An historic opportunity missed: In the midst of a development crisis gripping most of the world, the IMF and World Bank fail to provide a response
Following the Annual Meetings of the World Bank 2023, we published our reaction.
The IMF and World Bank closed this week's historic Annual Meetings in Marrakech - the first in Africa for 50 years - without delivering a response that matches the urgency of the moment.
Firstly, while acknowledging the increasing challenges of the debt situation, the institutions still failed to recognise that we are in the worst global south debt crisis ever. Their rhetoric on the impact of severe debt burdens was not matched by action to speed up their sluggish response so far. Beyond baby steps by the Global Sovereign Debt Roundtable to agree on basic elements of debt restructurings, neither the IMF and World Bank, nor the G20 Finance Ministers, took any steps to respond to the calls by civil society and global south leaders, to deliver on debt cancellation and debt architecture reform.
Secondly, the mission expansion that World Bank President Ajay Banga announced is not likely to deliver climate justice outcomes since the modus operandi of the Bank: relying on private finance and more debt creation, has not changed. Obstinately holding onto finance arrangements that have contributed to the current development crisis is a recipe for disaster.
What we heard throughout this week was a quick dismissal of proven solutions like debt cancellation and an injection of public resources. Instead we again saw the promotion of tried and failed recipes: mainly the push to leverage private finance, with risk transferred to the public purse, coupled with more austerity.
— Jean Saldanha, Director of the European Network on Debt and Development (Eurodad)
Meanwhile, wealthy countries are blocking meaningful reforms at the World Bank and the IMF. An additional seat for Africa in the IMF without a real increase in their voting power will not address their lack of voice in the Fund’s governance and decision-making. The global north is also making sure that World Bank reform will not lead to a change in its failed market-based development model.
Saldanha said: “This week we kept hearing about a ‘better’ and ‘faster’ bank. Yet, despite the rhetoric, as it stands, the Evolution Roadmap is a huge disappointment. Instead of delivering the root and branch reform that the Bank requires, it yet again centres the Bank as a facilitator of the mobilisation of private capital. This same approach failed to provide the “trillions” in development finance promised many years ago, and instead risks deepening existing structural inequalities that helped to cause the crises that the World Bank now seeks to address.”
Saldanha added: “Climate action has also been at the centre of the discussions this week. However, by prioritising lending instruments and market-based solutions for climate action, the IMF and World Bank fail to acknowledge the responsibility of the global north to tackle climate change and fulfill their climate finance commitments to the global south. In their statement, the G24 highlighted that IFI action must follow the principle of common but differentiated responsibilities and respective capabilities. For justice to prevail the institutions need to deliver genuine climate justice. There is really no time to waste.”
Media contact: Julia Ravenscroft, Communications Manager at the European Network on Debt and Development (Eurodad): [email protected]/ +44 7958 184 695.
Notes to editors:
* This week, Development Finance International released a briefing which shows that debt service numbers are higher than they have ever been. For 139 borrowers from the World Bank, service is above the levels which prompted the Heavily Indebted Poor Countries’ (HIPC) initiative and Latin American debt crises. It equals their total spending on education, health, social protection and climate adaptation combined. This briefing, jointly with AFRODAD, Debt Justice, Erlassjahr, Eurodad, LATINDADD and Norwegian Church Aid, shows that developing countries are in their worst debt crisis ever.