- G24 communiqué (09 October): analysis, original document
- G20 finance ministers’ communiqué (10 October): original document
- IMFC communiqué (11 October): analysis, original document
- Development Committee communiqué (11 October): analysis, original document
The G24 is a grouping of some of the most important developing countries in the World Bank and IMF. It includes G20 countries such as India, Argentina, Brazil, Mexico, and South Africa, and also Egypt, Iran, Nigeria, Venezuela as well as a number of other countries. The G24 communiqué is traditionally the first statement of the meetings.
The G24 added its concerns over global growth to the week’s discussion in its communiqué, but the G24 emphasis is very distinct. They say bluntly that a “robust recovery has not materialised”, and though agreeing with the IMF committee’s emphasis on deeper structural reforms, advocate “more supportive fiscal policy” rather than warning of the need to consolidate. The G24 focuses on risks due to spillovers from rich countries, in the form of “disruptive capital flows and exchange rate volatility”, along with geo-political tensions and the possibility of a “sharp correction in financial markets”. As a result it points explicitly to the BRICS’ alternative to the IMF, the Contingent Reserve Arrangement (CRA), as a ‘welcome’ contribution to the expanding range of non-IMF backstops, including the CRA but also the Asian Chiang Mai Initiative Multilateralisation and the Latin American Reserve Fund.
There is more of an emollient tone and consensus on the need for infrastructure investment. The communiqué welcomes the focus of the Bank and Fund on inequality as a basis both for less hawkish economic policies and the justification for expanded investment. It is in this regard perhaps where the G24 and other developing states differ considerably from civil society concerns over the Bank’s dilution of its social and environmental safeguards.
In highlighting external risks to small developing states, the communiqué emphasises the importance of the UN’s work to develop an effective multilateral framework for sovereign debt restructuring, something which major Fund and Bank shareholders opposed; it is in this context that the G24 welcomed IMF measures to reform legal clauses used by vulture funds to disrupt and exploit debt resolution processes, as occurred in Argentina most recently. Moreover, the G24 stresses the need for the Bank and Fund to be supportive, which in historical context could easily be interpreted as a warning not to block processes intended to agree the new SDGsand a satisfactory agreement in next year’s financing for development conference.
The G24 appears particularly keen to remind the Bank and Fund of the importance to developing states of being able to harvest their own tax revenues, and manage their domestic policy space and in this regard point to the overdue work on debt limits policies at the Fund. They pointedly “look forward” to the completion of the work “in consultation with stakeholders” to provide a “structured and unified debt framework for all countries”.
More pointed remarks relate to the role and ongoing reform of both institutions. The G24 expresses a very blunt message on the stalled IMF quota and governance reforms, which it describes as a “significant impediment” to the credibility and effectiveness of the IMF while also calling for an additional chair at the executive board for African constituencies. They also “call on the Fund to develop options for next steps”, dispensing with the nicety that no action should be agreed until it’s definitively clear that the US congress fails to ratify the overdue reforms. Amidst the drama of Bank president Kim’s handling of widespread staff dissent at his reforms, it is clear that the G24 is impatient to see the new strategy’s “continued implementation”. They include in the necessity of Bank reform a call for greater representativeness in staffing in terms of origin, gender and, intriguingly, educational background. This latter dimension appears to be a suggestion that Bank and Fund groupthink, associated with the Washington Consensus era, is not yet eradicated.
The G20 is a grouping of some of the largest countries in the world. Since 2009 it has met more frequently, and in 2013 the G20 finance ministers plan to meet four times, including meetings in Washington. The official G20 communiqué has become very important because agreements at the G20 carry enough weight to be pushed through the agendas of the IFI policy setting bodies.
The IMFC is the direction-setting body of finance ministers for the IMF. The communiqué of the IMFC sets out the consensus position about the direction of the Fund and reform. The usual practice of global economic governance is now that the G20 takes decisions which are then just repeated by the representative forums like the IMF board or the IMFC. The ministerial statements are also available online.
The IMFC, grapples with an ongoing dilemma in its latest communiqué, how to square its ongoing acknowledgement of the economic challenge facing the global economy, advocating “bold, ambitious” measures, while cautioning that macroeconomic policies be “appropriate” and advocating “critical, structural reforms”. This is often code for fiscal measures, austerity, and labour market flexibilisation. The squaring of this circle is apparently going to be achieved by putting the growing burden of government debt “on a sustainable track”, opting for investment in infrastructure provided by private capital, while rebalancing global demand via cooperation. These are fine words, but similar to what we hear every six months, accompanying each slashed forecast and downgrade to expected economic growth.
The IMFC paints a mixed picture, but it is impossible to ignore the evident concern in its communiqué over growing debt levels, stalling growth and major economic and non-economic risks on the horizon. Managing director Christine Lagarde has recently sought to coin a new term in order to sound the warning over a global economic outlook that may never return to growth rates enjoyed prior to the 2008 crisis – the ‘new mediocre’. Intriguingly, the IMFC made very explicit one of its most-favoured solutions to this challenge: “additional public and private infrastructure investment”, an increasingly ‘magic bullet’ approach favoured by the G20, the World Bank, and seemingly every multilateral forum grappling with high debts, low investment, and the absence of jobs, sufficient growth or stability. While identifying goals that hardly anyone could dispute: job creation, sustainable growth, greater cooperation to withstand instability and new geopolitical risks, the familiar call for “concrete medium-term fiscal consolidation” suggests that the tension present in these communiqués for the last three years is unresolved – unless you believe that private sector investment will fill the gap of course.
