anniversary of Bretton Woods Conference approaches</title>
<link>https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-preamble-bretton-woods-institutions-continue-to-sleepwalk-through-crises-as-80th-anniversary-of-bretton-woods-conference-approaches/</link>
<dc:creator><![CDATA[Jon Sward]]></dc:creator>
<pubDate>Thu, 11 Apr 2024 09:05:30 +0000</pubDate>
<guid isPermaLink="false">https://www.brettonwoodsproject.org/?p=49912</guid>
<description><![CDATA[At a time when transformative changes on governance and development financing are required, the World Bank and IMF have instead opted for a slimmed down Spring Meetings schedule.
The post <a href="https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-preamble-bretton-woods-institutions-continue-to-sleepwalk-through-crises-as-80th-anniversary-of-bretton-woods-conference-approaches/">Spring Meetings 2024 Preamble: Bretton Woods Institutions continue to sleepwalk through crises as 80th anniversary of Bretton Woods Conference approaches</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<content:encoded><![CDATA[As the World Bank and IMF approach the Spring Meetings in Washington DC from 15-20 April, it’s difficult to escape the conclusion that – despite endless talk of reforming the international financial architecture since the outbreak of the Covid-19 pandemic – the Bretton Woods Institutions (BWIs) and their wealthy country shareholders have largely failed to rise to the challenge, much to the chagrin of Global South countries and civil society. As we approach the 80th <a href="https://www.worldbank.org/en/archive/history/exhibits/Bretton-Woods-and-the-Birth-of-the-World-Bank">anniversary</a> of the Bretton Woods Conference in July, the BWIs’ governance structures – which were forged in the aftermath of WWII – remain largely unreformed.
The World Bank’s internal reform process in 2023 ended with a whimper, begetting potentially contradictory metaphors (an Evolution Roadmap that yielded an Evolution…Playbook?), minor tweaks to the Bank’s mission and vision, and precious little additional concessional financing – ignoring longstanding concerns regarding inequitable governance structures that favour wealthy shareholders (see Dispatch <a href="https://www.brettonwoodsproject.org/2023/10/marrakech-annual-meetings-wrap-up-2023-bretton-woods-institutions-wilt-in-the-desert-as-pragmatism-fails-to-resolve-urgent-crises/">Annuals 2023;</a> Observer <a href="https://www.brettonwoodsproject.org/2023/07/civil-society-calls-for-world-bank-to-reroute-evolution-roadmap-away-from-cascade/">Summer 2023</a>).
Meanwhile, the IMF’s 16th review of quotas, which concluded in December 2023, <a href="https://www.brettonwoodsproject.org/2024/03/civil-society-calls-for-an-end-to-the-gentlemans-agreement-and-a-merit-based-open-and-transparent-md-selection-process/">failed</a> to deliver on the long-delayed redistribution of IMF quotas needed to reflect the increased importance of emerging market countries in driving global growth. In the end, it agreed an equi-proportional increase that further entrenches the IMF’s flawed quota formula, where the US retains a de facto veto over key governance decisions (see Inside the Institutions, <a href="https://www.brettonwoodsproject.org/2020/04/imf-and-world-bank-decision-making-and-governance-2/">IMF and World Bank decision making and governance</a>). This raises the stakes for the 17th review, which shareholders have committed to complete by mid-2025.
This lack of progress has taken place even as multiple crises, including increased conflict, climate change, a growing Global South debt crisis, political instability and geopolitical fragmentation, threaten to further erode trust in multilateralism. In this context, the BWIs seem to have few answers other than to keep trying to entice private capital into development and climate finance efforts – a strategy that has had limited success since the launch of the Bank’s Cascade approach in 2017 (Observer <a href="https://www.brettonwoodsproject.org/2017/07/development-rescue-finance-banks-cascade-approach/">Summer 2017</a>).
