- G24 communiqué (16 April): analysis, original document
- G20 finance ministers’ communiqué (17 April) : analysis, original document
- IMFC communiqué (18 April): analysis, original document
- Development Committee communiqué (18 April): 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.
This G24’s Spring 2015 communiqué reveals a number of urgent issues of concern to developing countries. These include the uncertain consequences of the ongoing “new mediocre” as managing director Christine Lagarde has christened the sluggish global recovery, the subjects in the UN’s July Financing for Development Conference (FFD) which G24 states feel are most likely to yield unsatisfactory outcomes, and of course the bitter disappointment over the ongoing failure to reform the IMF. This all makes the frequent references to alternative institutions being built in the south more comprehensible, including the BRICS’ (Brazil, Russia, India, China and South Africa) Contingent Reserve Arrangement (CRA) and New Development Bank (NDB), and China’s Asian Infrastructure Investment Bank (AIIB).
On FFD, the G24 set out a host of issues on which they demand progress in the ongoing negotiations and seek to pressure richer states. Though they welcome the role of the Bank and Fund in contributing to these institutions, they tellingly add that these should be “consistent with their mandates and areas of expertise”, which tallies with concerns cited by civil society participants in the FFD negotiations that the two Washington Institutions have been playing a blocking role behind the scenes. They emphasise the need for coordinated tax reform to stop harmful tax avoidance, arguing that effective domestic resource mobilisation (DRM) will be crucial to achieving the goals of FFD. The communiqué also seeks to keep up the pressure so that negotiations should reflect the recommendations of the High-Level Panel on Illicit Financial Flows from Africa that highlights the “negative impact of outflows emanating from lawful but harmful cross-border practices”. On climate and the FFD, they reiterate the need for “adequate, new and additional finance” to aid climate change mitigation and adaptation.
A major, repeated point in the FFD section is the value and importance of more development institutions, regionally and based in the South. It is hard not to see the subtext of frustration in this. They note that MDBs “need to play a greater role in supporting governments in their efforts to scale up investment in infrastructure” and rather pointedly add “we also look forward to the operational launch of the New Development Bank and the establishment of the Asian Infrastructure Investment Bank”. They also make reference to the CRA when complaining of the ongoing risks to their economies from rich countries’ sluggish growth. They are basically telling rich countries to put their own economic house in order. By citing the potential “fallout from Greece” and implying that the need for alternatives to the Fund, such as the CRA, they reveal just how badly managed the global economy currently is in their view.
On the failure of IMF reform to move forward even an inch, the G24 states don’t mince their words. They state their “deep disappointment with the lack of progress in implementing the IMF quota and governance reforms agreed to in 2010 and strongly urge the US to complete ratification. This remains an impediment to IMF credibility, legitimacy, and effectiveness”. For the first time, they advocate de-linking of the two intertwined issues that Congress continues to block, reform of the Board and countries’ quotas. They suggest this as an “interim” solution, so that IMF resources can be increased without waiting on a Republican-controlled Congress to ratify reforms to an institution that some Congressmen and women like to suggest is a proto-socialist organisation not deserving of any more funds (or for that matter, enhanced representation of developing countries)! They remind the richer countries that an additional developing country place on the Board is also overdue, anticipating the subsequent quota reform, which is also now coming, due by December.
G20 finance ministers’ statement
The G20 is a grouping of some of the largest countries in the world. Since 2009 it has met more frequently, and in 2014 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.
This spring meetings G20 communiqué had, as has now been the case for some time, strikingly little to say of note. There are the usual noises about the global economy, sounding a touch more optimistic than previously but noting the risks to the global economy. Though there’s not a word about Greece, or the potential for a chaotic exit from the euro (or Grexit), mucking up the IMF forecasts, which had once again to be downgraded. After years of over-optimism, you would think they had learned their lesson.
On the substance the now all-too-familiar devotion to infrastructure investment delivered through public-private partnerships is reaffirmed. The G20 commit to “further promote infrastructure investments and more involvement by the private sector, we will continue to strengthen capacity building in and the functioning of PPP models and encourage an optimal use of multilateral and national development bank resources and facilitate the development of appropriate financial vehicles including asset-based financing structures.” We will have to wait and see if the paper by the IMF, which the communiqué is looking forward to, reiterates past criticism and concerns of these approaches or soft-soaps them given that criticism may not be what the G20 members wish to hear.
