- G24 communiqué: analysis, original document
- IMFC communiqué: analysis, original document
- Development Comm. communiqué: analysis, original document
- The G20 did not release a communiqué during these meetings.
The G24 is a grouping of some of the most influential 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.
From the G24 communique it is clear that there is as much concern in developing countries as in developed countries about the state of the global economy and its “high downside risks”. Apart from weak global demand and the refugee crisis, the risks are mainly attributed to advanced economies (AEs) and their “subdued growth outlook”, the “monetary policy normalization in the U.S., rebalancing in China, volatile financial markets, political tensions, [and] uncertainties related to Brexit”. The G24 countries are signalling concern about the slowdown in the growth of global trade and make it clear where the blame lies, with an “increase in protectionist trends” and the “backlash against globalizations, mainly in AEs”. They also note the “adverse effects of illicit financial flows”, calling for “strengthened support” of the Fund and Bank in the “broader effort to combat illicit financial flows”.
The G24 countries argue for “boosting and sustaining growth” in order to achieve the Sustainable Development Goals, and “improving social protection, broadening financial inclusion, addressing under-employment and unemployment” and “fostering effective female labour force participation.” Similarly to the Bank and Fund’s statements, the G24 have internalised this inclusive growth argument, but talk is cheap. They emphasise the need for support for “capacity building on domestic resource mobilization in developing countries”. The G24 welcome the Platform for Collaboration on Taxation (not mentioned elsewhere) and notably “encourage all countries to join the BEPS [base erosion and profit shifting] inclusive framework on an equal footing” and press for the improvement of “the international standards on tax transparency”, as well as enhancement of “the availability and the international exchange of beneficial ownership information of legal persons and legal arrangements.”
The G24 “look forward to ambitious efforts by Multilateral Development Banks (MDBs) to effectively support sustainable infrastructure financing”, focussing on countries impacted by external shocks facing constraints in accessing financing”, however, civil society may wonder what kind of infrastructure they are calling for. They underscore the need for “encouraging and enhancing the participation of the private sector as an additional source of capital”. The communiqué points to the G20 Hangzhue Action Plan, “which emphasises the role of infrastructure development in the growth agenda and highlights the key role of MDBs”, something which the World Bank has now come to embrace rather than admit it feels threatened by; if you can’t beat them, join them.
The G24 countries desire to have no strings attached to their finance and “urge the international community to work with small middle-income countries to improve their debt sustainability”, calling on developed countries to fulfil their commitments on concessional finance –keen for it to be generous – both for official development assistance (ODA) as for the 18th replenishment of the Bank’s low income country arm, the International Development Association (IDA), as well as supporting an IDA private sector window under the IFC and MIGA, and “are pleased with” the focus on and doubling of finance to fragile and conflict situations. This may well be problematic given that financing coming through the IFC and financial intermediaries has repeatedly come under fire from civil society , as we have often noted. On climate action post the Paris Agreement, the G24 “look forward to a concrete roadmap from developed countries to meet their Climate Finance commitments”, calling for financing that is provided through grants.
The G24 “support efforts to further strengthen the Global Financial Safety Net” and encourage “an adequately-resourced, quota-based IMF” to be central to that, whilst calling for “more even-handed IMF surveillance, program-design, and monitoring” that does not put the burden on developing countries. The ongoing concern of developing countries is to ensure their voice in these institutions is consistent with their growing economic weight, reminding the Bank of the Istanbul Principles, highlighting the WBG’s ‘Forward Look’ exercise, welcoming the creation of the Global Crises Response Platform and “all options to strengthen the financial capacity of the IBRD [the International Bank for Reconstruction and Development, the Bank’s middle-income country arm] and International Finance Corporation (IFC)”, closing with endorsing the WBG’s “modernized Environmental and Social Framework”, especially keen that the framework “gives a greater role to the use of borrower frameworks”, ultimately meaning less constraints.
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 to the IMFC, often revealing of the true differences of opinion amongst the IMF’s membership – are also made available online.
