IFI governance


The Bank and the IMF in 2016: year in review

17 February 2017

The Coalition for Human and Rights and Development and #RaiseTheMic protested outside the World Bank Headquarters in Washington, DC April 2016. Credit: International Accountability Project

The Coalition for Human and Rights and Development and #RaiseTheMic protested outside the World Bank Headquarters in Washington, DC April 2016. Credit: International Accountability Project

2016 was characterised by continued concerns over the anaemic state of the world economy, which were exacerbated by mounting fear of an anti-trade, populist backlash. While the IMF and World Bank tried to soften their image through a rhetorical focus on inequality, women’s ‘empowerment’ and support for environmental responsibility, civil society and affected communities saw little change in Bank and Fund policies and operations on the ground.

In fact, both continued to press for increased reliance on the private sector and market-based solutions to meeting the financing gap required to meet the UN’s Sustainable Development Goals. This included demonstrating leadership on a push for increased cooperation among multilateral development banks (MDBs) with a focus on mega infrastructure projects, a reliance on public-private partnerships (PPPs) as a way to circumvent constrained fiscal space and a continued push for labour flexibilisation and other supposedly defunct conditionalities.  Along ‘the more things change the more they stay the same’ theme, both institutions saw their respective European and American leaders re-appointed for a second term.

World Bank

One of the key topics on the World Bank and IMF’s development committee agenda during 2016 was forced displacement, referring to the ongoing refugee crisis, with the Bank putting itself forward as a key player in resolving the crisis. The Bank’s eagerness to assume leadership was, however, not matched by a corresponding willingness to discuss its role in contributing to displacement, which came to prominence in 2015 after a long delayed internal review was finally made public. The Inspection Panel, the Bank’s accountability mechanism, also launched its first report in a new series on “emerging lessons”, which happened to be precisely on involuntary resettlement.

Another major theme of 2016 was the cooperation of the MDBs. The April spring meetings saw all the major MDBs lining up for the inaugural Global Infrastructure Forum, including the ‘new kids on the block’, the Asian Infrastructure Investment Bank (AIIB) and the BRICS’ (Brazil, Russia, India, China and South Africa) New Development Bank (NDB). Moreover, the AIIB signed an MoU with the Bank to cooperate on projects. Concerns remain over how much this process will primarily facilitate controversial large-scale projects. Despite the Bank telling CSOs repeatedly that they don’t “push” PPPs, this was very much the word of the day at the Global Infrastructure Forum and elsewhere. The question remains whether these contracts lock poor countries into social, economic and environmental disasters, where the governments have to pay premiums to ‘minimise the risk’ to the private sector. As the year came to a close, the Bank signed up to another controversial MDB-funded mega project deal, the Southern Gas Corridor – however, less advertised was its retreat from previously much-promoted mega projects, most significantly the Inga 3 hydropower project in the Democratic Republic of Congo.

After a fraught four-year process, the Bank’s new social and environmental framework (ESF), replacing the safeguards, was approved in early August. Despite the lengthy consultation process, civil society remained unconvinced and continued to accuse the Bank of “diluting” its responsibilities and the protections afforded to communities by the framework. Lots of details are yet to be clarified, not least the Bank’s commitment to consulting on the guidance notes, which will set-out the ESF’s implementation. Moreover, given that development policy lending was never included in the safeguards review, civil society is now calling for this big loophole to be put back on the table.

Gender continued to be a prominent theme of both the Bank and Fund’s recent research and PR. The March launch of the UN High Level Panel on Women’s Economic Empowerment (HLP) featured a host of big names, including Fund managing director Christine Lagarde and Bank president Jim Yong Kim. The World Bank says it is now implementing its 2016-2023 gender strategy, launched in December 2015, with the now familiar mantra on how the private sector is a key partner for implementation, but little information on the implementation has been shared with civil society. In October the Bank launched its task force to tackle gender-based violence, but without the inclusion of a single women’s group or clarity on its commitment to implement the Task Force’s recommendations.

Another topic featuring on the side lines during the year was the follow up to the Paris Agreement on climate change, signed off under the UNFCCC process in December 2015. During the spring meetings the Bank put itself forward for a key role in the implementation of the agreement, including through its low-income country arm, the International Development Association (IDA), but concerns remain about how much the Bank’s work is actually contributing to rather than mitigating climate change. Questions were also raised about whether climate finance will primarily go through the UN’s Green Climate Fund or the Bank-hosted and MDB-led Climate Investment Funds (CIFs), with the implementation of the CIF’s so called ‘sunset clause’ yet again being pushed into the future. Moreover, the Bank’s lofty words on climate change continued to be tarnished by new reports outlining the Bank’s continued investment in fossil fuels.

Finally, 2016 saw the latest round of canvassing for the replenishment of IDA. While the Bank reported a successful round in terms of an increase in funds from $52 billion for the previous replenishment round, IDA17, to $75 billion for IDA18, worryingly a third of this is expected to be raised from the capital market. In another controversial move, IDA18 also saw the Bank introduce a new IDA private sector window, in collaboration with the Bank’s private sector arm, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Arm (MIGA), particularly focusing on fragile and conflict-affected states. This raises serious concerns on how the IFC will be able to operate effectively in these kinds of difficult and complex environments, given its poor track record, even in ‘less challenging’ contexts.

