Financial crises and global slowdown capture IMF-World Bank spring meetings agenda
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By Charlotte Carlsson, Bretton Woods Project
The global economic slowdown and donor countries’ differing views on what to do about it, pushed issues related to the world’s poorest nations to the sidelines of public debate on this year’s spring meetings of the IMF and World Bank. The meetings, held in Washington DC, came to a conclusion on 1 May 2001.
Much of the world’s attention was instead directed towards the new US administration, known for its general hostility towards World Bank/IMF, and its stance on IMF intervention in Turkey and Argentina to stave off financial crises.
Spurred by US Treasury Secretary Paul O’Neill, Horst Köhler, Managing Director of IMF, said “crisis prevention will be at the heart of the Fund’s activities”. O’Neill has criticized the IMF‘s role in large-scale bailouts in the past, while acknowledging the institution’s role in early warning and prevention of financial crises. Yet, tension between the European Central Bank and the IMF arose when IMF Chief Economist Michael Mussa pressured the ECB to lower its interest rates, saying the euro area should be “part of the solution rather than part of the problem of slowing global growth.”
The issue of debt relief made little progress, with World Bank President James Wolfensohn arguing full debt cancellation would lead to World Bank bankruptcy. Some African ministers agreed: “it would not be very wise to kill the hen who lays the golden eggs,” commented Basil Mramba, Minister of Finance of Tanzania.
However, advocates and protesters outside the World Bank/IMF buildings helped keep the spotlight on debt relief. “We should not ignore [the protestors’] message,” said Mr Ali Badjo Gamatie, Minister of Finance, Budget and Privatisation in Gabon. “If they become violent, it means that the listening system is not good. We are not listening well enough.” There was no violence on the streets of Washington DC, however, and the 1,500 police far outnumbered the around 400 peaceful protesters. More significant protests are planned for the Annual Meetings (28 September – 4 October, 2001).
Wolfensohn’s tight budget and familiar plea for an increase in resources resurfaced in response to the reported low morale among his staff. “We have all these new things that we are being asked to do. We have no new money,” he said. Many – from government ministers at the Development Committee in Prague last September to UN officials and activists – feel the Bank is influential in too many areas and are calling for broader debate about the Bank’s expanding remit.
Yet the spring meetings revealed World Bank plans to play a pivotal role in a number of new initiatives. These include a global campaign to reach the international development targets (IDTs) and the establishment of a new global health fund to fight malaria, TB and HIV/AIDS. Wolfensohn also indicated that education spending will increase and that his organisation will play a major role in capacity building to help developing countries access global markets.
The International Monetary and Financial Committee (IMFC) of the IMF and the Development Committee of the World Bank both called for better market access for developing country products – especially to markets of the developed countries – recognising the importance of multilateral trade talks to resume.
In parallel to the official World Bank-IMF meetings, a meeting on “Structural Adjustment: 20 Years is Enough?” gathered NGO representatives to discuss human rights and the social impacts of structural adjustment as experienced by participants in their home countries. The meeting, organised by Globalisation Challenge Initiative, also looked at issues around privatisation of public services and explored alternatives to the Washington Consensus. Among the guest speakers was former Minister of Culture in Mali, Animata Traore.
At a press conference organised by Bank Information Centre, Ms. Traore spoke on the issue of full disclosure of World Bank documents, saying key information that influence the economies of developing countries should be made available to the public. An NGO campaign, calling for increased Bank transparency, gathered signatures from over 500 organisations from 100 countries on a letter addressed to World Bank Vice President Joanne Salop.
Specific issues: summary and links
Trade
A new World Bank paper, discussed by Ministers during the spring meetings, pledges increased World Bank work on trade at “global, regional and national levels”. (For a summary, see World Bank to intensify work on trade). Ministers broadly endorsed this intensified trade focus of the Bank, including support for countries to address trade issues in their PRSPs. .
Global trust fund for health
A global fund to tackle malaria, tuberculosis and HIV/AIDS received strong support among G7 countries. The fund would concentrate on drugs, commodities and vaccine development. The idea is to raise some of the money from the private sector. The UK is also considering a research and development tax credit that would encourage research into diseases. While the fund is likely to be approved during the G8 meeting in Genoa in July 2001, no specifics were discussed as to how beneficiaries would be identified and how it would link into other national processes and poverty reduction strategies (PRSPs). It is proposed that the World Bank administer the fund, drawing on technical expertise from WHO. See Bretton Woods Project comment: New World Bank/WHO fund for health: Risk of misuse
International Development Targets (IDTs)
In addition to increased efforts to set up a global fund for health, Wolfensohn claimed that the Education for All initiative launched in Dakar is high on the World Bank agenda. The Bank is moving to increase its role and financing towards the goal of universal primary education by 2015. The World Bank called for increased contributions from donor countries towards achieving the 2015 targets. The yearly publication World Development Indicators was launched with statistics and charts to demonstrate progress towards the international development targets.
Conditionality:
IMF is carrying out a consultation as part of its drive to streamline conditionality. Conditionality will be focused on macroeconomics and financial sector matters, an approach unanimously supported by the IMFC. The committee denounced the notion that macroeconomic conditionality would be replaced by governance conditionality. The Group of Twenty-Four (G24) less developed country governments welcomed the IMF policy review, stressing that conditionality needs to be less intrusive and designed to enhance programme ownership. They noted that efforts to streamline conditionality should address the issue of how to better define the division of labour between the Fund and the World Bank, while preventing cross conditionality. See Bretton Woods Project submission to the consultation process.
Debt:
The IMFC communiqué stressed the need to assess sustainability for the 22 countries that have achieved debt relief before adding more countries to the scheme. More countries, the communiqué says, will be added later. While World Bank President James Wolfensohn argued full debt cancellation would lead to World Bank bankruptcy, a new report from the Drop the Debt campaign said they could write off 100 per cent of the debts of Heavily Indebted Poor Countries without impeding their ability to function.
Middle-income countries:
The Development Committee supported the World Bank’s continued involvement in middle-income countries but stressed it must be highly selective in what it does, drawing increasingly on analyses by other development partners and by the countries themselves. They recommended the World Bank to look to development partners to take the lead in supporting reforms in particular sectors where they have a comparative advantage.
Harmonisation of Operational Policies and Procedures:
Ministers in the Development Committee stressed the importance of harmonising operational policies and procedures by the Bank, other Multilateral Development Banks (MDBs) and bilateral aid donors. They urged the Bank to rely increasingly on the borrower government’s own planning and budgetary processes, helping to strengthen these systems and processes where needed. See briefing: Success or failure? Wolfensohn’s reforms at the World Bank
Global Public Goods:
The Development Committee stressed the need to anchor its global public goods activities in its core business and country work, to remain selective and focused in each of the areas and to consolidate cooperation and division of labour with other international partners. The Bretton Woods Project, however, notes that the definition and scope of the Bank’s work in this area are contested. Defined as “any activity areas that produce cross-national benefits and require cross-national collective action to achieve them,” it is a very loosely defined area where donor driven interests may dominate over national processes and/or local needs. See The World Bank’s global public goods agenda: Good for whom?
Civil society group links:
- Drop the Debt
- European Network on Debt and Development
- Bank Information Centre
- Globalisation Challenge Initiative