IMF-WB Annual Meetings: High expectations, poor outcomes
Eurodad’s Director Jean Saldanha reflects on the “business as usual” approach of the past week, the lack of urgency around Special Drawing Rights, and the total failure by G20 finance ministers to address deepening debt levels in the global south.
This week, the World Bank and IMF had the opportunity to take important steps to support countries in the global south as they deal with multiple crises. They could also have responded to the Doing Business Report scandal by undertaking immediate and structural reform. Unfortunately, the lack of action has been utterly unsatisfactory. What is worse, calls for countries to ‘calibrate their fiscal space’ and for ‘people-oriented fiscal consolidation’ threaten to unleash further austerity.
Eurodad’s Director Jean Saldanha reflects on the “business as usual” approach of the past week; the lack of urgency around Special Drawing Rights; and the total failure by G20 finance ministers to address deepening debt levels in the global south:
“The DBR scandal threw up important issues that should have been addressed this week. Instead they were reduced to a battle between two camps: those defending IMF Managing Director Kristalina Georgieva and those that wanted her to go. The role of World Bank’s current leadership went unaddressed, highlighting even further a serious problem of internal and external accountability.
“Equally concerning was the Bank’s ongoing assertion that it will continue with the ideological approach which was at the heart of the Doing Business Report problem: promoting private investment by forcing countries into a race to the bottom on issues like deregulation and taxation. This tells us that nothing has been learned from the scandal and things risk going back to business as usual. Instead the World Bank Group’s Green, Resilient and Inclusive Recovery initiative again demonstrates its intent to promote "private sector solutions”, through policy advice and conditionality. For Eurodad and our partner organisations - 130 of whom signed a statement at the beginning of this week calling for root and branch reform - this is totally unacceptable.
“On Special Drawing Rights, we welcome the fact that rich countries are exploring ways to channel their unused SDRs to countries that need them the most. However, we are not seeing the adequate level of urgency, creativity and ambition in this conversation. Country-specific commitments on rechanneling are still few and vague and some donors are signaling that they may count the SDRs they re-allocate as part of their Official Development Assistance and Climate finance commitments. This would not be acceptable.
“The use of the Poverty Reduction and Growth Trust (PRGT) as preferred modality of channeling means that SDRs will ultimately create more debt, often accompanied by austerity conditionality, while at the same time being inaccessible to middle-income countries in need.
The agreement to create a new Resilience and Sustainability Trust could support climate action and pandemic response by providing concessional finance. Or it could turn into yet another instrument to constrain the policy space of developing countries and lock them into multiple conditionalities. To avoid this, the IMF should open its design to direct consultation with countries in the global south and civil society and be guided by the six principles on SDR channeling laid out by 280 CSOs last week.
“The ongoing negotiations to replenish the International Development Association (IDA), the World Bank’s lending arm to the poorest countries, is also an opportunity to break with the past and play a truly progressive and transformative role in helping low-income countries rebuild their economies in the context of the Covid-19 recovery and the climate transition. To do so it must provide much needed concessional resources, and focus on investing in public services, away from the fixation on mobilising private sector investments.
“The way the current debt crisis was addressed by the G20 Finance Ministers’ and the IMFC’s communiques was nothing less than shameful. As the IMF MD warned of a two-speed recovery, and even the World Bank was warning that unsustainable debt burdens were undermining chances of recovery, the G20 and IMF Board appear to be washing their hands of any responsibility. The fact is that the G20 debt servicing suspension initiative (DSSI) has suspended less than a quarter of debt payments. Its common framework has not restructured any debt yet. It was clear from the start that the difficulties to bring private creditors into the initiative and the unwillingness to provide multilateral debt relief would water down the new framework and make it meaningless. Maintaining an almost blind faith that the Common Framework will be enough to tackle debt distress in an increasing number of countries in the global south is irresponsible to say the least.
“Debt payments will resume in January for the 46 countries that have taken part in the DSSI, and from 2023 onwards the suspended payments will add up to existing and new debts - a ticking bomb has been created. The absolute lack of action by the G20 and IMF to tackle the debt crisis, marks a stark contrast to the proposals made by leaders of the global south at the recent United Nations General Assembly. This included calls for immediate debt cancellation, improved mechanisms for debt restructuring as well as the creation of a debt workout mechanism. Only when debtors are given a seat at the table will we be able to overcome this crisis.”
Media contact: Julia Ravenscroft, Communications Manager, Eurodad: [email protected]/ +44 7858 184 695.