Unusually for the World Bank – IMF meetings in Washington, much of the talk this year was focused on what was happening at the Fund. With the managing director’s strategic review being considered by the board of governors, many probing questions about the Fund’s role and continued relevance were being posed. Having finalised its share of the G8 debt deal, the World Bank’s governors were left to discuss the controversial clean energy investment framework, while in the corridors all discussion was about president Wolfowitz’s high-profile announcements on corruption.
Thursday April 20
Wolfowitz announces new managing directors
President Wolfowitz appointed Graeme Wheeler and Juan Jose Daboub to managing directors positions. Before joining the World Bank in 1997, Wheeler was the deputy secretary to the New Zealand treasury and also has experience as treasurer of the New Zealand debt management office. Daboub has previously served as finance minister of El Salvador.
Activists interrupt opening press conference
As Wolfowitz tried to discuss the Bank’s plans for energy and climate change, activists from US Food and Water Watch unraveled a banner which read “Corporate corruption, who can we thank? The IMF and the World Bank”. Read more on the IFIwatchnet weblog
Friday April 21
NGO press conference on the World Bank and corruption
A coalition of NGOs criticised the Bank for ignoring the fundamental causes of corruption and dragging its feet in responding to allegations of corruption in Bank-funded projects. “The World Bank has financed many projects riddled with corruption such as the Enron power plant in Guatemala, the Chad-Cameroon oil pipeline and Shell in Nigeria,” said Wenonah Hauter of US NGO Food and Water Watch, “Many of these corporations are engaged in highly questionable activities, financed by the World Bank, that involve influence payments, human rights abuses, and projects with damaging social and environmental impacts. Who holds the World Bank accountable for continuing to reward corrupt behaviour?”
Food and Water Watch interrupted the Wolfowitz press conference on Thursday (see above). ‘Mug shots’ of activists involved were distributed to security guards to save president Wolfowitz from any further embarrassment.
G8 debt deal confirmed; Final list of HIPC-eligible countries
The Bank announced that the final technical hurdle had been passed, as a sufficient number of member countries of the International Development Association had approved the Multilateral Debt Relief Initiative (MDRI, or commonly known as the G8 Gleneagles debt deal).
Bank and Fund staff have identified 11 countries that meet the income and indebtedness criteria of the Heavily Indebted Poor Country (HIPC) initiative as of the end of 2004. These include seven countries that had been previously identified as HIPCs (Central African Republic, Comoros, Cote d’Ivoire, Liberia, Somalia, Sudan, and Togo) and four other countries (Eritrea, Haiti, the Kyrgyz Republic, and Nepal). Three countries that technically meet the income and indebtedness criteria have indicated that they do not wish to participate in the initiative (Bhutan, Lao PDR and Sri Lanka).
Dialogue on development policy lending and conditionality (see Eurodad summary of spring meetings)
Africa Action, 50 Years is Enough Network, Jubilee USA Network, Mobilization for Global Justice and Stop HIV/AIDS in India staged a theatrical “health inspection” of these institutions, finding them to be a public health hazard in Africa and other impoverished regions.
The World Bank’s governance conditionality: Time for reform (see Eurodad summary of spring meetings)
Briefing on the IMF strategic review
Outgoing head of Fund external affairs, Tom Dawson, hosted a session with CSOs on the Fund’s medium-term strategic review. In response to charges that the process of developing the review had been opaque, Dawson offered “slightly structured outreach to CSOs over the summer”. Implementation would begin following endorsement of the document by the IMFC on 22 April. When CSOs insisted that being asked to consult on a document already in implementation was like “re-arranging deck chairs on the Titanic”, Dawson became belligerent, insisting that the Fund knew NGO opinions on the range of issues discussed, and that CSOs should present their views to their own governments.