IFC and the private sector

The Bank’s push for leveraging the private sector continued to gain strength. Its support for PPPs and reliance on IFC investments, including through financial intermediaries (FIs), despite well-documented negative impacts, remained undiminished. In the current difficult economic context in which government budgets and fiscal space are under increasing strain, or are presented as such, the lure of the ‘risk-free’ private sector investment and market solutions to the provision of essential social services, including low-fee for profit schools or to pressing environmental issues will no doubt continue to appeal.

Adding to already ample evidence of the potential perils of IFC investments in FIs, 2016 saw the release of more detailed reports of human rights violations and environmental degradation linked to IFC-backed projects. The urgent need for international financial institutions to ensure that investments through FIs do not violate the rights of community members was tragically brought to light by the murder in March of Honduran activist Berta Cáceres, who had led local opposition to the Agua Zarca dam, linked to the IFC through an FI. The year closed with the release of a damning report detailing IFC’s investments in coal through FIs, in contravention of the Bank’s agreement to only fund coal “in rare circumstances” and despite repeated statements by president Kim about the need to end investments in fossil fuels. In no small part because of the leaked Panama Papers, momentum also continued to build on the need for responsible tax policies by international financial institutions, with light shed on IFC investments in companies that use tax havens.


The IMF’s traditional role of monitoring and safeguarding the global economy regained prominence in 2016. It is now deemed to be at the “apex” of the world’s Global Financial Safety Net (GFSN), a new buzzword meaning the patchwork of partial and emerging regional financial mechanisms intended to act in crisis. The continued presence of dark economic and political clouds on the horizon explained the announcement at the annual meetings of a $340 billion contribution by 25 IMF members, as bilateral creditors to the Fund, to “maintain the IMF’s lending capacity”. This replaced a $393 billion agreement from 2012, which had not been drawn on but was a significant element of the IMF’s lending ‘firepower’.

Perhaps chastened by a damning report from its Independent Evaluation Office (IEO) on the Fund’s role in the Ireland, Greece and Portugal programmes, the IMF painted the Greek government and the European Commission as overly optimistic in their projections and has continued to waver on its participation in Greece’s third Troika loan programme, signalling a break with its role of the previous six years. The IMF’s ‘rebranding efforts’ continued with a series of well-publicised papers on the perils of inequality and an article published in the IMF’s in-house magazine which appeared to question orthodox ‘neoliberal’ policies long-associated with the IMF, such as removal of restrictions on capital controls and fiscal consolidation. The Fund has also embarked on what it terms ‘macro-structural’ analysis to incorporate its emerging policies on gender and inequality.

A high-level seminar during the spring meetings including David Lipton, first deputy managing director of the IMF, made the macro-critical case for gender equality and came to the consensus that we have to “move faster and push the envelope” on gender equality, including at the IMF. Whether that means that the Fund’s gender surveillance pilots will evolve systematically to lending facilities and technical assistance and approach gender equality in a more coherent way remains to be seen.

The IMF’s 2016 World Economic Outlook focused on the continued threat of subdued demand and, as was the case with the World Bank’s “Forward Look”, the related perils of anti-globalisation and trade sentiments, noting the need for policy frameworks that “mitigate the adverse income-distribution effects of economic changes, whether due to technology, globalisation forces, or other developments” and provide “better social insurance mechanisms and appropriate income tax”. As the year saw quite a few eye-catching statements by the Fund on neoliberalism, inequality, labour reform, etc, civil society turned its attention to gauging the extent to which the change in rhetoric was matched by country-level policy changes.


The ‘cursory’ and early reappointment of Kim, another American man, as World Bank president in September and the reappointment of French Christine Lagarde as managing director of the IMF earlier in the year was further evidence of the slow-pace of structural changes in the governance of both institutions and ensured that the division of leadership of the Bank and Fund between the US and Europe remains unchanged. This was only reconfirmed by the fact that Lagarde retained her post despite her being subsequently convicted of negligence in a corruption scandal by a French special tribunal in December.

The closing of civil society space globally remained a pressing concern in 2016 and took many forms, from laws that restrict NGO campaigning to the intimidation of and violence towards human rights defenders. The Bank’s approach to civil society engagement was unflatteringly reflected in Kim’s dismissive attitude of civil society concerns during the annual meetings. This was particularly troubling in light of the persistent concerns raised by civil society about systemic problems, such as the Banks unwillingness to live up to its human rights obligations and ensure effective protection of communities through robust safeguards.

Work on the World Bank’s shareholding review continued with a “dynamic formula” presented at the October annual meetings, however, questions remain whether earlier disagreements on how the formula should balance GDP and contributions to IDA have been resolved. An agreement of the specifics of the new shareholding framework is expected by the 2017 annual meetings. Governors were also busy discussing the future of the Bank, through its secretive “Forward Look” process, which was presented at the October annual meetings. As expected, the document highlighted the Bank’s continued relevance as the premier development institution and stressed its importance in fostering inter-agency cooperation (read collaboration with other MDBs on mega infrastructure projects). Also dispiritingly, but unsurprisingly, the Forward Look continues to beat the drum for leveraging of private sector finance. In a reflection of mounting anxieties about growing anti-globalisation and populist sentiments, the document asserts the Bank’s key role in “support[ing] trade, openness, and free markets as essential conditions for growth and poverty reduction, and in leading a global agenda to address and mitigate the risks of globalisation”.