WASHINGTON: The World Bank and International Monetary Fund will tackle the thorny issue of institutional reform at their upcoming annual meetings in Morocco next week.The two international financial institutions are looking to scale up and retool to pursue ambitious global climate goals, while continuing to support emerging market and developing economies struggling to service rising debt levels.
This year’s gathering of world leaders will take place in the city of Marrakesh, just weeks after a devastating earthquake in the region left close to 3,000 people dead. It is the first such meeting to be held on the African continent for half a century, something underscored by IMF Managing Director Kristalina Georgieva during a speech Thursday in the city of Abidjan in Ivory Coast.
During her speech, Georgieva noted that the world was heading into the annual meetings in much better economic shape than many analysts had predicted. “The world economy has shown remarkable resilience,” she said in prepared remarks, pointing to strong demand for services and tangible progress against high inflation.
“This increases the chances for a soft landing for the global economy,” she added, referring to the prospect of lowering inflation through interest rate hikes while avoiding a damaging recession.
Georgieva also called on member countries to “bolster” funding levels through an increase in the quotas they pay.
The United States, which has a blocking minority at the fund, has indicated it would back an across-the-board increase in quotas — a move which would leave the overall voting power of member countries unchanged. The Fund is also looking to replenish popular concessionary lending facilities for low- and middle-income countries which have been exhausted by the pandemic and the war in Ukraine, Georgieva said. She added that the IMF will consider changes to its management structure to elevate the voices of developing economies.
“I am looking forward to our members agreeing to a third African Chair at our Executive Board,” she said, backing plans to expand the IMF’s 24-person management board to add an additional seat for African countries.
This year’s annual meetings will be the first for new World Bank President Ajay Banga, a former Mastercard chief executive who was elected on a pledge to boost private sector financing for the transition to renewable energy. Since taking office, Banga has indicated that he plans to reform the bank’s current twin mandate of poverty alleviation and boosting shared prosperity to include climate change. “I think the twin goals have to change to being elimination of poverty, but on a livable planet, because of the intertwined nature of our crises,” he told a conference last month. He added that proposals to reform the World Bank’s balance sheet from countries including the United States and Saudi Arabia could add as much as $125 billion in extra lending capacity if they come to pass. This would mark a significant increase for the development lender, which mobilized just over $100 billion in financing last year. But the process is likely to take a long time, and Banga’s plans “certainly won’t happen next week,” Danny Scull, policy advisor at the climate change think tank E3G, told AFP.
Even if these changes come about, they will likely be insufficient to meet the scale of funding needed for the climate transition.
The World Bank estimates that developing countries will need $2.4 trillion every year for the next seven years just to address the costs of climate change, conflict and pandemics.
While the World Bank and IMF are looking to retool to tackle the climate transition, many member countries are grappling with high levels of debt due to the Covid-19 pandemic and war in Ukraine. During the IMF and World Bank’s spring meetings in April, Georgieva said that around 15 percent of low-income countries were already in debt distress, and “an additional 45 percent are near it.”
The current efforts to lower the debt burden of low-income countries undertaken by the G20, World Bank and IMF are insufficient, the UN’s trade and development chief Rebeca Grynspan said Wednesday.
“We need to have a better mechanism for a faster resolution of the debt problem,” she told reporters in the Swiss city of Geneva, urging world leaders to tackle the issue at the annual meetings.