On governance reform, Dawson said that the key issue was how tightly a ‘second stage’ of reforms (including basic votes, board chairs and quota formulas) was tied to the ‘first stage’ (ad-hoc quota increases for countries whose representation is particularly out of line with what they should have under the current quota formula). Dawson said the US wanted a tight linkage. The G24 group of developing countries has called for specific timelines to be set. Dawson assured CSOs that the best way to kill the governance reform discussions would be to push debate over a new quota formula.
On selection of the managing director, Dawson said that the Fund “had already crossed the line” into a transparent and meritocratic selection process, citing the inclusion of non-European candidates in the selection processes for the last two heads of the Fund.
Intergovernmental group of 24 (G24) communiqué
The G24 grouping of developing countries on the board of the IMF commented on all the major issues on the agendas of both the IMFC and the Development Committee:
- Trade: greater attention to the political economy of trade reform, poverty and distributional outcomes and shocks;
- Debt: extend the Multilateral Debt Relief Initiative (MDRI, or G8 debt deal) to all low-income countries and speed up its implementation;
- IMF strategic review: the IMF can do more to prevent crises through the automatic provision of adequate financing on a precautionary basis. The G24 expressed “reservations” about charging for technical assistance. On the issue of developing country representation in the governance structures of the Fund, the G24 was concerned about the lack of deadlines for progress and continued to call for a new quota formula and an increase in basic votes;
- Climate change: underscored the principle of common but differentiated responsibilities, requiring “developed countries to take responsibility for their historic and current contributions to environmental degradation”.
G7 finance ministers’ communiqué
The surprise in the communiqué was that China was singled out for needing to make its exchange rate more flexible, a breach in the normally vague language of diplo-speak. The IMF strategic review was welcomed, but disappointingly on the governance issue, only ad hoc quota increases were mentioned – no talk of a so-called ‘second step’ constituting an increase in basic votes and a reconsideration of chairs on the board. The president of the Bank was requested to come up with a strategy for fighting corruption.
NGOs expressed disappointment that more was not accomplished toward meeting the UN-sanctioned goal of cutting poverty in half by 2015. ‘By their next meeting, we want to see real change – not just pocket change – for the 100 million poor children out of school,” said Max Lawson, policy adviser for Oxfam International.
Saturday April 22
Senior IMF staffer Peter Heller walks out over accusations of culpability for wage ceilings.
International Monetary and Finance Committee
- Global economy and financial markets – outlook, risks and policy responses
- Implementation of the IMF’s medium-term strategy
- Low-income countries: Status of the Multilateral Debt Relief Initiative and debt sustainability
- Progress reports on avian flu, and the Independent Evaluation Office
The IMFC backed down from naming China specifically in its discussion of global economic imbalances, referring euphemistically instead to the need for “greater exchange rate flexibility in a number of surplus countries in emerging Asia”. There was a call for the US to increase savings and reduce the budget deficit, and for Europe and Japan to continue “further structural reforms”. Despite high and volatile oil prices, the Committee welcomed the continued strong expansion of the global economy and called for collaboration of oil producers, consumers and companies in order to improve the supply-demand balance in oil markets over the medium term. In light of the economic expansion, it called on member countries to reduce fiscal deficits and in order to proceed with such reforms in pension and health systems. On the Doha Round, the Committee called on members to “resist protectionism” in trade and foreign direct investment, and to reach an agreement on a comprehensive package for a strengthened multilateral trading system.
On the Fund’s strategic review:
- the Committee endorsed the need for ad-hoc increases in quotas for countries under-represented under the current quota formula. Insiders say that this is likely to be limited to increases for China, South Korea, Mexico and Turkey, but if the list is expanded, it could include Singapore, Thailand and Malaysia. No mention of so-called ‘stage two’ measures such as an increase in basic votes, a change in the quota formula, or a revision in chairs on the board.
- On surveillance, the Committee endorsed the proposal for a new framework for multilateral surveillance.
