World Bank-IMF annual meetings 2007
News||22 October 2007|
This page is being updated regularly. Check back for more news about the events inside and around the annual meetings 2007.
The World Bank and IMF will be view it as a partial success that these meetings were reasonably low-key, after the storm that eventually led to the ingnominious departure of former president Paul Wolfowitz at the spring meetings this year (see Update 56), and the Singapore government's mistreatment of civil society delegates at the annual meetings 2006 (see WB-IMF 2006). However, both institutions faced serious challenges to their continued relevance and legitimacy, with observers keen to see the tone that new heads Robert Zoellick and Dominique Strauss-Kahn set for the institutions.
If the spring meetings were the Bank's congressus horrendus, it was the Fund that came in for brickbats at this year's annual meetings. The view in the major press was scathing. "The IMF is a much diminished institution", declared UK daily The Guardian, "it is a case of Rodrigo de Rato leaving a sinking ship". The Financial Times reinforced this view, reporting that "many of the Fund's most powerful members were angry that the IMF was so feeble just at the time it should be centre stage".
Finance officials from north and south were no more impressed. David Dodge, outgoing Canadian central bank governor, mourned the fact that "this is precisely the time we need the Fund's ability and skills to deal with global imbalances." Asian under-statement was captured by Korea's Kwan O-kyu who said "the IMF should be more relevant" to a changing global economy. The G-24 chastised the Fund in the face of financial uncertainties in rich countries, urging it to do more to increase "surveillance of advanced economies, putting as much focus in evaluating their vulnerabilities as it does in emerging-market economies."
Undoubtedly the case was made most strongly by Brazil's finance minister Guido Mantega. Commenting on the failure to agree significant governance reforms to give southern countries more power in IMF decision-making: "Developing countries, or many among them, would go their own way, were the perception to arise that reform will not happen or that we will be left with a purely cosmetic form." Venezuela was already absent at these meetings with president Hugo Chavez's decision to give them a miss.
One positive signal came from Italian finance minister and new IMFC chair, Tommaso Padoa-Schioppa. Reuters reported that Padoa-Schioppa had agreed that Europe should occupy one seat to make way for emerging economies. "IMF includes the word 'monetary'. The EU has one money. It should consolidate."
All hopes now pinned on Dominique Strauss-Kahn to right the ship by spring meetings 2008.
By contrast, according to the FT, "the World Bank appeared to be regaining its footing under the new leadership of Robert Zoellick".
Civil society groups however are wary. Those who attended Zoellick's meeting with civil society described him as a 'smooth operator' who "knew all the right buzzwords, the right language on inclusiveness and participation, and the right way to disarm all the criticism", bringing back memories of former president James Wolfensohn.
For Zoellick's agenda, read private sector (not that this is particularly new for the Bank). Difficulties getting sufficient funds for the poorest countries? Bring in the private sector to the IDA replenishment. How to keep the middle-income countries happy and borrowing to keep the Bank in the black? Learn new financing instruments from Wall Street. Countries want to scale-up aid flows? Improve the investment climate to bring in the private sector. Want to tackle climate change or rural development? Well, you guessed it.
Fraser Reilly-King of Canadian NGO Halifax Initiative captured this succinctly: "the Zoellick era may be characterised not so much by the notion of "business as usual", as by the notion of "business" - less world, more bank.
On the agenda for the Development Committee was the Bank's long-term strategy and scaling-up aid to low-income countries through the International Development Association (IDA). The Bank's Clean energy for development investment framework was downgraded to a luncheon discussion item, though encouragingly, the words 'climate change' were actually referenced in a departure from Wolfowitz's aversion to using the term.
On the agenda for the IMFC was the usual discussion of the global economy and financial markets and then a discussion on implementation of the Fund's medium-term strategy.
Read BWP analysis of the content of the communiqués and the story behind the positions.
Departing chief economist François Bourguignon has finalised his contribution to the Bank's formulation of a long-term strategy, entitled Meeting the challenges of global development. Bourguignon is at pains to stress that the report is "an initial step in this process", not itself a long-term strategy, and does not consider what other institutions will be doing in the future.
For those who listened to president Zoellick's speech 10 October, however, Bourguignon's key themes will ring familiar: strengthening the Bank's role in Sub-Saharan Africa and fragile states; responding better to the needs of middle-income countries; and expanding the Bank's role in the provision of global public goods, specifically referencing climate change, knowledge services and statistical systems.
Welcome is Bourguignon's consideration of rising inequalities and stress on the need to better measure the developmental outcomes of the Bank's work. The section on conditionality is muddled. On the one hand Bourguignon concedes that conditionality "may be ineffective" and "remains too strong". At the same time, he describes a "remarkable decline in conditionality" and transfers blame for its continued use onto vertical funds, NGOs and private foundations. Future Bank conditionality "should be based on results and expected performance rather than on detailed policy rules derived from doctrine".
