Annual Meetings round-up: As uncertainty reigns in the global economy, there are strong calls for a rethink of Fund and Bank policies


With the country still reeling from the devastation of the Sulawesi tsunami, Indonesia played host to the Annual Meetings of the International Monetary Fund (IMF) and World Bank Group (WBG), in Bali last week. The sobriety of the moment was reflected in gloomy forecasts from the IMF, which issued stark warnings of debt and trade risks to global growth. Meanwhile, controversy surrounded the World Bank’s new Human Capital Index; the 2019 World Development Report; and the ‘private finance first’ approach at the core of the Bank’s Maximising Finance for Development. CSOs and academics raised their voices to shine a light on the risks that the policies of the Bretton Woods Institutions (BWIs) posed to human rights and sustainable development across the Global South. Eurodad presented new research on the harmful impacts of Public-Private Partnerships and on IMF loan conditionality, and facilitated dialogue on better creditor coordination to solve debt crises.

A decade after the crash, risks to global growth abound

Ten years on from the global financial crisis, the BWIs are advocating vigilance. The Annual Meetings kicked off with warnings from the IMF’s latest Global Financial Stability Report of a growing list of risks to the global economy that threaten to jeopardise an already uneven growth outlook. These concerns were reflected in the communiques of the IMFC and DevelopmentCommittees – the ministerial-level bodies guiding the strategic direction of the BWIs. Both drew attention to rising debt levels across the world, and the instability spreading across low-income developing countries and so-called emerging markets – from Argentina to Turkey – as the financial consequences of rising interest rates and an end to quantitative easing in the Global North take hold. A big factor in the downbeat forecasts are the escalating trade tensions between the US and China, and the wider implications of ongoing geopolitical uncertainty.

 IMFC – champion of Low Income Countries?

It was left to the IMFC, however, to make an explicit link to the impact that this is having on countries to deliver on the SDGs, in a communique that closely echoed the Global Policy Agenda laid out by Christine Lagarde earlier this month. In signs that the Fund is becoming ever more cognisant of the challenges facing its poorer members, the IMFC made welcome references to states using capital controls and countercyclical measures, amongst other policy tools, to mitigate the risks ahead, and pointed to the opportunities arising from the ongoing review of IMF loan conditionality, and reform of how the Fund works with low-income, fragile and small states. The strategies emanating from the Bank, however, focus on creating markets for private sector investments which can create even more problems if not done properly.

Piecemeal steps towards governance reform

The IMFC also committed to revision of the IMF’s quota formula in the upcoming 15th general review, noting that the changes are expected to increase the share of ‘emerging markets and developing countries as a whole’. This leaves open the question of how far the voices of the poorest economies will be boosted in the institution’s decision-making. CSOs and other critical voices have long highlighted the structural imbalance in BWIs governance, calling for fundamental reform to move towards double-majority voting in specific proposals. They have also set out what a model public development bank should look like. The 15th IMF quota review remains an opportunity to be seized, as the G24 - – the group of major developing countries and emerging economies – highlighted last week.

 The proof of the pudding will be in the eating

Indeed, it remains to be seen how much of the IMFC’s welcome rhetoric will translate into Fund policy. Although the Committee noted the need for countries to assist effectively ‘those bearing the cost of [structural] adjustment’, the communique makes no specific suggestions for reform of the Fund’s approach to lending, at a moment when the political and social costs of IMF programmes are squarely back in the spotlight. Forthcoming Eurodad research reveals that fiscal contraction remains central to IMF loan conditionality, with the majority of programmes agreed in 2016 and 2017 centred around this. At a panel discussion convened by Eurodad, the Bretton Woods Project and other CSO partners, the IMF was called upon to use the ongoing conditionality review to rethink fundamentally its current lending practices, in view of the need to respect democratic ownership and borrowing country sovereignty, and avoid adverse impacts of fiscal adjustment on human rights and development priorities.

Detailed actions on how to deal effectively with growing debt risks were also missing from the IMFC communique. It rightly acknowledged the co-responsibility of (public and private) creditors and debtors for rising debt vulnerabilities, but did not elaborate on how commitments to promote better debt data transparency, responsible lending and borrowing, and improved creditor coordination in restructuring, would be realised. In a discussion co-sponsored by Eurodad on this latter issue, IMF, Institute for International Finance, and Paris Club representatives agreed on the evolving complexity of challenges facing future sovereign debt restructurings: nevertheless, the institutional appetite to discuss genuine reform of the global financial architecture to match this complexity – such as the introduction of a sovereign debt resolution framework – remains almost non-existent.