With EU countries signalling support for a second term for IMF Managing Director Kristalina Georgieva, whose current term ends in September (see Observer <a href="http://tinyurl.com/MDCampaign2024">Spring 2024</a>), the long-standing “gentleman’s agreement” – which has seen every head of the IMF be a European and every World Bank President be a US citizen since the BWIs’ inception – looks set to continue (see Inside the Institutions, <a href="https://www.brettonwoodsproject.org/2019/07/what-is-the-gentlemans-agreement/">What is the ‘gentleman’s agreement’?</a>).
The failure of recent reform efforts to address longstanding governance failings was not lost on the Group of 77 developing countries, which noted in the <a href="https://www.g77.org/doc/3southsummit_outcome.htm#:~:text=We%2C%20the%20Heads%20of%20State,to%20continue%20to%20act%20in">outcome document</a> of the Third South Summit, held in Kampala, Uganda, in late January: “We note with great concern that the international financial architecture has not kept pace with a changing global landscape and has failed to deliver the financing or stability needed to achieve the Sustainable Development Goals, and call for urgent reform of the international financial architecture,…and to broaden and strengthen the voice, participation, and representation of developing countries in international economic decision-making.”
<h2>Whither a ‘better’ Bank?</h2>
The World Bank is likely to command much of the limelight at the Spring Meetings. Having officially assumed his post in June 2023, this is Ajay Banga’s first Spring Meetings as Bank President. With Banga’s vision for a “bigger and better Bank” unveiled at the 2023 Annual Meetings in Morocco last October (see Dispatch <a href="https://www.brettonwoodsproject.org/2023/10/marrakech-annual-meetings-wrap-up-2023-bretton-woods-institutions-wilt-in-the-desert-as-pragmatism-fails-to-resolve-urgent-crises/">Annuals 2023</a>), this Spring Meetings feels critical for decision making. Despite the slimmed down agenda – the rationale for which remains unexplained – discussions of significant importance to States and populations of the Global South will take place, including on a substantial 21st replenishment for the International Development Association (IDA21), the Bank’s low-income country arm, operationalising the Evolution Roadmap, and outlining what is really meant by bigger and better Bank.
Developments in recent months have brought fresh concerns for civil society about the current direction of travel. Financing for struggling countries is urgently needed, and so the IDA21 policy package, which will be discussed in DC and fully developed over the summer, will be watched eagerly. IDA is arguably the most critical opportunity for the Bank to put financing behind its thematic strategies, as noted by the Bank itself in a November 2023 mid-term <a href="https://www.worldbank.org/en/publication/ida20-mid-term-review">review</a> of IDA20, which asserted that “policy commitments are effective in continuing to mainstream key priorities.” However, this replenishment has been framed as “SimplifIDA” by Banga himself: An opportunity to remove what he deems unnecessary <a href="https://www.cgdev.org/event/fireside-chat-world-bank-president-ajay-banga">rules and processes</a> to create – in theory – a more effective and efficient Bank, in addition to his hopes for it to be the largest replenishment “of all time” (see Observer <a href="http://tinyurl.com/IDA21Replenishment">Spring 2024</a>). Despite this optimistic call to action, many donor countries have already signalled cuts to overseas development assistance, putting this goal in jeopardy.
SimplifIDA is indicative of how, in practice, hard-won gains on critical thematic areas, including gender and disability inclusion, already seem to be disappearing into a muddle of rejigged buzzwords like ‘lenses’ and ‘pillars’, which risk watering down the response to critical issues. The deprioritisation of issues from ‘special themes’ to ‘lenses’ with few or no policy commitments could directly result in reduced funding for such issues in the Bank’s poorest borrowing countries, and less attention on thematic strategies. Following more than a yearlong consultation process and extensive engagement with civil society, the Bank’s much awaited <a href="https://documents1.worldbank.org/curated/en/099013107142345483/pdf/SECBOS04cf7b650208a5e08b784c0db6a4.pdf">2024-30 Gender Strategy</a> is slowing before it crosses the line for official release. While civil society await details of implementation plans, the potential loss of gender as an IDA21 ‘special theme’ could signify the start of a worrying side-effect of Banga’s simplifying exercise, whereby strategies collect dust rather than encouraging concrete WBG commitments.