Other points of note:
While Bourguignon insists that the status quo is not acceptable, this plan feels like status quo plus. No discussion of the radical reforms to the Bank's governance structures and operations that are needed to respond to its legitimacy crisis, nor is there sufficient re-appraisal of what climate change means for the Bank's export-oriented growth model, or the need for the Bank to be subject to a growing body of rights-based frameworks and conventions.
After a 25-year hiatus, the Bank has once again focused its flagship annual publication on agriculture. Bretton Woods Project has been covering the process leading up to the final report. Coinciding with the release of the report is an Independent Evaluation Group assessment of Bank assistance to agriculture in Sub-Saharan Africa. See Bank Information Center for an analysis of the IEG findings.
First off the blocks to offer an exhaustive critique of the report has been ActionAid. In their Critical review of the World Bank's WDR 2008, ActionAid describes the report as "dangerous". Eric Gutierrez, ActionAid policy coordinator says "We blame the Bank for contributing to the destruction of smallholder agriculture which has left hundreds of millions in the developing world unable to feed themselves."
A new report from Norwegian Church Aid, A deadly combination?, examines the effect of privatisation on the agricultural sector in Malawi, Zambia and Ethiopia. The report draws a clear link between conditions imposed by the World Bank and the IMF and restrictions to development.
The Institute for Agriculture and Trade Policy (IATP) report on the WDR is entitled The World Bank's WDR 2008: Agriculture for Development, Response from a slow trade - sound farming perspective. The authors conclude that the WDR is "without an anchoring vision from which to advocate some of the really radical changes needed to move agriculture beyond reliance on fossil fuels and beyond servicing the markets of a few wealthy countries and social groups, towards a sustainable, locally-owned and locally accountable sector that neither excludes trade nor makes trade the focus of infrastructure and technology investments.
More than usual, a plethora of background papers and progress reports has been prepared for these meetings:
The report covers four areas:
On strengthening the country-based development model, the Bank calls for more focus on private sector-led growth, costing national development strategies, and strengthening national financial managment and monitoring and evaluation systems. Highlighted is the continued failure to link Poverty Reduction Strategies with budget frameworks.
On opportunities to scale-up aid flows, the Bank calls for improved investment climate to attract private inflows, but then notes that low-income countries recieve only about two per cent of private debt and five per cent of private equity flows. It argues that these countries which are left-out of the private sector windfall can absorb "substantially more" aid. Global and regional financing mechanisms are increasingly in favour as an instrument to channel increased aid.
On improving the delivery of aid, the Bank slaps donors on the wrists for poor predictability of their aid. With no irony, the Bank says this is in part due to a failure of recipient countries to meet conditions even in "better performing countries". This "phenomenon" is something the Bank deems worthy of "further investigation" (see recent Eurodad investigation into the persistent and problematic use of intrusive economic policy conditions by the Bank). Calling for vertical programmes to be integrated into national plans and budget cycles, the Bank is positioning itself as the 'ringmaster' of the aid circus. There are also calls for donors to consider longer timeframe commitments.
Of its own role, the Bank seems to have nothing but praise, whether on strengthening ownership, achieving results, or on alignment, harmonisation and collaboration with other agencies. Wonder if those closely following the Paris process on aid effectiveness would be so sanguine?
This paper is the latest in a series of action plans of the World Bank's investment framework for clean energy and development. The Bank has been developing this framework since the G8 in 2005 in Gleneagles, which bestowed the institution with a leadership role tackling climate change and "creating a new framework for clean energy and development, including investment and financing" (see Update 55). The framework, which will rely heavily on private sector participation though as yet undetermined, is set to be followed by similar initiatives by other multilateral development banks. It is due for completion by the G8 in Japan in 2008. The action plan is based on three pillars:
The paper lists the Global Environment Facility, the United Nations Framework Convention on Climate Change Adaptation Fund and the forthcoming IDA replenishment as key sources of concessional financing for adaptation and/or mitigation of climate change. Carbon finance is also expected to provide a future source. However the role of the private sector will be essential, through investment support, barrier removal and competitive markets.
The paper's claims that "substantial progress has been made since the Spring meetings" were quickly shot down. Any progress the Bank may be making has been seriously undermined by the billions of dollars that it continues to pump into greenhouse gas emitting fossil fuels (see Hundreds say World Bank needs an oil change). Moreover, by the Bank's own admission, its "new renewable and energy efficiency" portfolio is mostly a small number of large hydropower projects, and carbon finance.
An interesting new development since spring 2007 is that four low carbon country growth case studies - India, China, Mexico and Brazil - were initiated, with plans for a fifth one in South Africa in 2008.
This framework comes in response to a call from the Development Committee last year and to sharp reviews from the IEG of the Bank's global (see Update 44) and regional programmes (see Update 56). Five areas are addressed:
Operational implications include better aligning regions and networks, addressing the coherence of the Bank's trust fund portfolio, and exploring new financing mechanisms. The latter might include more public-private partnerships (emphasis on partnerships with foundations), new carbon finance facilities, and sub-national lending/guarantees (those to the province or municipal level). Transfer of more IBRD profits to global public goods work also to be considered.