The statement by Francophone low income countries (LICs) released a day prior to the IMFC communiqué makes explicit what is at stake. “Risks to debt sustainability” in LICs are growing from external loans, domestic debt and public-private partnerships (PPPs), the latter being precisely the mechanism by which most international institutions advocate tackling high debt, low growth and low investment. The IMFC instead reiterates its encouragement to the IMF to extend the exemption of any interest rate charges on loans to LICs via the Poverty Reduction and Growth Trust. Other risks present in the international economy demonstrate how significant this support may be, including most notably the Ebola crisis. The IMFC and IMF can be applauded for their stance on support to Ebola-afflicted countries; providing more cash, disregarding concerns over deficits and most importantly pointing out the need for urgent grant support.
Growing geopolitical tensions explain the communiqué’s repeated emphasis on global cooperation, be it on macroeconomic policy, tax spillovers affecting developing countries, or “strengthening the global trading system”. These are compounded by what the IMF is calling ‘asynchronous monetary policy’, code for what was referred to as the ‘taper tantrum’ in 2013, when emerging market economies were buffeted by developed economies’ domestic policies. Necessary cooperation hardly seems to be in evidence in another crucial area, governance. Despite the IMFC calling once again on the US to ratify outstanding reforms, the prospect of a ‘Plan B’ to bypass the governance reform deadlock imposed by the US congress seems slim, despite a January deadline for staff to come up with alternatives if the US does not ratify.
The Development Committee is a joint committee of the boards of governors of the International Monetary Fund (IMF) and the World Bank (Bank), which is meant to advise the Bank and the IMF on critical development issues and the resources needed to promote economic development. The Development Committee communiqué sets the direction for the Bank in the coming 6 months. The ministerial statements will also be available online.
As was the case in the spring, the communiqué presented few surprises, although its tone is more cautious on the prospects for the world economy. The communiqué notes that “the global economy remains on a cautious watch and is subject to considerable downside risks.” In line with its more careful tone, it states that since 2000 “a fifth of IDA [International Development Association, the World Bank’s low-income country arm] countries have not recorded per capita output growth … and are vulnerable to adverse shocks … that can quickly reverse the progress achieved.”
In a climate of reduced growth expectations, fiscal constraints in the public sector and expanding liquidity in the private sector, and in line with the previous communiqué, the board outlined the important role of private investment in catalysing economic growth through infrastructure investment. The communiqué welcomed the launch of the Global Infrastructure Facility (GIF) and noted that the board hopes that GIF will soon assume “the required scale and ambition”. The focus on financing for infrastructure as the answer to the economic gloom is to be complimented by well-known policy prescriptions aimed at private-sector led growth.
In terms of broad themes and approaches to evolving development challenges, the communiqué remains focused on “supporting investment in human capital, improved access to markets, structural reforms, financial inclusion, infrastructure, improved tax and transfer systems, including social safety nets, and addressing climate change.” The faith in “the importance of policies and institutions to promote an enabling environment for the development of the private sector” remains undiminished. The emphasis on the establishment of an enabling business environment continues to reflect the ageing post-Washington Consensus, which sees the role of the public sector essentially as a hand-maiden of private investment.
Thus while the document commends the continued discussions on and attention to shared prosperity and social safety nets, these remain anchored to the premise that economic growth requires the usual array of ‘bold policies’, inclusive of flexible labour markets, as can be seen by the exclusion of international labour rights standards in the World Bank’s new proposed draft safeguards. The refusal of the Bank to discuss inequality from the lens of the wealth of the top 10 per cent (rather than its continued focus on the bottom 40 per cent) and reticence to attention on within-country inequality are worth noting. The fact that redistribution fails to be considered as a potential tool with which the address inequality is also noteworthy.
On issues related to social inclusion, seen by the Bank as an important component of its emphasis on shared prosperity, the communiqué stresses the importance of continuing the Bank’s focus on gender and looks forward to the new Gender Equality and Development Strategy.
The communiqué highlights the effectiveness of the Bank’s response to the Ebola crisis and in particular its rapid reaction and coordination with other international bodies, such as the World Health Organisation. The Bank’s rapid and flexible response to Ebola received substantial attention during the annual meetings and was used to showcase the Bank’s newly enhanced capacities. The need for speed and flexibility can be linked to the much-discussed (outside the Bank) rise in competition to the World Bank by the new BRICS (Brazil, Russia, India, China and South Africa) bank, among others, and the continued demand for governance reform of both Bretton Woods institutions. In that regard the communiqué reaffirms the board’s commitment to “the completion of the 2010 WBG shareholding realignment”. Responding to competitive pressures, the current communiqué urges the Bank to focus on “integrated regional approaches … including South-South cooperation, responding to client needs and reacting quickly to unexpected shocks.”
It urged the Bank Group to play a prominent role in assisting with consensus building in the development of the post Millennium Development Goal 2015 development agenda and highlighted the importance of the upcoming Third International Conference on Financing for Development in Addis Ababa in July 2015.
While the spring communiqué placed the Bank’s institutional reform front and centre, it receives a far less prominent role in the current document, where mention it mainly focuses on monitoring of the progress made. Given the well-documented and much discussed staff tension and discontent arising from the internal change process, this shift in prominence was perhaps to be expected.