- G24 communiqué: analysis, original document
- G20 finance ministers’ communiqué: analysis, no document was released
- IMFC communiqué: analysis, original document
- Development Committee communiqué: analysis, original document
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.
The G24 communiqué of this year’s Spring Meetings began by pointing out that the bulk of global growth will be contributed by emerging market and developing countries (EMDCs), clearly signalling their expectation of greater influence in international financial institutions and over the global economy. The G24 countries expressed concern about tightening of global financial conditions, the potential turn to inward-looking policies, and a reversal of financial regulatory reforms in advanced economies (AEs).
In a nod of approval to the IMF’s recent work on inequality, the G24 countries indicated they will remain focused on boosting inclusive growth as key to raising living standards and reducing poverty. Pointing to an opportunity in this agenda to gain more policy space and autonomy, they specified they will use “all policy levers to ensure that benefits of growth are shared widely and to reduce high levels of income inequality” and called on the BWIs for support in this field.
Just as last year, the G24 continued to call for a strengthened Global Financial Safety Net, with “an adequately-resourced, quota-based IMF at its center”. They also called for more work to be done on minimising fears of “perceived stigma attached to IMF facilities” and “even-handedness” in lending decisions and welcomed the IMF’s review of its ‘institutional view’ on capital flows.
Under Financing for Development, this year’s communiqué focused in particular on issues related to tax, emphasizing progress made on improving tax revenue-to-GDP ratios and the important role of progressive tax policies in improving income equality. Once again, the G24 called for the upgrading of the UN Tax Committee to an intergovernmental body to “enhance the voice of EMDCs on international tax policy matters”, as opposed to the OECD-led BEPS process or the Platform for Collaboration on Taxation. They also called for the further development of fair tax rules to guide taxation of multinational corporations in particular and to prevent harmful international tax competition, negative spillovers from shifts in tax policies in major countries, and illicit financial flows.
Welcoming the increased 18th replenishment of the International Development Association (IDA), the G24 countries stressed the need to preserve concessionality as a core element of IDA and to ensure adequate concessional resources for the poorest and most vulnerable countries. Despite civil society concerns on mega infrastructure projects, the G24 called attention to the importance of scaling up infrastructure investments while stressing the implementation of the Paris Agreement on Climate Change and urged developed countries to authorise the use of reflows from the Clean Technology Funds.
On governance, the G24 countries expressed ongoing concern to ensure “the voice of developing countries in these institutions is consistent with their growing economic weight”. For the IMF, the group presented a clear timeline on their expectations for governance reforms, calling for “the completion of the 15th General Review of Quotas, including a new quota formula, by the Spring Meetings of 2019 and no later than the Annual Meetings of 2019”. According to the G24, this revision should shift quota shares from AEs to EMDCs, while protecting quota shares of the poorest countries and not coming at the expense of other EMDCs. It is hard to imagine however that they have any great expectations on this front, given the ongoing lack of clarity about the Trump administration’s apparent hostility to the role and mandate of the Bretton Woods institutions, as we pointed out in our pre-Meetings analysis.
At the World Bank, the G24 once again called on the Istanbul Principles to guide the “timely implementation of the Lima Roadmap” and the upcoming shareholding review to achieve “equitable voting power between developed and developing and transition countries”. In the meantime, it expressed concern with “the IBRD’s and IFC’s strained financial capacity and the consequent expected decrease in annual lending over the coming years”.
Finally, as G24 communiqués often express, the group called for greater representation of underrepresented regions and countries in recruitment and career progression of the BWIs, including at managerial levels. It emphasised the importance of staff diversity, gender balance and diversity of educational institutions, indirectly revealing an ongoing structural problem of the institutions that have long been accused of “groupthink” and a rigidly ideological approach to policy that may be even less appropriate for these times.
The G20 is a grouping of some of the largest economies in the world, accounting for around 85 per cent of the gross world product. Finance ministers and central bank governors of the group meet four times a year, including during Spring and Annual 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.
No G20 communiqué was released during the 2017 spring meetings.
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.
