The double shock of the COVID-19 pandemic followed by the Russian invasion of Ukraine has been accompanied by an uptick in income and social inequalities. Looking across six areas—food and fuel shortages, inflation, debt distress, extreme climate-related events, and political unrest—there are very few countries that escape the reach of at least one crisis. New research from the Pathfinders team shows that in those countries for which complete data exists across six crises (90 in total), eight countries are at risk for being impacted by all crises at the same time. 72 out of these 90 countries (or 80 percent) are at high or moderate risk of suffering from at least three crises at the same time.
The International Monetary Fund (IMF)-World Bank Spring Meetings are underway this week, with the usual circus as government delegations, civil society and the private sector descend on DC. What do discussions look likely to produce, viewed from the perspective of the debates at the United Nations (UN)?
First, the Good. This year is shaping up to be amongst the most fundamental debates on the mission of the World Bank since the era when Jim Wolfensohn refocused the Bank on reducing poverty. Driven by the United States in speeches from Janet Yellen last year and this year, the Bank’s Evolution Roadmap has evolved since the first version issued in draft in December 2022. The latest iteration, titled “Evolution of the World Bank Group –A Report to Governors,” lays out a new mission and emphasizes major operational and financial change. This is in line with the calls by many member states—especially developing countries—at the UN General Assembly last year, and by the secretary-general in a number of speeches. The potential and the level of expectations are well-summarized by the Prime Minister of Barbados, Mia Mottley, and former USAID President Raj Shah here.
Second, the Bad. There is little sign that new funds of any scale will be committed at the Spring Meetings to countries struggling with the legacy of three years of crises, rising debt, and empty coffers. Bank President David Malpass has called for “up to USD 50 billion” in additional funds to be committed, with the majority of attention going to International Bank for Reconstruction and Development (IBRD), the World Bank’s window for middle-income countries (MICs). But this would be only a 15 percent increase in lending, compared to the reforms that led to a doubling of IBRD lending in 2014. A general capital increase is not at present drawing support from developed economies.
The International Development Association (IDA), the World Bank’s concessional financing arm for low-income countries (LICs), is estimated to disburse two thirds of its three-year replenishment by only midway through the term, and few new funds have been forthcoming for its Crisis Response Window. Efforts to leverage more funds on the markets are constrained by current high interest rates, as noted by President Malpass and Managing Director Kristalina Georgieva in their opening remarks for the Spring Meetings yesterday. While there is a roundtable on Global Sovereign Debt planned for this week on April 12, following up from the G20-IMF-WB roundtable earlier this year in February, no-one expects it to put forth new debt restructuring mechanisms. In other words, there is little new money on the table at present: it is highly unlikely that those ministers and global leaders who will be speaking at the UN’s Financing for Development Forum on April 17-20 will have good news to give.
Third, the Ugly. The proposed provisional new mission for the World Bank would be “to end extreme poverty and boost shared prosperity by fostering sustainable, resilient and inclusive development.” This is not only jargon-filled and uninspiring (imagine it being translated into Swahili, Spanish, French or Arabic); it also fudges a major question about trade-offs. The first part of the mission refers to the World Bank’s “twin goals,” put in place under the Presidency of Jim Kim just before member states adopted the Sustainable Development Goals. The Bank has never strongly embraced the Sustainable Development Goals across all areas, and the lack of reference now is a missed opportunity.
The second part of the mission (“sustainable, resilient and inclusive development”) is explained in the Development Committee paper as referring to global challenges. This is where the trade-offs come in. The US and other developed economies are keen to see more emphasis on global public goods, including pandemics, climate change and (in the development committee paper) conflict. Developing countries are wary that, rather than being additional finance, this will cut into their country allocations for national development. In surveys commissioned by the World Bank itself, climate has low priority in relation to education, jobs, and employment.
The February 9 speech by Secretary Yellen explained that the US was seeking to address the mission statement of the World Bank first, before getting agreement on financing. That is certainly logical, funds should follow strategy. Yet we worry that this is in itself too great a trade-off at the current moment: developing countries are faced with early agreement on a mission they have had little time to debate, while being deprived of funds they desperately need. As Martin Wolf put it in the Financial Times,
Inevitably, incoming Bank president Ajay Banga has a full plate when he steps into role upon Malpass’ early departure in June this year and will have to face these trade-offs and discussions head-on, particularly during the crucial time period between the summer and a busy fall–with the 78th session of the UN General Assembly this September and the Fall Meetings in Marrakech in October. There is great potential to accelerate liquidity and debt relief and start longer-term reform of the international financial architecture this year, but there is still a long way to go.
All opinions and views expressed in this article solely represent the views of the authors and the Center on International Cooperation at New York University. Support was provided through generous contributions from the Dutch Ministry of Foreign Affairs, Norwegian Ministry of Foreign Affairs, and the Swedish Ministry of Foreign Affairs.
The International Monetary Fund (IMF) and World Bank conducted their first virtual Spring Meetings amid the COVID-19 pandemic. This briefing summarizes the discussions, which focused on the economic impact of the pandemic, and provides key takeaways on topics such as debt relief, financing for COVID-19 response, multilateral partnerships, and efforts to support global supply chains.
Strengthening Approaches to Conflict Prevention and Peacebuilding at the UN and IFIs: Key Ideas and Recommendations
All three of the recent UN secretary-general reports on peacebuilding and sustaining peace (2018, 2019, and 2020) take note of the need to enhance collaboration between the UN—not only its development system but also its peace and security and humanitarian arms—with international financial institutions (IFIs), namely the World Bank and International Monetary Fund. This note provides a set of recommendations, with a view to strengthening strategic and policy collaboration across the three institutions in fragile and conflict prevention situations.
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