IMFC Chairman and governor of Mexico’s central bank Agustín Carstens referred to the communiqué as reflecting IMF managing director Lagarde’s “too low for too long and benefiting too few” message. The IMFC has adopted a tried-and-tested approach; first acknowledge in technocratic terms problems of growth and the inequity of how its benefits are (not) shared, set out some mitigation strategies whether it be for ‘more inclusivity’ or to lessen the burden on Low Income Countries (LICs) and hope to muddle through until the next meetings. The statement headlines the theme of the meetings: that trade and global cooperation – and therefore economic recovery – are under threat. However, the focus, beyond cautioning against populist protectionism, is rather tame. Some space is provided to longstanding concerns over illicit flows, over the growing risks to developing countries, and the need for a more active role by countries to foster growth. However, the overall impression of muted positions suggests that not all countries agree on the seriousness of the situation, and even where they do agree, consensus is lacking as to quite what to do about it (and where the fault lies).
The statement points to the “persistently low growth [which] has exposed underlying structural weaknesses”, and in case you didn’t get the message, adds that “uncertainty and downside risks are elevated, while longstanding headwinds persist”. It sees growing threats that exacerbate this insipid situation due to “inward-looking policies, including protectionism, and stalled reform”. Did anyone mention Trump? Or in the politer terms of the World Trade Organisation’s statement to the IMFC “we must be attentive to the declining public sentiment regarding trade liberalisation”.
The IMFC breaks, finally, from the pattern of previous communiqués stating that “we will use all policy tools—structural reforms, fiscal and monetary policies—both individually and collectively” to encourage growth and it may even feel like grounds for optimism that they add that “all countries should use fiscal policy flexibly and make tax policy and public expenditure more growth-friendly”. But reading more closely one sees this call to arms couched in the usual caveats about structural reforms. A quick glance at the IMFC statement, to take one example utterly at random, the German finance minister might suggest one source of where this caution is coming from and why it pays to be sceptical as to what policy this communiqué might actually encourage. The IMFC point to “further work identifying the reasons behind rising inequality in some countries, including analyzing the causes behind the declining share of labour in output and understanding the impact of policies on inequality“Indeed, early indications of imminent loans in Egypt and Zambia suggest the IMF is not heeding its own committee’s advice. The ILO’s IMFC statement reminded the participants that perhaps even more urgency is needed, given that “over 70 million women and men not in work today would have had a job if pre-crisis growth had resumed”. Indeed the sense we had in April, especially following the release of the Panama Papers, that the IMFC was taking note of concerns over illicit flows, the need to encourage countries to use capital flow management measures or simply enact fiscal and not just monetary policy, has somewhat fizzled out.
Though the statement acknowledges that “monetary policy by itself cannot achieve sustainable and balanced growth” the words on illicit flows and capital controls are more muted and perfunctory than before. April’s much-vaunted tax collaboration platform also appears to have rather disappeared into a technocratic black hole and seems far from a comprehensive response to the limitations of the BEPS (base erosion and profit shifting) work or the Panama Papers revelations.
Instead of these hoped-for signs, the IMFC stays on the uncrontroversial territory of looking forward to “finalising the ongoing review of the IMF’s lending toolkit to further enhance its effectiveness”. The desire to see this no doubt stems from growing concerns for and within developing countries as to their potential need for ever-greater IMF support and scepticism over whether the hoped-for alternative sources of financing to the Fund are viable. Instead the communiqué celebrates the “extension of zero interest rates on all IMF concessional lending facilities for at least the next two years, through end-2018.”
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.
As has now become depressingly customary, the latest Development Committee communique begins by once again expressing anxiety about continued slow growth and lack of demand, but this time (perhaps with an eye on Trump’s continued resilience in America’s presidential election polls) adding concerns about the growing anti-globalisation sentiment world-wide. The governors rather optimistically requested IMF and World Bank Group (WBG) leadership in re-establishing support for multilateralism, but without suggesting that the institutions revisit their development models or investigate the root causes of the rise in antagonism toward globalisation.
Recognising that in an increasingly competitive environment, the Bank must seek to maintain its relevance by means that go beyond its lending programmes, the document emphasises the need for the WBG to remain at the forefront of policy formulation and the provision of technical assistance. The increased focus in these areas of the Bank’s work and their wide-ranging impact are precisely the reasons that civil society has demanded that social and environmental safeguards should be developed for all Bank activities, including development policy lending and Program for Results.
In addition to the continued grim world economic outlook, the Committee identified climate change, demographic change, conflict, rapid urbanisation and mass migration as serious challenges in need of Bank and Fund attention, noting the need to ensure all interventions support the Sustainable Development Goals (SDGs) and the Paris climate change agreement.
In regard to one of the key items in the agenda of this year’s annual meetings, the Committee welcomed the Forward Look report and the document’s emphasis on increased collaboration with other IFIs, focus on leveraging private sector involvement and support for domestic resource mobilisation. The document welcomed the September launch of the Global Infrastructure Connectivity Alliance and indicated that the governors expect Forward Look indicators by Spring 2017. The focus on cooperation among multilateral development banks (MDBs) was echoed in the Statement by Multilatetaral Development Banks.
As noted in our wrap-up of the annual meetings, civil society remains deeply concerned about all the trends pushed by the Forward Look, fearing that they will result in mega regional other infrastructure projects of dubious benefit for marginalised communities, implemented by potentially costly public-private partnerships that do not appear in countries’ balance sheet that do nothing to liberate developing countries from their dependency on commodity exports. As also noted by civil society during the meetings, while the Bank’s focus on support for domestic resource mobilisation is certainly a step in the right direction, the lack of a progressive tax policy by the International Finance Corporation (IFC, the Bank’s private sector arm) that ensures it does not invest in companies that use aggressive tax policies, thereby depriving developing countries of essential domestic resources, remains highly problematic. While the Committee did not mention this minor incoherence, it at least did stress that Bank support should be focused on countries most in need of capital.
Reflecting wide support for the 18th round of replenishment for the International Development Association (IDA, the Bank’s arm for low-income countries), the document highlights that an “ambitious” IDA replenishment is key to fulling the objectives of Agenda 2030. The Development Committee therefore expressed its support for doubling resources to IDA, including specific support to refugees and host communities, agreeing with civil society that the increase in resources should be accompanied by strengthened capacity to work in these difficult environments and better coordination with humanitarian actors. Apparently unconcerned with the very troubling IFC track record in less complex environments, the governors welcomed IDA’s new private sector window.
With regards to the Bank’s efforts to combat climate change, the governors noted that they look “forward to implementation of the WBG Climate Change Action Plan and support countries’ nationally determined contributions under the COP21 agreement.” Civil society will no doubt hope that the criticisms of the Bank’s continued support for fossil fuels will be taken onboard by Bank management and result in significant changes in policies.
Noting that the SDGs cannot be met “unless countries make significant progress in closing gender gaps in key sectors”, the Committee “strongly” supported the continued implementation of the Bank’s 2015 gender strategy, which the Bank’s Independent Evaluation Group recently noted had become a ‘tick-box’ exercise. Civil society has been strongly demanding that the Bank’s gender strategy move beyond instrumentalising women as agents of economic growth and adopt a human-rights based approach to its work on gender.
Speaking of human rights, or the lack thereof, the governors welcomed the approval of the Bank’s new, and heavily criticised, environmental and social framework, noting, without apparent irony, that the new framework is part of the Bank’s effort to improve development outcomes. Affected communities left with an erosion of their protection will likely not find the link obvious. Echoing civil society demands, now that there is no hope of changing the framework, the Committee asked “the Bank to focus on effective implementation, ensure appropriate financial and human resources to build staff and client capacity, establish a robust accountability framework, and provide hands-on support where needed.”
On the sensitive topic of the Bank’s “roadmap for implementation of the Shareholding Review that was agreed at the 2015 Annual Meetings”, the governors thanked the executive directors “for completing their work on a dynamic formula that reflects the evolution of the global economy and contributions to the WBG’s mission” and noted that they “look forward to the next stage of discussions, based on agreed shareholding principles, formula guidance, and the package of commitments in the Report to Governors on the Dynamic Formula.”