The roll-out of the World Bank’s Evolution Roadmap is also due to begin at the Spring Meetings, which has also failed to meet reform expectations (see Observer <a href="http://tinyurl.com/BiggervsBetter">Spring 2024</a>). Thus far, the Bank’s ‘private finance-first’ approach to development has been front and centre of the Roadmap, in addition to balance sheet optimisation. Indeed, new research from the Bretton Woods Project shows that this is a continuation of the Bank’s existing approach, including comprehensive ‘green conditionality’ in the energy sectors of many countries between 2018-2023, to promote a private-led energy transition, which could deepen profit extraction from the Global South to North, while passing costs on to consumers (see Report, <a href="https://www.brettonwoodsproject.org/2024/04/gambling-with-the-planets-future-world-bank-development-policy-finance-green-conditionality-and-the-push-for-a-private-led-energy-transition/">Gambling with the planet’s future?</a>).
In civil society spaces, including <a href="https://thedocs.worldbank.org/en/doc/e447d6d16dc28a2cc7a4617d7023e9b1-0360012024/original/CSPF-Schedule.pdf">Civil Society Policy Forum</a> (CSPF) panels, the Bank is likely to face questions over several problematic issues. The key arguments of a forthcoming book by economist Matthew Greenslade, Beyond the World Bank: The Fight for Universal Social Protection in the Global South, will be presented, as part of the wider fight to see the World Bank meet its <a href="https://www.worldbank.org/en/topic/socialprotectionandjobs/publication/charting-a-course-towards-universal-social-protection-resilience-equity-and-opportunity-for-all">commitment</a> to support universal social protection, and move away from <a href="https://www.developmentpathways.co.uk/publications/hit-and-miss-an-assessment-of-targeting-effectiveness-in-social-protection/">controversial</a> targeted and means-tested forms of social protection (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/beyond-the-world-bank-the-fight-for-universal-social-protection-in-the-global-south/">Spring 2024</a>). This is part of a wider movement across civil society to see the Bank invert its private sector bias and instead support public services and uphold human rights across its operations (see Observer <a href="https://www.brettonwoodsproject.org/2023/07/civil-society-calls-for-world-bank-to-reroute-evolution-roadmap-away-from-cascade/">Summer 2023</a>). On Friday, 19 April, a wide constituency of civil society organisations will join protests outside the venue, calling into question the BWIs’ approach amidst multiple ongoing crises.
Speaking of human rights, the International Finance Corporation (IFC), the World Bank’s private finance arm, will surely expect more heat from civil society during the meetings, amidst yet more scandal relating to the Bridge International Academies case, Oxfam’s revealing 2023 Sick Development <a href="https://policy-practice.oxfam.org/resources/sick-development-how-rich-country-government-and-world-bank-funding-to-for-prof-621529/">report</a>, and recent evidence of human rights abuses within IFC-funded private hospitals in India (see Observer <a href="http://tinyurl.com/IFCApolloHospitals">Spring 2024</a>).
<h2>Georgieva evokes ghost of Keynes, but Fund has long-since departed from his vision</h2>
In a <a href="https://www.imf.org/en/News/Articles/2024/03/08/sp031424-kings-college-cambridge-kristalina-georgieva">speech</a> at King’s College, Cambridge, on 12 March, Georgieva was invited to reflect on the John Maynard Keynes essay, Economic Possibilities for Our Grandchildren. Georgieva pointed out that Keynes, a noted King’s alumnus and often-lauded UK representative at the Bretton Woods Conference, had successfully predicted an eight-fold increase in living standards, driven by capital accumulation, but had been overly optimistic about the benefits of global growth being shared equitably. Georgieva argued that in order to avoid the onset of a new ‘Age of Anger’ amid rising global challenges, a new multilateralism was needed, which was more representative, and more results oriented. She noted, “In a world of abundant capital accumulation and accelerating technological change, prospects for my grandchildren will hinge on whether we can allocate capital to where it is needed most and will make the biggest positive impact.”