The IMF’s flagship analysis, the World Economic Outlook, has for the first time in years been able to upgrade its past forecasts. The IMFC communiqué thus reiterates a cautiously positive view on growth accompanied by the now familiar but ever-stronger demands that the IMF must consider ‘distributional’ (meaning social) concerns, and support the Sustainable Development Goals (SDGs), suggesting these remain hollow but useful words. This dichotomy is present throughout the communiqué. Given the anti-trade mood in major economies, there is an unsurprising reiteration of multilateralism and the benefits of trade, but once again couched in concerns over the winners and losers of globalisation’s signature feature. It suggests an emerging strategy that can placate the economic nationalism emerging in the United States and other major economies (and major IMF stakeholders of course) and re-purpose managing director Lagarde’s ‘macro-structural’ agenda to consider issues such as income inequality, gender equality and more broadly the SDGs to address the concerns of economic nationalists.
The positive view on growth in the communiqué reflects the divergent paths of developed and developing economies, with the former facing continued struggles while developing countries seem to benefit from a cyclical recovery after the many years of rich and poorer country stagnation was apparently under way. This relative optimism toward developing countries may, however, be overly-positive if growing concerns about their debt legacies and the ever-changing verdict of financial markets conspire to put new pressure on emerging markets.
Despite the presence of the new American representative on the IMFC, the US Treasury Secretary Stephen Mnuchin, the communiqué trots out the standard defence of trade, while cautioning that those ‘left behind’ cannot be forgotten. This may be seen to be rather ironic given that the standard IMF orthodoxy on trade does not really admit anyone could be left behind. Rather everybody benefits from trade, just some benefit a bit more than others; somewhat like the concept of equality on Orwell’s utopian Animal Farm.
The broader framing of the IMF’s role in reinforcing its “commitment to achieve strong, sustainable, balanced, inclusive, and job-rich growth” is tempered by the recognition “that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability”. These suggest growing, but still tantalizing, hints of the IMF’s softening towards the potential need for controls on capital flows. This relates to a little-discussed aspect of G20 decisions last year which form part of a concerted effort to re-examine the workings of the international financial and monetary system, to ensure stability and the emergence of a global backstop, led by the IMF in concert with multi-lateral partners. The IMF would be the natural institution to lead this work, as it was with the original Institutional View on capital flow management which it adopted in 2012. IMF involvement at the time arose out of significant international policy debate driven by countries demanding that controls be made a part of their toolkit to deal with the turbulence in global financial markets threatening to destabilise their economies.
The communiqué sets out five major priorities for policy making, each with extensive caveats along a similar theme, e.g. please grow, please spend, please create jobs, but don’t do so if you can’t afford it (even if you cannot afford not to, which is left unsaid). These are i) Accomodative monetary policy; in case countries have low inflation. ii) Growth-friendly fiscal policy; this may sound revolutionary but is couched in the usual caveats that in practice tend to overrule growth-friendly spending, namely “ensuring that public debt as a share of GDP is on a sustainable path”. iii) Tailored, prioritized, and sequenced structural reforms; needed to “lift growth and productivity and enhance resilience, while assisting those bearing the cost of adjustment”, and of course iv) Safeguarding financial stability.
Most intriguing is priority v) A more inclusive global economy. “We will implement policies that promote opportunities for all within our countries, sustainability over time, and cooperation across countries.” While consistent with the growing social concerns the IMF presents, this is perhaps the biggest hostage-to-fortune statement made by the most senior component of the institution’s governance to date. Given that many find these words empty, the statement suggests that they serve the actual purpose of the Fund; to present a softer image rather than actually change the policies. However, this is the IMFC’s communiqué, not a humble working paper of a junior staffer and it suggests an opportunity to confront the Fund with the components of this commitment, including “We will implement domestic policies that develop an adaptable and skilled workforce, assist those adversely affected by technological progress and economic integration”, and “we will … support efforts toward the 2030 Sustainable Development Goals (SDGs)”. The latter commitment to SDGs is something most of the institution appears to still believe does not apply to them. Despite the IMFC’s fine words, perhaps they do know better.