It wouldn’t be a G20 statement if there were not the painfully repetitive ‘disappointment’ expressed in the lack of a resolution of the IMF reform process. But despite the G24 statement calling for de-linking the reform and proposing “interim solutions” (note that a few G20 members of course are also part of the G24), there is no awkward citation of bypassing the US Congressional impasse nor ‘interim proposals’ that could risk diluting the US veto, even just temporarily.
Perhaps most significantly, they indicate that the G20 is on track to finalise the G20/OECD tax work (the nattily titled “base erosion and profit shifting action plan”). Additionally they graciously reiterate that “we are committed to promote an enabling environment for developing countries, including low-income developing countries” in the upcoming Financing for Development summit in Addis Ababa and the climate summit in Paris. We shall have to wait and see.
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 ministerial statements will also be available online.
The latest IMFC appears to be something of a curate’s egg. You may be wondering what a curate’s egg is – so read on. At first glance the latest IMFC statement draws out the familiar debate over how to manage a still-ailing global economy and achieve growth, by more cuts and reform or by prioritising investment, demand and jobs. But given the context of looming UN summits on Financing for Development, Climate and the post-2015 goals, there may also be something rather significant lurking between the lines.
The communiqué’s positive points, and they are there, are couched in more troubling calls for greater public-private investment in infrastructure, the ‘criticality’ of fiscal consolidation, and a seemingly fatalistic acceptance of the new ‘mediocre’. The calls for labour market reforms and financial deepening all hark back to a troubling past for the global economy, and cast doubt on the extent to which the positives are likely to materialise, given the role leading members of the IMFC are playing in the Greek crisis and in the negotiations for the UN Financing for Development conference and the climate summit later this year. Structural reforms are “critical” – these will apparently “boost business confidence, investment, and job creation” while simultaneously achieving “sustainable and more inclusive growth”.
A notable bright spot is the recognition of the need for “a stronger role of women in the economy” as necessary to achieve this, but more troubling is the simultaneous call for more “labour market reforms, deepening financial markets”. In the IMFC press conference Lagarde indicated that the IMF’s upcoming May paper on infrastructure would reveal that “pretty much every project is suboptimal in its selection, management, and can be improved by a margin of about 30 percent”.
However, it is possible to detect a rather more ambitious and significant subtext: a reinvigorated IMF.
This is visible in the new big idea – a “new multilateralism” that will seek to “build a new global framework for sustainable development through 2030 and beyond”. This seems to be the great encompassing approach that can put the differing needs of the global economy together – resolving how to achieve “macro-financial resilience, increase revenue mobilization, help tackle infrastructure gaps, enhance capacity building, and promote inclusive growth”. The IMF seems to be at the centre of building the model of the future global economy. The Fund is asked to work on “fragile and conflict-affected members” and told to “make more use of its existing lending framework” and to “contribute positively” to the FFD, Post-2015 SDG and climate summits later this year.
This communiqué may one day come to mark the coming of age of the IMF’s third phase. The Fund reinvented itself once already in the 1980s to become the prophet of structural adjustment. Yet by the time of the international financial crisis, the IMF had been in almost existential doubt as to its future role and relevance (much like the current commentary about its sister organisation, the World Bank).
There is no more doubt. The IMFC has reaffirmed its role. The Fund is invited to tackle gender challenges, inequality, fragile states and those “most poor and vulnerable” to pandemics, alongside expanded activity in familiar territory such as financial deepening, more interventionist and comprehensive surveillance, and last but far from least the mandate to frame a “new multilateralism” toward 2030.
A curate’s egg is a phrase usually taken to mean something that is a little bit good and a little bit bad. But the source of the phrase is instructive; it originates from a 19th century satirical cartoon depicting a meek priest (the curate) who, when given a stale egg by his very senior bishop, does not complain but instead suggests that ‘parts of it are excellent’. Though there are welcome elements, this communiqué still leaves a bad taste in the mouth.
This is because the legitimacy of tasking the IMF with all of these challenges is undermined by the seemingly endless saga of stalled governance reform at the Fund. The IMFC continues to “remain deeply disappointed with the continued delay” and advocates exploring “interim solutions”, almost to a word endorsing the G20’s communiqué published a day earlier. Given the governance impasse and the refusal to contemplate a truly multilateral institution – by airing the possibility of ending the US veto – this pungent mix may be more akin to that curate’s egg than the fragrant new dawn apparently envisaged.