Yet, Georgieva’s speech was strangely blind to the power dynamics that underlie such capital allocation – and indeed that are behind the IMF’s stalled quota review redistribution and the continuation of the “gentleman’s agreement”, which will ensure her likely re-appointment. Revered economist Angus Deaton noted in a reflective March <a href="https://www.imf.org/en/Publications/fandd/issues/2024/03/Symposium-Rethinking-Economics-Angus-Deaton">piece</a> in the Fund-published Finance and Development that the tendency to overlook power dynamics is a malaise common in the economics discipline more broadly – and is among the issues that require urgent attention, as has also been underlined in the UN Secretary General’s New Agenda for Peace (see Observer <a href="https://www.brettonwoodsproject.org/2023/12/un-secretary-general-new-agenda-for-peace-calls-for-urgent-financial-architecture-and-policy-reform/">Winter 2023</a>).
Georgieva rather optimistically argued at King’s College that, “For African countries, the key is to attract long-term investors and ensure stable trade flows….This means promoting better growth: from improving the business environment, to raising more revenue, and weeding out inefficient spending.” However, this approach largely re-treads the policy paradigm the BWIs have promoted since the 1980s, which has notably failed to achieve economic transformation in LMICs.
Although Georgieva failed to mention it in her Cambridge speech, Keynes’s proposal for an International Clearing Union at the IMF that – as Jamie Martin noted in his 2022 <a href="https://www.hup.harvard.edu/books/9780674976542">book</a> The Meddlers – “would automatically provide credits to deficit countries to keep their balance of payments in equilibrium”, was ultimately rejected. Instead, Martin pointed out that US- and Wall Street-backed arguments for “inquisitorial powers” at the IMF won the day at the Bretton Woods Conference, making access to financing conditional rather than automatic, and setting the stage for the paternalistic influence of the Fund in countries’ domestic affairs over the following eight decades. As has been well-documented by civil society, the IMF continues to promote austerity in many countries (see Observer <a href="https://www.brettonwoodsproject.org/2023/12/world-bank-and-imf-promoting-private-finance-and-fiscal-consolidation-despite-mounting-evidence-of-harmful-impacts/">Winter 2023</a>) – contradicting the key tenant of <a href="https://www.imf.org/external/pubs/ft/fandd/2014/09/basics.htm">Keynesian economics</a>: That in times of economic downturn, the state must step up its spending in order to increase aggregate demand.
<h2>Bypassing the BWIs: Alternate fora for reform</h2>
The lack of meaningful reform being offered by either of the Bretton Woods Institutions seems stark in comparison to ongoing conversations in other spaces. The historic Framework Convention on International Tax Cooperation was passed through the UN General Assembly in November 2023 (see Observer <a href="https://www.brettonwoodsproject.org/2023/12/civil-society-urges-governments-to-agree-on-a-un-tax-body-as-a-high-priority-matter/">Winter 2023</a>), and is now in negotiation following years of advocacy and input from civil society, which many <a href="https://www.eurodad.org/un_reaches_global_consensus_on_the_road_ahead_towards_a_tax_convention">hope</a> could be a step towards filling fiscal gaps left by international tax dodging and unequal systems (see Observer <a href="https://www.brettonwoodsproject.org/2023/04/against-regressive-taxes-and-austerity-imf-and-world-bank-must-pivot-tax-policies-to-support-a-just-and-green-transition/">Spring 2023</a>). The monumentally significant UN Tax Convention highlights how plausible resource mobilisation from sources other than private financers could be.
The upcoming UN Summit for the Future, happening in September, potentially opens a door for urgent reform initiatives. <a href="https://www.un.org/en/summit-of-the-future">Hailed</a> as an “opportunity to enhance cooperation on critical challenges and address gaps in global governance, reaffirm existing commitments including to the Sustainable Development Goals (SDGs)”, it’s yet to be determined how tangible outputs from the upcoming session will be for transformative measures. Elsewhere, Brazil’s 2024 G20 presidency offers space for reform of multilateralism amidst ongoing conflict and crisis, with Brazil <a href="https://www.theguardian.com/world/2024/feb/22/brazil-urges-united-nations-reform-g20">noting</a> its intention to put UN and wider international financial architecture reform on the agenda this year. Such processes will put pressure on the BWIs to put their money where their mouth is on structural reform.