Further on, the communiqué calls on the IMF to “expand opportunities” so that it can “sharpen the understanding of macroeconomic and distributional effects of technological progress, trade, and capital flows”. This seems to indicate that, for now, concerns that the new US administration would seek to end the growing willingness of the IMF to admit that gendered and income inequalities result from its long-standing policies, and to examine whether this can be addressed within its mandate, were misplaced. Perhaps the desire to be seen to ensure that the losers from otherwise “positive reforms” are acknowledged and compensated or protected will, rather than be curtailed by skeptical rich countries, prove a useful approach to reassuring them that the concerns of rich country voters seen in 2016 are, in reality, being considered. The hope that civil society had that this work would benefit the most vulnerable in poorer countries may depend on this deft bit of re-positioning. Given that some very senior officials within the Fund consider the populist and anti-trade threat a strictly developed world phenomenon, the Fund’s approach to the distributional impact of it policies in developing countries will be carefully watched.
Another key aspect to note from the communiqué is the recognition of the importance of fiscal policy, reform to tax regimes, and the tying of this to the IMF’s Public Investment Management Assessment tool, which many in civil society see as a positive development to challenge the over-use of expensive and often corrupt public-private partnerships (PPPs). We know also that the joint Bank-Fund Debt Sustainability Framework (DSF) consultation is largely completed and is likely to tighten the scope for countries to use PPPs by restricting how much of PPP-related debts, especially contingent risks that countries often do not admit are debts, can be permitted under a Debt Sustainability Assessment. Thus the Fund’s long-standing hostility to PPPs as supposed ‘magic bullets’ continues, and perhaps is succeeding given the DSF is a combined Bank and Fund exercise. The Bank is a major cheerleader for PPPs as the solution to cash-strapped countries’ infrastructure and development needs.
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.
In contrast to the negative outlooks of previous years, the spring meetings communiqué starts on a cautiously optimistic note regarding the global economy, but with a number of caveats, including the need to strive for “inclusive and sustainable growth”. It noted in particular the need to reduce inequalities within countries, and called on the World Bank and IMF “to redouble efforts to eradicate poverty and ensure that the benefits of international economic integration are shared widely.”
It is clear that the unusually short communiqué is the result of a careful balancing act with regards to the new US administration’s ‘red lines’, therefore the US statement to the committee, published in advance of the meetings, is perhaps more illuminating than the communiqué itself. On the positive side, no doubt president Kim will have sighed of relief at the confirmation that the US “is committed to remaining a top donor to IDA”. The US continued commitment to a well resourced implementation of the new environmental and social safeguards framework must also have been welcome, but the call for the Bank’s accountability mechanism, the Inspection Panel, to be reviewed might fall on deaf ears after the long and drawn out safeguards review. Moreover, sadly but unsurprisingly, any reference to addressing the challenges of climate change was notably absent.
Disappointingly, the Development Committee seems to have taken the lead from the US administration in also omitting any direct reference to climate change in the communiqué, despite the committee’s strong track record of acknowledging the challenges of climate change, not to mention the anniversary of the Bank’s own Climate Action Plan, which was released after the Paris Agreement. The tiniest glimmer of hope was perhaps indicated in the reference to support for “global public goods”, in relation to the update on the Bank’s Forward Look report, its vision for the future of the Bank which was released at the 2016 annual meetings.
More familiar language, also in line with US demands, was the continued focus on the private sector, which has now been made even more explicit through the Bank’s new ‘cascade’ approach, which sets out that the private sector should be the first port of call before any public finance is deployed. Moreover, continued support for public and private sector collaboration was mentioned, most likely as a hint at the Bank’s push for the controversial public-private partnership model.
Also in common with previous communiqués, the committee highlighted the need for continued attention to the challenges of fragility, conflict and violence, including support for the Bank’s “scaled-up activities in the area of crisis preparedness, prevention, and response, through investments to address the root causes and drivers of fragility by helping countries build institutional and social resilience.”
Following on from president Kim’s controversial restructuring efforts, the committee welcomed the Bank’s organisational and cost saving measures, including its people strategy and the outcomes of the expenditure review, and asked for continued due diligence on how the Bank manages its resources. Furthermore, despite that the US made it clear that a capital increase for the Bank is off the table as far as they are concerned, at least until all that is possible can be done to maximise the Bank’s balance sheets instead, the committee asked for the discussion to continue with a set of options to be developed by the annual meetings. Finally, the progress report on the Bank’s shareholding review was noted, following repeated calls for a larger voice at both the Bank and the Fund from for example India, as well as a commitment to diversity and inclusion at the Bank, including efforts towards gender diversity at the board level.