A bigger Bank to do what? Strong calls for a rethink

The communiqué of the Development Committee acknowledged ongoing work to implement the agreement reached during the Spring Meetings to have an increase in the lending capacity of two arms of the Bank: the International Bank for Reconstruction and Development (IBRD), which lends to middle-income countries, and the International Finance Corporation (IFC) which lends to private sector. Although ‘a bigger Bank’ has been strongly welcomed by many inside the Bank, there are still no signs that the right framework is in place to ensure that the policies of the institution will deliver results in the public interest.

As Eurodad highlighted in April, the implementation of the new Maximising Finance for Development (MFD) strategy, which gives priority to private finance over public finance, is at the core of the World Bank’s agenda over the coming years. In Bali, the strategy again generated intense debate, including at a session in which CSOs raised their concerns. In a letter published last week, 90 academics also criticised MFD and moves to attract institutional investors (including through securitisation) for promoting shadow banking and creating risks to global financial stability. 

The issue of infrastructure financing also merited CSO discussion. During a panel, Eurodad challenged the G20’s plan to develop infrastructure as an asset class, and called for an increased focus on the quality and public financing of infrastructure. Our view was complemented by a forthcoming report co-sponsored by the Heinrich Boell Foundation and the Office of the UN High Commissioner for Human Rights focused on ‘the other infrastructure gap.’ The report will highlight the potential gains from integrating human rights and environmental dimensions of sustainability within mega-infrastructure plans and projects. Although the G20’s work on infrastructure did not hit the headlines this time, behind closed doors G20 Finance Ministers discussed how to move forward with this controversial proposal.

Eurodad and partners launched another wake-up call on the negative impacts that financing development projects through public private partnerships (PPPs) have had on the public purse and on citizens. The report, History RePPPeated, launched in Bali – together with a video compiling the voices of CSO representatives from around the world – includes 10 ‘failed’ PPP projects covering different sectors in countries from the Global North and South. During the launch of the report, Gerd Schwartz, Deputy Director of the IMF’s Fiscal Affairs Department, welcomed the publication and called for increased transparency and responsible decision making to finance development projects. Francophone African Finance Ministers seconded the critique and also called for less risky and more transparent ways to finance development projects.

The Human Capital Index and the World Development Report 2019

Two additional key points dominated World Bank discussions in Bali: the launches of the Human Capital Index (HCI), and the World Development Report (WDR) 2019: The Changing Nature of Work, both welcomed by the Development Committee. While the increased focus given to health and education in the HCI is highly welcome, and extremely necessary to meet the Sustainable Development Goals (SDGs), the index seems to be another controversial way of ranking countries – which adds to concerns raised several times about the Bank’s Doing Business Report. The HCI prompted reactions from countries less than satisfied with their position in the ranking – such as India – and questions about the methodology used, including from the G24, who expressed “caution on the inappropriate use of the Index to rank countries’ performance.” The Development Committee mentioned “the potential for further methodological refinements” in the WDR. For the head of Education International, the index is a “new ‘Washington Nonsensus’ initiative, that potentially undermines… efforts to achieve quality education for all.”

The 2019 edition of the WDR, meanwhile, was slammed by CSOs and other observers. According to ITUC, the report promotes deregulation; places the burden of social protection on individuals; and ignores the impact of technology on inequality. This, when even the Fund now accepts that “automation is good for growth and bad for equality”. CSOs called on the Bank to focus on reducing inequality, supporting just transitions for workforces dislocated by climate and technology, and strengthening the protection of workers.

Ten years on from the financial crisis, it’s time to commit to reform

The legacy of the 2008 financial crisis underpinned this year’s Annual Meetings, with the BWIs demonstrating sensitivity to the potential human consequences of another global economic downturn. But enumerating the challenges does not equate to solving them: the Fund and the Bank need to do more to recognise the contribution that their policies are making to exacerbating crises and holding back development, and commit to reform. Until then, their warnings may ring hollow.


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