Forecasts of historically high public debt levels, combined with low growth, demonstrate the failure of these institutions to fulfil their mandate. Instead they have stuck to tried and failed recipes such as austerity and market-based  approaches, in the face of increasing inequality and a climate emergency.

María José Romero, Policy and Advocacy Manager for development finance at the European Network on Debt and Development (Eurodad) said: “The limited announcements and the rhetoric that we have heard this week have been unable to hide the inadequacy of the institutions’ policies in the face of growing economic challenges  - including high debts and low growth prospects, the climate emergency, and increasing inequalities both within and between countries. As they celebrate their 80th anniversary, the Bretton Woods Institutions continue to resist meaningful governance reform and therefore risk losing relevance.”

Record levels of public debt became too big to ignore this week, following years of warnings by civil society and the UN about the costs of not taking urgent action. Initial IMF warnings of high debt and low growth, together with calls on countries to step up on fiscal adjustment last week, turned into moderated forecasts of a “soft landing”. This still did not calm anxiety about economic prospects. The fact that the institutions and the G20 failed to decide on anything meaningful on how to tackle the debt crisis doesn’t give any space for optimism. Their plan to increase domestic resources mobilisation and growth through structural reforms, coupled with more lending, is unlikely to be sufficient unless debt relief is on the table.

The IMF and World Bank calls for more austerity and to increase lending so creditors can get their money back, will only worsen the situation. 

Iolanda Fresnillo, Policy and Advocacy Manager for debt justice at the European Network on Debt and Development (Eurodad), said: “The global financial architecture is neither preventing nor addressing debt crises. Instead countries - especially those in the global south - are forced to default on their obligations to their citizens because they have to pay off their unsustainable debt. 

“It was clear this week that the institutions and the G20 are paralysed, unable or unwilling to take any meaningful action despite the catastrophe that has been unfolding for years in the global south. We need the cancellation of enough debt to bring countries back to a sustainable development path - and we need the reform of the global debt architecture. Our new paper published this week explains how this could happen - through the setting up of a new process under the auspices of the UN. The Financing for Development process is where this should take place.”

One year after launching its new mission and vision the World Bank was promoting its new  Corporate Scorecard at this week’s meetings. The meetings also marked the latest chapter of its fundraising effort to get a record replenishment of its International Development Association (IDA) - the part of the World Bank that provides assistance to the world's poorest countries, before a pledging meeting in December. 

The announcement of this week was the early pledge from Spain, which comes with an increase in the size of its envelope, following a similar move from Denmark last month. CSOs including Eurodad are advocating for a set of ambitious policies that would position IDA to deliver the economic transformation that is needed to place countries away from the increasing commodity dependency. The fact that the Scorecard omits an economic transformation indicator, when it is so central to the World Bank’s mandate, adds to concerns. 

Furthermore, the World Bank Group promoted a narrative of ‘evolution’ on the basis of the reforms promised a year ago. Yet, most of the initiatives promoted indicate a strong belief in private capital mobilisation that has failed to deliver. This includes a strong focus on mobilising private finance in the poorest countries of the world, including with a proposal to increase the size of the IDA Private Sector Window in this year's replenishment.

Maria Jose Romero said: “The ‘future-ready’ World Bank Group that was announced this week to the institution’s shareholders is far from the ‘better Bank’ that we were promised a year ago. The ‘private finance first’ rhetoric we are used to hearing from the Bank continued, even though this does not work for the poorest countries. It is critical that IDA prioritises grants-based resources, ensures a focus on socio-economic transformation as a cross-cutting ‘mission’ of IDA21 and that the private sector window is scrapped altogether in favour of reinstating the IFC subsidy to IDA.”

ENDS 

Media contact: Julia Ravenscroft, Communications Manager at Eurodad: [email protected]/ +44 7958 184 695. 

Notes to editors: 

• A new briefing from Eurodad lays out a blueprint to reform the global debt architecture under the auspices of the United Nations, following the failure of the International Monetary Fund, the World Bank and G20 to take meaningful action.  Read the report here in English, French and Spanish.
• According to UNCTAD, 3.3 billion people are living in countries that spend more on interest payments than on healthcare or education. This comes from A World in Debt report 2024 - which you can find here. 
• CSOs have produced the following World Bank Bento Box for a transformative IDA: