IMF and World Bank spring meetings: missing the big picture?

The IMF and World Bank spring meetings, which used to be a major forum for global economic decision making, end today with few concrete outcomes, the Bank under fire for its human rights and environmental record, and the IMF still unable to make any progress on reforming its creaking governance structure.

Finance ministers and central bankers from all over the world met in Washington DC this week for the IMF and World Bank spring meetings. The concerns caused by slowing growth in emerging market economies, collapsing commodity prices, and uncertainties over the future of monetary policies in the developed world were very real. Action to deal with them was not. Instead, all the IMFC – the ministerial committee that oversees the IMF - could promise was “vigilance” when dealing with “large shifts in exchange rates and asset prices, protracted below-target inflation in some economies, financial stability concerns, high public debt, and geopolitical tensions”.

The centrepiece of discussions for this year's meetings was supposed to be the critical upcoming United Nations summit on Financing for Development (FfD), slated for July in Addis Ababa. However, the background document prepared by the World Bank and five regional development banks did not tackle the breadth of structural issues that are on the FfD agenda. It reads more like a prospectus for increasing use of the banks that authored it.

Unsurprisingly, a great deal of emphasis is placed on their ability to “promote and catalyze private investment”, with a focus on infrastructure. The real meat of the FfD agenda – major structural changes to how the global economy is managed, including a new inter-governmental body on tax, proposed in the first draft of the FfD outcome document – are absent. Similarly the communiqué of the Development Committee of Ministers who oversee the World Bank’s work has little to say about economic architectural reform. Instead it is left to the G24 group of developing countries to remind the Bank and Fund that the UN has taken centre stage in these discussions, including through the “positive…creation of the UN Ad Hoc Committee on Sovereign Debt Restructuring Processes.” This UN effort, led by developing countries, to create a multilateral legal framework to rapidly and fairly resolve debt crises, could be the biggest change to global economic management for decades.

One reason the IFIs may be reluctant to tackle these issues is that their own governance structures are falling apart. The communiqué of the IMFC notes – with extraordinary understatement – that it is “deeply disappointed” that the relatively minor changes to IMF governance agreed in 2010 are still blocked by the US Congress’s failure to ratify them. As Eurodad has noted, the de facto veto the US has over governance reform at the IMF and World Bank could make any future progress impossible. Though the IMFC calls for “interim solutions” the deadline for the 15th review of voting shares at the IMF is the end of this year, which looks a forlorn hope, given that the 14th review remains unratified.

The Bank will start its own governance review this year, but it is already losing centre stage in development financing, as the recent launch of the Asian Infrastructure Investment Bank (AIIB) proved. Despite the US’s attempt to stop allies from joining the AIIB, it already has 57 member states supporting it. While the Western countries that have joined this China-led initiative have emphasised the need for strong social and environmental policies at the new institution, the World Bank’s own record on these issues was forced in the spotlight this week.

A year-long investigation by the International Consortium of Investigate Journalists (ICIJ) revealed that during the past 10 years World Bank projects have been responsible for the economic or physical displacement of 3.4 million people. In addition, World Bank President Jim Kim’s efforts to play a leadership role on climate change by calling for an end to fossil fuel subsidies were undercut by a report from Oil Change International, which showed that Bank support for fossil-fuel related projects increased by almost a quarter in 2014. The World Trade organisation’s definition of a subsidy is a “financial contribution by a government or any public body”, which would include the World Bank’s loans and loan guarantees.

These revelations underscore claims by a coalition of civil society organisations that the Bank’s ongoing review of its social and environmental safeguard policies may end up with a massive dilution of existing policies.