The post <a href="https://www.brettonwoodsproject.org/2024/04/spring-meetings-2024-preamble-bretton-woods-institutions-continue-to-sleepwalk-through-crises-as-80th-anniversary-of-bretton-woods-conference-approaches/">Spring Meetings 2024 Preamble: Bretton Woods Institutions continue to sleepwalk through crises as 80th anniversary of Bretton Woods Conference approaches</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<title>Undemocratic gentleman’s agreement will further challenge next IMF managing director</title>
<link>https://www.brettonwoodsproject.org/2024/04/undemocratic-gentlemans-agreement-will-further-challenge-next-imf-managing-director/</link>
<dc:creator><![CDATA[Mihaela Siritanu]]></dc:creator>
<pubDate>Tue, 09 Apr 2024 20:50:44 +0000</pubDate>
<guid isPermaLink="false">https://www.brettonwoodsproject.org/?p=49470</guid>
<description><![CDATA[EU countries’ backing of Kristalina Georgieva for a second term as IMF Managing Director will likely set in motion the next steps towards her reappointment, representing another lost opportunity to reform IMF governance.
The post <a href="https://www.brettonwoodsproject.org/2024/04/undemocratic-gentlemans-agreement-will-further-challenge-next-imf-managing-director/">Undemocratic gentleman’s agreement will further challenge next IMF managing director</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<content:encoded><![CDATA[In September, the term of the current IMF Managing Director (MD) Kristalina Georgieva will expire. On March 14th, the IMF board launched the formal process for appointing a new MD, with nominations open for three weeks and closing in early April, ahead of the IMF and World Bank Spring Meetings. While French Finance Minister Bruno Le Maire and Ireland’s Paschal Donohoe, who leads the Eurogroup of eurozone finance ministers, were both rumoured to have considered a run, no formal candidacies have been put forward so far.
The race seems pretty much tied up as European Union finance ministers already <a href="https://www.politico.eu/article/eu-backs-kristalina-georgieva-for-second-imf-term/">endorsed</a> Kristalina Georgieva for a second term in early March. Civil society organisations <a href="https://imfboss.com/2024/03/12/for-immediate-release-civil-society-condemns-the-continuation-of-the-undemocratic-gentlemans-agreement-as-european-countries-back-kristalina-georgieva-for-another-term-at-the-helm-of-the-imf/">rejected</a> this move, which proves yet again that the “gentleman’s agreement”, an unwritten agreement that has ensured for 80 years that the IMF managing director has been a European and the World Bank president a US national, is alive and well (see Inside the Institutions,<a href="https://www.brettonwoodsproject.org/2019/07/what-is-the-gentlemans-agreement/#:~:text=The%20so%2Dcalled%20gentleman%27s%20agreement,president%20is%20a%20US%20national."> What is the ‘gentleman’s agreement’?</a>). This means, in practice, that no other candidates – particularly from the Global South – are likely to emerge, as Georgieva seems on track to get backing of majority shareholders of the IMF, meaning the doors are already shut before the process even begins (see Inside the Institutions, <a href="https://www.brettonwoodsproject.org/2020/04/imf-and-world-bank-decision-making-and-governance-2/">IMF and World Bank decision-making and governance</a>).
Global civil society and countries from the Global South have long <a href="https://www.opendemocracy.net/en/oureconomy/its-time-to-end-the-gentlemans-agreement-an-open-letter-to-the-imf/">called</a> for an end to this illegitimate, neo-colonial agreement and for a more democratic appointment process. This should ensure the selection of the next managing director is undertaken in accordance with a merit-based, open and transparent process, underpinned by criteria involving a demonstrated commitment to international human rights, feminist principles, green and equitable development, as well as candidate engagement with civil society to outline IMF priorities and publicly available shareholder votes.
<h2>Lack of governance reform will result in increased pressure for the IMF</h2>
Assuming she is re-appointed, Georgieva’s next term will likely be even more difficult than her first. Her first term was marked by numerous crises, from the unequal Covid-19 pandemic recovery and the economic and social spillovers from conflicts in Ukraine and Palestine, to the dramatic increase in capital costs and worsening debt crisis for low- and middle-income countries. These crises further exacerbated existing global challenges such as climate change, rising inequality, and the related increase in social and political instability as well as fragmentation of the multilateral order (see Observer <a href="https://www.brettonwoodsproject.org/2022/07/a-new-bretton-woods-for-whom-civil-society-calls-for-democratisation-of-global-governance/">Summer 2022</a>).
Her efforts to tackle these overlapping systemic crises – including a historic Special Drawing Rights (SDRs) allocation in 2021, the launch of a new Resilience and Sustainability Facility (RST; see Observer<a href="https://www.brettonwoodsproject.org/2022/04/new-imf-resilience-and-sustainability-trust-rst-how-to-make-it-work-for-the-global-south/"> Spring 2022</a>), and securing critical financial support for countries like Ukraine and Argentina – were seen as key achievements. However, the Fund continues to be dictated to a large extent by geopolitical factors related to its unequal governance, with the MD often left to walk a fine line trying to manage increasingly contested shareholder interests. The allocation of SDRs (see Briefing, <a href="https://www.brettonwoodsproject.org/2023/10/reconceptualising-special-drawing-rights-as-a-tool-for-development-finance/">Reconceptualising Special Drawing Rights as a tool for development finance</a>) was determined by US domestic politics rather than global needs and, due to the IMF’s anachronistic quota system, was unequally <a href="https://repositorio.cepal.org/bitstream/handle/11362/47856/1/S2200199_en.pdf">distributed</a> based on the relative size of countries’ IMF shareholding. Similarly, while the RST provides concessional finance, in order to acces it, countries must have other loan programmes with the IMF and accept austerity policies (see Observer <a href="https://www.brettonwoodsproject.org/2022/12/unbalanced-financial-stimulus-followed-by-fiscal-austerity-when-will-the-imf-learn-from-its-mistakes/">Winter 2022</a>), combined with questionable <a href="https://imfboss.com/2024/03/19/the-policy-trilemma-in-store-for-the-next-imf-managing-director/">green conditionality</a> from the RST itself, limiting their fiscal and policy space to address their vulnerability to climate change in the first place (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/civil-society-raises-concerns-about-resilience-and-sustainability-trusts-green-conditionality-as-fund-conducts-interim-review/">Spring 2024</a>).
Amid these difficult economic conditions, and a particularly volatile global peace and security landscape, Georgieva as leader of the Fund will face increased pressure from states in the Global South to reform the global economic architecture to tackle a world mired in systemic crises. In the <a href="https://dppa.un.org/en/a-new-agenda-for-peace#:~:text=On%2020%20July%202023%2C%20Secretary,for%20a%20world%20in%20transition.">New Agenda for Peace</a>, the UN Secretary General expressed concerns about the security implications of a fragmented geopolitical landscape. The internalisation of geopolitics in the international financial system through the continuation of the ‘gentleman’s agreement’ creates further tensions in the multilateral system. A product of this unspoken agreement, Georgieva will continue to be perceived as the instrument of western control of the Fund, particularly as the IMF has a <a href="https://www.bu.edu/gdp/files/2020/11/IMF-Austerity-Since-the-Global-Financial-Crisis-WP.pdf">history</a> of applying different rules for countries friendly with western governments. More recently this was seen when shareholders supported a change in the Exceptional Access Policy to allow more funding to Ukraine, while <a href="https://theintercept.com/2023/09/17/pakistan-ukraine-arms-imf/">conditioning</a> Pakistan’s most recent IMF bailout on an arms deal with Ukraine. Regardless of her expertise and efforts, Georgieva’s new mandate does not represent the change needed but rather more of the status quo, affecting her ability to be an effective leader in tackling existing crises, thus contributing precisely to the dynamics outlined in the UN’s Agenda for Peace.