This paper reports on implementation of the middle-income strategy paper endorsed last year in Singapore. The big issue for NGOs is the use of country-based environmental and social safeguards and fiduciary policies (see at issue). A methodology is to be prepared to assess procurement capabilities, which will be "broadly" consulted on. An evaluation of the experience with country systems pilots is expected to go to the board by year-end.
Stress is put on new financing instruments for MICs. The proposed development of an instrument to help countries deal with "unexpected liquidity needs arising from exogenous shocks" sounds awfully simliar to the IMF's Exogenous Shocks Facility (see Update 54, 49). While experience with the new joint IBRD-IFC subnational department has been limited (four transactions totalling $156 million), there is already a call to mainstream it and ramp up the volumes - this will have important implications both for social/environmental protection and for debt accumulation. On advisory services, the Bank is under pressure to stop telling MICs what to do, and wade into the messy question of how to do it; do more to address global public goods issues and link them to country partnership strategies; and a board paper on the role and scope for fee-based services "is under preparation".
Beyond the usual Bank arguments about the benefits of trade liberalisation and the obstacles to improved trade performance, this paper is meant as an update on 'aid for trade' activities (see Update 50 for both an inside and an independent critique of the same). The Bank is frustrated by an inability to quantify global support for 'aid for trade' thanks to an OECD definition which is so broad as to be useless. (By its own narrower definitions Bank support for 'aid for trade' has increased from $400 million in 2000 to $1.6 billion last year.) In its update on the Enhanced Integrated Framework (EIF) (an initiative of recipient countries, donors and multilateral agencies to provide trade-related technical assistance), the Bank is forced to concede that under the latest in a seemingly endless series of re-organisations it is no longer responsible for leading the diagnostic process and has been relegated to the role of technical advisor. According to the Bank, remaining gaps in the provision of 'aid for trade' include the fact that slightly less worse-off poor countries are overlooked, as are some middle-income countries (small island states) and regional projects.
In a word - uninspiring.
Two work phases proposed. The first would cover basic votes, communications, board effectiveness and composition. Second phase would include quota formula, review of the role of IDA board relation to IDA deputies, and selection of the president.
On the Fund in middle-income countries: Looks like any new contingency fund is dead on arrival. The latest incarnation of the defunct Contingency Credit Line was to be called the Reserve Augmentation Line (see Update 54), but the Fund reports that "there is no clear interest in utilising a new instrument" and "other members continue to have concerns regarding key features of the new instrument". That means that countries that want to use it don't want it to come with heavy conditionality, and those that will never use it do.
On the Fund in low-income countries: Most of the Fund contrition here has been released previously in response to the IEO evaluation of the Fund's role in Sub-Saharan Africa (see Update 55) and the Goldsborough report (see Update 56 on Fund impact on social sector spending. The Fund will do more to "assist low-income members to elaborate alternative macroeconomic scenarios". External consultations are to be launched on the arrangements for the Joint Staff Advisory Notes (Bank and Fund staff comments on national development strategies). Note that the board is to review the Fund's role in fragile and post-conflict countries after the annual meetings.
On debt relief: The Fund will name and shame bilateral creditors who don't do their part to pay for debt relief. Not to be blamed for the hold-up in debt relief for Liberia however - that is the work of several middle-income countries (who rightfully think the rich should cough up more) and Belgium (no excuse for Belgium).
On governance reform: Democratising the Fund going nowhere fast. Maye they'll have a proposal for adding alternate executive directors by the spring. Rest still 'to be discussed'. In a wonderful euphemism for slashing expenses, the Fund will "pursue cost effectiveness and expenditure restraint". Despite getting the green light to invest more of its resources and selling some of its gold, the hole in the Fund's finances is yawning - $165 million this year, rising to an estimated $400 million by 2010. Could this mean Fund economists on economy class?
For a complete listing of civil-society events, briefings, press releases, and a blog, see IFIwatchnet.
The World Bank will be posting webcasts of many of the civil society dialogues.
14 - 21 October: Week of global action against debt and IFIs
15 October: World vs. Bank - A public hearing on the World Bank in The Hague
Return here for highlights of meetings hosted by civil society organisations from Bretton Woods Project staff in Washington.
15 - 17 October: Commonwealth finance ministers' meeting
Meeting in Guyana, the final communiqué included calls for: faster and deeper reform of World Bank and IMF governance structures, including leadership selection; learning from new players in the international financial architecture who practice "speedy disbursement" and "less intrusive conditionality"; more emphasis on need in aid allocation decisions; and continued attention to increasing fiscal policy space.
19 October: G24 Communiqué, G7 Communiqué, Programme of seminars
20 October: IMFC Communiqué, IMFC statements by finance ministers, Group of ten communiqué
22 October: Statements made at the final plenary session
Read BWP analysis of the content of the communiqués and the story behind the positions.
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Published: 22 October 2007 , last edited: 29 October 2007
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