Reaction: IMF/WB Spring Meetings 2023 - So-called ‘reforms’ create greater dependence on private finance and increase debt burdens
Amidst mounting concerns that the debt crisis is spiraling out of control, decisions made at this week's Spring Meetings will not substantially change anything, especially for countries with large debts owed to multilateral development banks. Instead, reforms currently being discussed will open the way to greater dependance on private finance, and increase their debt burdens.
The World Bank’s Evolution Roadmap - one of the central points of discussion this week - was created due to a growing demand from its shareholders that the multilateral development banks need to increase their 'fire power' amidst a deteriorating global economic context. The WBG’s Roadmap primarily lays emphasis on increasing lending and de-risking private finance for developing countries, similar to parallel initiatives including the evolving Bridgetown initiative and Paris Summit on a New Global Financial Pact, scheduled for June.
Jean Saldanha, Director of the European Network on Debt and Development (Eurodad) said: “Some will hail the emerging consensus around the World Bank Evolution Roadmap as a sign that the calls for international financial architecture reform, including the ‘Bridgetown Initiative’ are being addressed. This initiative, put forward by Barbadian Prime Minister Mia Mottley and her climate envoy Avanish Persaud, is aimed at overcoming the obstacles that face middle-income countries, and particularly small island developing states, to accessing affordable finance as they try to achieve the Sustainable Development Goals, while dealing with the impacts of the climate emergency. However, rather than tackling the systemic causes of these obstacles, and shoring up countries’ capacity to raise domestic revenue, the current reform agenda will open the door to more lending, further inflating the already extraordinarily high debt levels.”
The now inevitable appointment of former Mastercard Chief Ajay Banga will also further entrench the unfair global power relations that exist at the World Bank. Saldanha said: “At one and the same time the Bank has maintained the archaic neocolonial gentlemen’s agreement that the US appoints the World Bank’s President, while continuing to promote the privatisation and financialisation of public goods. This only intensifies an economic model that has been responsible for deepening inequality and overreaching planetary boundaries.”
The Global Sovereign Debt Roundtable
Much hope was pinned on the new “Global Sovereign Debt Roundtable’ whose second meeting took place at the Spring Meetings. While the mood at the end of their meeting was celebratory, it failed to deliver any substantial solution to the worsening debt crisis.
Saldanha said: “Agreeing on sharing Debt Sustainability Assessments with creditors earlier in the process (but not making them public), and convincing China to drop their claim of multilateral involvement in debt relief, can't be considered progress. In fact it is the opposite.
“Multilateral debt is an important portion of low-income countries' debt, and its burden will be even bigger as MDBs’ envisioned reform makes countries more dependent on private creditors. We need a multilateral debt resolution framework where all creditors, public and private as well as borrowers are brought together around the negotiating table; one that addresses the need for debt relief from all creditors in a timely and fair way. This can only be done by opening up a genuinely inclusive and transparent discussion on how to advance towards a new debt architecture under UN auspices.”
IMF practice does not match its rhetoric again
In its newest World Economic Outlook, the IMF acknowledged that government savings on public expenditures or ‘fiscal consolidation’ only works under certain, very specific conditions of economic growth and external positive context. Conditions that are rarely met in the case of global south countries facing debt distress.
“Civil society organisations have long pointed out that public expenditure cuts - which are often a condition the IMF poses as part of its support to a country - undermines development impacts and excessively hurts women and gender minorities.” - Jean Saldanha
A report released on the eve of the meetings by Oxfam laid bare the full tragic absurdity of the current system. It revealed that for every dollar that the IMF provides to a poor country for social spending, it requires the country to cut four times more through austerity measures.
Saldanha said: “Despite its rhetoric acknowledging the limitations of fiscal consolidation, the IMF continues to prescribe austerity as a solution, while failing to provide a lasting solution to the debt crisis.”
Media contact: Julia Ravenscroft, Communications Manager, Eurodad: [email protected].