A new civil society <a href="https://imfboss.com/2024/03/27/csos-call-for-an-end-to-the-the-gentlemans-agreement-and-a-merit-based-open-and-transparent-selection-process-for-the-next-imf-managing-director/">letter</a> sent to the IMF board on 26 March called on the next IMF managing director to prioritise policies and systems that are gender transformative, equitable, environmentally sustainable, and consistent with international human rights norms. The letter notes the MD’s objectives for the next mandate should include: A new SDR allocation to help meet urgent financing needs for developing countries in ways that do not create additional debt burdens and undue policy conditionality; promotion of progressive taxation; support for sustainable debt resolution instead of austerity conditionality; reform of the IMF’s quota formula to accurately reflect the changes in the global economy; and commitment to establish a human rights policy with ex ante and ex post impact assessment of all IMF’s policies and programmes.
The post <a href="https://www.brettonwoodsproject.org/2024/04/undemocratic-gentlemans-agreement-will-further-challenge-next-imf-managing-director/">Undemocratic gentleman’s agreement will further challenge next IMF managing director</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<title>Better ways to reduce the pain of debt crises for developing countries?</title>
<link>https://www.brettonwoodsproject.org/2024/04/better-ways-to-reduce-the-pain-of-debt-crises-for-developing-countries/</link>
<dc:creator><![CDATA[Luiz Vieira]]></dc:creator>
<pubDate>Tue, 09 Apr 2024 20:47:18 +0000</pubDate>
<guid isPermaLink="false">https://www.brettonwoodsproject.org/?p=49630</guid>
<description><![CDATA[Amid challenging global conditions, proposals to address liquidity issues must be urgently matched by a reformed, development-focused international financial architecture.
The post <a href="https://www.brettonwoodsproject.org/2024/04/better-ways-to-reduce-the-pain-of-debt-crises-for-developing-countries/">Better ways to reduce the pain of debt crises for developing countries?</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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<content:encoded><![CDATA[High interest rates and reduced access to global capital markets have made it harder for many developing countries to service and roll over significant portions of their maturing external debt, limiting their ability to make necessary investments to advance the Sustainable Development Goals (SDGs) and address climate change (see Observer <a href="https://www.brettonwoodsproject.org/2023/12/new-data-show-global-south-is-in-worst-debt-crisis-ever-with-another-lost-decade-looming/">Winter 2023</a>, <a href="https://www.brettonwoodsproject.org/2023/10/debt-sustainability-assessment-reform-essential-to-address-retrogression-of-international-human-rights-and-crisis-of-development/">Autumn 2023</a>). With a debt servicing crunch facing developing countries between now and 2026, there is a need for urgent intervention.
A recent <a href="https://findevlab.org/wp-content/uploads/2024/01/FDL_A_Bridge_to_Climate_Action_final.pdf">study</a> by the Finance for Development Lab (FDL) suggests that many of these countries face an illiquidity rather than an insolvency problem and advocates a response that incorporates preemptive debt reprofiling combined with scaled up international investment support to begin funding the green transition. But beyond the liquidity problem we also need to face a long-overdue, and more fundamental, reform of the international financial architecture and sovereign debt system.
The low global growth environment, higher debt costs and geopolitical conflicts already undermine developing countries’ efforts to advance their development agendas and begin to take on the climate challenge. However, in our search for things that can be done now, we must ensure that even partial solutions are consistent with our longer-term vision of a reformed, development-focused international financial system (see Observer <a href="https://www.brettonwoodsproject.org/2023/04/the-global-financial-architecture-and-the-international-debt-crisis-an-urgent-call-for-reform/">Spring 2023</a>).
When it comes to sovereign debt, the dividing line between illiquidity and insolvency depends largely on the “pain” that a country is willing to endure to avoid default (see Observer <a href="https://www.brettonwoodsproject.org/2023/12/new-book-addresses-shortcomings-of-traditional-approaches-to-debt-and-economics/">Winter 2023</a>). And since the costs of default under the current international financial architecture are high, so are the “pain thresholds”. Faced with complex, protracted, and ineffective debt workout processes (see Observer <a href="https://www.brettonwoodsproject.org/2021/12/debt-crisis-what-next-as-imf-and-g20-initiatives-set-to-expire/">Winter 2021</a>, <a href="https://www.brettonwoodsproject.org/2020/12/g20-debt-proposal-continues-to-favour-creditors/">Winter 2020</a>), countries are, instead, making the impossible choice to privilege debt servicing over investments in the SDGs. The FDL’s proposal to link liquidity relief with an International Monetary Fund (IMF) programme may not solve the problem given the time taken to negotiate and implement such arrangements (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/sri-lankas-continued-debt-crisis-highlights-urgent-need-for-wider-reform/">Spring 2024</a>). The proposal has two key questions to answer: Will it be enough? and, will it deliver relief in time? Unless these questions can be more definitively answered, the process might only serve to worsen the situation of citizens down the line.
