Earlier in October, the World Bank and International Monetary Fund (IMF) met for their Annual Meetings, a moment in which their leadership was tested. With the Doing Business Report scandal turning into the elephant in the room, the Annual Meetings provided important insights into how US politics and geopolitics have a greater impact on the Bretton Woods Institutions, than the debt and climate crises, interest rate increases and growing inequality. As a result, business as usual - notably the so-called Wall Street Consensus - prevailed over the need for genuine reform to address critical governance and ethical issues in the World Bank. While the debt crisis appears to have become yesterday's news, and the Group of 20 (G20) is not even trying anymore to provide any meaningful answers, the IMF is eager to raise its profile in the context of the recovery from the pandemic. The next months will certainly bring more clarity to what all this means for countries from the global south and the most vulnerable.

This is the first of a three-blog series dealing with the Doing Business Report scandal, allocation of rich countries unused Special Drawing Rights and the debt crisis.

The Doing Business scandal and beyond - the World Bank Group at a crossroad?

The week of the Annual Meetings started with the news that the IMF Board “reaffirmed its full confidence” in the IMF Managing Director, Kristalina Georgieva. This was after the scandal triggered by the publication of the report by the law firm WilmerHale into the data irregularities in DBR 2018 and 2020. The issue resulted in reports by the Financial Times that the IMF’s two largest shareholders – the US and Japan – wanted Georgieva out, while she retained the backing of major European countries, such as France, the United Kingdom,  and Germany, as well as China, Russia and Sub-Saharan African countries. While the Board absolved the institution’s leadership of all responsibility, the way in which the scandal was handled exposed the extent to which the Bretton Woods Institution is mired in geopolitical dynamics.

The scale and importance of addressing all the issues that the DBR threw up was undermined when it was reduced to a battle between two camps: those defending Georgieva and those that wanted her to go. In the bargain the role of World Bank’s current leadership went unaddressed. Essentially, the World Bank was very easily left off the hook which is a serious problem of internal and external accountability.

More concerning is the fact that there is no clarity of what is being done about the substantive issues of ethics and toxic culture, and the lack of a firewall between research and leadership that the report raised - some of them also mentioned in a report by an external review panel set up by the World Bank. The World Bank’s Ministerial-level steering group – the Development Committee – issued a communiqué that could not ignore the scandal. It states: “We also strongly support the WBG’s commitment to the highest levels of transparency and accountability in its operations and research. We expect the WBG to take additional steps to assure the integrity and credibility of data and knowledge products and to foster a culture of respect, inclusiveness, and non-discrimination” (emphasis added). However, no clear indication is provided on what steps the institution will take to do that. A boost in the WBG accountability certainly requires an active civil society engagement at all levels.

Equally concerning is the World Bank President’s assertion in a civil society townhall that the institution will continue with its (ideological) approach to private sector development. This was at the heart of the DBR problem: promoting private investment by forcing countries to a race to the bottom on deregulation and taxation. So essentially nothing has been learned from the scandal and things risk going back to business as usual.

This is also clear in how the WBG presents its Green, Resilient and Inclusive Development initiative, as it demonstrates its intent to promote "private sector solutions”, through policy advice and conditionality attached to its loans and grants. As Eurodad’s analysis indicated earlier this year, this initiative provides the WBG an opportunity to further embed its development vision - with private sector finance at the core - into developing countries. This is a concerning policy development that requires close monitoring, as also indicated last week by a group of more than a dozen independent United Nations human rights experts. As they argue, current financialisation trends risks having a serious negative impact on the enjoyment of human rights, including the rights to food, adequate housing, development and a healthy and sustainable environment, among others.

Eurodad and 130 partners from around the world issued a statement at the beginning of the Annual Meetings calling the DBR scandal “just the tip of the iceberg”. It calls for root and branch reform, which includes reform of their governance system that would get rid of the quota voting system that underrepresents the global south and overwhelmingly favours the global north, and dispose of the ‘gentleman’s agreement’ which currently governs the leadership selection process, despite its colonial flavour.

Moreover, and in line with calls in the joint statement, civil society should remain vigilant of any World Bank attempt to promote a “Doing Business 2.0”. Instead, the Bank should set out a path for rethinking what constitutes an ‘enabling business environment’ for firms that put people and planet before profit and are aligned with the Sustainable Development Goals.

Read part 2