Development Committee communiqué
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 six months. The ministerial statements will also be available online.
The communiqué begins with a cautiously optimistic tone, noting the slight uptick in growth from 2014, apparently making this year’s ‘new mediocre’ a little less so. Interestingly the document also notes the need for vigilance in order to “protect hard-won gains”. One wonders whether this refers to a realisation that the putative progress made on the back of the development model supported by the two institutions is more fragile than normally admitted.
Helpfully that Development Committee provides a bit of clarity on the uncertainty surrounding the recent sharp fall in oil prices and commodity prices, bravely stating that this will likely result in a real income shift from oil exporter to importers. The communiqué concludes that this will result in a net positive impact for developing countries generally and will provide a great opportunity to pursue a popular policy of both institutions, the end of fuel subsidies.
In a not very subtle response to the concerns resulting from the establishment of the Brazil, Russia, India, China and South Africa (BRICS) New Development Bank (NDB) last year, and the more recent announcement of China’s Asian Infrastructure Investment Bank (AIIB), the communiqué commended cooperation among Multilateral Development Banks (MDB) to develop and eventually work to achieve the UN’s new Sustainable Development Goals (SDGs). In that vein the document notes the presence of the UN secretary general and heads of multilateral development banks (MDBs) at the Development Committee meeting. The note seems aimed at instilling in the new institutions a sense of team spirit, lest they develop ideas of carving out their own territories or approaches, oblivious to the oft-repeated refrain that the massive gap in infrastructure financing makes competition unnecessary and cooperation the word of the day. The role played by MDBs in advance of the UN’s Finance for Development meeting to take place in Addis Ababa in July is not without critics, as civil society has expressed concerns that the World Bank and IMF have played an unhelpful role behind the scenes.
The push for continued progress on the financial deepening front continues with references to the need to catalyse and leverage private and non-traditional finance, particularly for what seems development’s new silver bullet: large scale infrastructure projects. Despite a cautious approach undertaken by Fund and Bank officials during high-level discussions and conversations with civil society on the issue, public-private partnerships once again received support of the Committee by explicit mention of the potential in the communiqué. In this the communiqué gives IFC an important role, despite pressing concerns once again raised by civil society about the potentially serious negative human rights impact of IFC’s investments, including through financial intermediaries.
The Committee congratulates the Bank and Fund on their contribution to the Ebola response. While discussion on potential responses to future public health emergencies seems prudent, there is no mention of the need to strengthen country-level health system in order to avoid emergencies in the first place. This is particularly striking as the Ebola outbreak was greatly exacerbated by weak health systems of the affected countries.
Gender receives little attention in the communiqué, which limits itself to a reference to the renewed gender strategy that will be released later this year. One hopes the strategy will move beyond the additional focus on entangling women in commercial financial systems through micro-credit lending or focusing on increased labour participation regardless of jobs quality. It is hoped the new strategy will focus on structural issues that constrain women socially and economically.
On climate change, unsurprisingly, the communiqué expresses its support for the World Bank and IMF’s market-based approach to this pressing problem. Apparently the meeting’s flagship event, co-hosted by the UN Environment Program (UNEP), on aligning the financial system with sustainable development did not make much of an impression on the Committee, as the event’s five panelists stressed that market-based solutions without a strong role for governments are unlikely to succeed and that a carbon tax, for example, was much preferable to carbon trading schemes.
The Committee, presumably as anxious as everyone else to see the end to the endless and highly contentious strategy and reform process at the World Bank states that it looks forward to its implementation. It also mentions that it welcomes the ongoing consultations on the Bank’s much criticised draft new safeguards, but without making mention of the concerns that have arisen from the recent damning report on the failure of the Bank’s implementation of its resettlement plans.
The communiqué calls on the Bank Group to continue to foster South-South cooperation, and to focus on fragile and conflict-affected states. No doubt reflecting fears of the wider impact of the conflicts in the Middle East and North Africa, the document makes specific mention of these and “look forward” to the exploration of ways to increase IDA financing.
Finally, the communiqué ends by looking forward to the completion of the 2015 shareholder review to be completed for the October annual meeting in Lima Peru. The establishment of the AIIB and NDB is likely to make the review more interesting than usual.