Private credit providers’ share of developing country debt increased significantly between 2010 and 2021 – they doubled for low-income countries (LICs) to 13 per cent and are now the dominant source of funding for lower-middle income countries (LMICs) – see figure V.1 from the <a href="https://unctad.org/system/files/official-document/tdr2023_en.pdf">Trade and Development Report</a> 2023. By the end of 2023, they accounted for almost a quarter of the external exposure of the 36 <a href="https://www.imf.org/en/Topics/PRGT">Poverty Reduction and Growth Trust</a>-eligible countries currently listed by the IMF as highly indebted or in debt distress. This is only slightly less than the exposure of those countries to bilateral creditors and serves to emphasise that without private sector participation, any developing country debt workout process is doomed to be too little and ineffective. In an environment where debts are being serviced, there is little incentive for the private sector to take seriously attempts to reprofile the debt of the country participating in the debt restructuring. Even if the private sector is persuaded to join, as the G20 Common Framework has shown, lack of comparability of treatment for different types of lenders creates prolonged and unproductive negotiations between different creditor groups with high costs to the country concerned. Much more needs to be put in place to secure the rapid restructuring of debt to limit long-term damage to the borrower.
Another way the sovereign liquidity problems of the kind identified by FDL could be addressed would be with a better-functioning global financial safety net. There are several improvements that could be made to the existing system, including the effective rechanneling of (more) unused Special Drawing Rights (see Briefing, <a href="https://www.brettonwoodsproject.org/2023/10/reconceptualising-special-drawing-rights-as-a-tool-for-development-finance/">Reconceptualising Special Drawing Rights as a tool for development finance</a>); revised IMF quota limits that replace the existing skewed and outdated ones and help to recapitalize the IMF (see Observer <a href="https://www.brettonwoodsproject.org/2022/12/imf-quota-review-putting-climate-at-the-core-of-imf-governance/">Winter 2022</a>); the abolition of tiered interest rates on the IMF’s Resilience and Sustainability Trust (RST) to support climate-related projects (see Observer <a href="https://www.brettonwoodsproject.org/2024/04/civil-society-raises-concerns-about-resilience-and-sustainability-trusts-green-conditionality-as-fund-conducts-interim-review/">Spring 2024</a>), and the elimination of IMF <a href="https://link.springer.com/content/pdf/10.1057/s41301-022-00340-5.pdf">surcharges</a>. The latter are a penalty charge that are expected to impose costs of $2.1 billion on 17 developing countries in 2024 alone (see Observer <a href="https://www.brettonwoodsproject.org/2022/10/quota-reform-needed-at-imf-in-order-to-address-21st-century-challenges/">Autumn 2022</a>, <a href="https://link.springer.com/content/pdf/10.1057/s41301-022-00340-5.pdf">Spring 2022</a>).
These improvements could be adopted relatively quickly and with limited cost. Additionally, the IMF and World Bank should lead the way to the universal adoption of contingency clauses in new debt agreements that provide safeguards in the event of climate catastrophes, natural disasters, and other crises, increasing resilience of developing countries to external shocks. Then we will have made progress in adopting a more development-focused global financial system.
The post <a href="https://www.brettonwoodsproject.org/2024/04/better-ways-to-reduce-the-pain-of-debt-crises-for-developing-countries/">Better ways to reduce the pain of debt crises for developing countries?</a> appeared first on <a href="https://www.brettonwoodsproject.org">Bretton Woods Project</a>.
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