- On crisis financing, the Committee supported “further examination” of the proposal to create a new high-access financing instrument. This language is likely a concession to countries such as Germany which are said to have serious reservations about the proposal, wanting to maintain a much higher level of conditionality on any such instruments. The Committee asked the IMF to explore the role it can play in supporting regional arrangements for pooling reserves, and for a review into the IMF’s policy on lending into arrears.
- On low-income countries, nothing new. The Committee welcomed a continued IMF role, the latest debt relief deal and called for the “refinement” of the Bank-Fund debt sustainability framework.
Sunday April 23
- Global Monitoring Report 2006: Strengthening Mutual Accountability – Aid, Trade and Governance
- Clean Energy and Development: Towards an Investment Framework
- Reports to be discussed: Fiscal Policy for Growth: An Interim Report; The Doha Development Agenda and Aid for Trade: Hong Kong and Beyond – Progress Report; Heavily Indebted Poor Countries (HIPC) Initiative: Final List of Countries Potentially Eligible for Assistance under the Initiative; Global Monitoring Report 2006: Strengthening Mutual Accountability – Aid, Trade and Governance; Clean Energy and Development: Towards and Investment Framework
Development Committee communiqué
Media, CSOs and Bank staff were all talking about corruption, so it comes as no surprise that the Committee did too. Drawing from the Global Monitoring Report, the Committee asked the Bank to develop governance indicators, and come up with a strategy to address corruption by the time of the annual meetings in September. Apparently some fairly charged statements were given by developing country representatives who are not pleased by the high-profile and apparently arbitrary way in which president Wolfowitz has approached the issue thus far.
Despite rumours that middle-income countries had been blocking discussion of climate change at the Bank (along with the US and some other northern countries), the G-plus-5 group (Brazil, Mexico, China, India and South Africa) have backed the Bank’s initial stab at a clean energy investment framework. The committee asked the Bank to assess needed changes in existing financing instruments and to explore new instruments to accelerate investment in “clean, sustainable, cost effective and efficient energy”. Strong feelings were apparently exchanged during the discussions on the inclusion of different energy types in the mix. The US and UK were reported to be supportive of keeping nuclear in the mix, while Brazil was vocal about the need to learn from its experience with biofuel. A progress report has been requested by the time of the annual meetings.
The Committee welcomed the completion of the Multilateral Debt Relief Initiative and the final list of potentially eligible countries for the HIPC initiative. A paper is expected shortly which will address the issue of ‘free-riding’ – where both private and sovereign lenders take advantage of the space created by debt relief initiatives to lend at market rates to countries which risk getting back into debt troubles. The committee called for all export credit agencies, IFIs and other official creditors to use the Bank-Fund debt sustainability framework in their lending approach. This will further stress the importance of the overhauling of this approach, which civil society debt observers say should be based on human development needs.
More language on education in the final communiqué than had been expected given that it didn’t merit a mention in the G7 finance ministers communiqué. The Committee called on donors to fill the financing gap for universal access to primary education, and asked for a progress report on the Education for All – Fast Track Initiative by the annual meetings.
On aid more generally the Committee called for rapid progress in implementing the Paris Declaration framework. Donors are encouraged to move towards multiyear commitments in order to improve aid quality and delivery and to ensure closer alignment with PRSPs. Greater coordination is requested of the Bank and other partners at the country level, for instance with regard to health systems. The Committee noted progress made on the International Finance Facility for immunisation, and the key role of the Bank and IMF in helping countries to improve their absorption capacity. It welcomed the creation of the Exogenous Shocks Facility and Policy Support Instrument at the IMF in terms of flexibility in dealing with low-income countries.
The committee called for a report on the Bank’s strategy in middle-income countries by the annual meetings. Look for ‘clean energy’, infrastructure, and new regional financing arrangements to figure prominently in the Bank’s attempt to re-invent itself to stay relevant for emerging economies.
Monday April 24
CSO meeting with the Inspection Panel