As if hoping that the stunning setting would help soften the harsh reality of the global economic and political (dis)order ten years on from the global financial crisis (see Spring Meetings 2018 CSPF session notes), this year’s IMF and World Bank Annual Meetings were held on the beautiful island of Bali, Indonesia.
Despite the idyllic setting and notwithstanding recent global growth, the meetings took place in a context of apprehension, which seemed unmatched by forceful action. As the Fund’s 2018 World Economic Outlook (WEO) stressed, economic growth has been more uneven than expected: “Not only have some downside risks that the last WEO identified [in April] been realized, the likelihood of further negative shocks to our growth forecast has risen.” The Fund once again revised its growth projections downward and warned that growth in the developed world and some important emerging economies is likely to trend downward in the medium-term. The impact of the ongoing trade dispute between China and the US and the continued threat to multilateralism featured prominently at the meetings, as did the role of China as an increasingly important creditor. On trade tensions the IMF Managing Director Christine Lagarde noted that, “If these tensions were to escalate, the global economy would take a significant hit.”
The Fund’s Global Financial Stability Report (GFSR) noted that, “an intensification of concerns about emerging markets, a broader rise in trade tensions, the realization of political and policy uncertainty, or a faster-than-expected tightening in monetary normalization could all lead to a sharp tightening in financial conditions.” Relatedly, the UN Conference on Trade and Development, in an October document stressed that, “by the end of March 2018, global debt stocks had reached $247.2 trillion, up from $168 trillion at the onset of the financial crisis of 2007–2008 and by nearly $25 trillion from a year earlier.” The Fund’s Fiscal Monitor (FM) also calls for caution in the medium term and recommends that countries put their deficits and debt firmly on a downward path to their mid-term targets. While the FM notes that approaches should be tailored, forthcoming research on IMF conditionalities demonstrate causes for concerns, as, despite the IMF’s claims to the contrary, the number of Fund conditionalities continues to increase.
The fact that these events took place on the side-lines of the Bank and Fund’s flagship event, under the spotlight of global media, where one would expect some protection of peaceful critical voices, illustrates very clearly the urgency of addressing persistent concerns about the closure of civil society space and silencing of critical voices
As climate change bites, Bank continues incremental progress
In addition to increasing concerns about underlying global macro-economic trends, the launch of an Intergovernmental Panel on Climate Change (IPCC) report on the eve of the meetings revealed the urgency and dramatic scale of the challenge that countries face in adapting to climate change – with The Guardian pointing out that the spectre of catastrophic climate change would provide less flexibility in the event of a new financial crisis. The IPCC report found that in order to achieve the Paris Agreement – and keep average global temperature rise at 1.5˚C relative to the pre-industrial average – drastic cuts in greenhouse gas (GHG) emissions are needed by 2030: GHG emissions need to fall by around 45 per cent by 2030 from 2010 levels, and reach net zero by around 2050. If states fail to achieve this deep cut in emissions, irreversible changes, including tipping points leading to exponentially higher warming, are probable, the report asserts. Given that countries’ current commitments to reduce emissions collectively amount to a trajectory of 3˚C projected warming, this is cause for grave concern.
The IPCC report was published on the same day that the International Finance Corporation (IFC, the Bank’s private sector lending arm) announced new measures to curb finance from IFC’s investments in financial intermediaries (FI; e.g. commercial banks and investment funds) being used to fund coal. In a blog published in development news outlet Devex, IFC CEO Philippe Le Houérou announced that over the past two years, the IFC had ring-fenced 95 per cent of its investments in FIs to prevent them from being used to fund coal projects. He also announced that the IFC would develop a ‘green equity’ approach in the coming months that would require new FI clients to publically disclose their exposure to coal and update this annually, with a commitment to reducing or exiting these investments.
Civil society organisations welcomed this announcement, but were cautious about the ultimate details of the green equity approach. A particular area of concern is that the ‘green equity’ approach will not cover financial intermediaries’ exposure to “upstream” oil and gas, at least initially, in line with the phase-out of finance for “upstream” oil and gas in the WBG’s direct lending at the end of 2019 (see Observer Spring 2018). At a Civil Society Policy Forum (CSPF) event on 9 October on FI lending, Kate Geary of Bank Information Center Europe also pointed out that the IFC’s legacy of coal investment through FI lending continues to harm communities. In October 2017, the Philippines Movement for Climate Justice filed a complaint with IFC’s independent accountability mechanism, the Compliance Advisory Ombudsman (CAO), in relation to support for 19 coal-fired power plants being built in the Philippines (see Observer Winter 2017-2018); Geary urged the IFC to intervene as a board member of the commercial banks building these plants, to prevent the 15 plants that received IFC finance, still under construction, from coming online.
At the Annual Meetings the World Bank also confirmed it will withdraw support from a coal project in Kosovo – the last legacy project in the WBG’s project pipeline that was potentially exempt from the Bank’s 2013 moratorium on project lending for coal (see Observer Autumn 2018). World Bank President Jim Yong Kim confirmed this at the CSO Town Hall event on 10 October. “We have made a very firm decision not to go forward with the coal power plant, because we’re required by our bylaws to go with the lowest-cost option, and renewables have now come below the cost of coal. So without question, we’re not going to do that,” Kim said, according to Devex. As with elsewhere, the Kosovar challenge now turns to scaling up renewable energy – and overcoming the political and logistical obstacles that stand in the way of deep decarbonisation. CSOs are concerned that despite incremental progress, the Bank isn’t moving quickly enough to support this shift, and have called on it to raise its ambition in the post-2020 climate goals it will announce later this year.
MFD, WDR, EPG and GCI: Can you spell instability?
Amid calls for enhanced measures to safeguard financial stability, Professor Daniela Gabor and other civil society participants cautioned that the World Bank’s Maximising Finance for Development (MFD) approach and the G20 and Bank’s drive to create infrastructure as an asset class are contradictory to this aim, in addition to raising significant human rights concerns as outlined by the UN. An October letter signed by nearly one hundred academics from around the world highlighted another critical concern about MFD (see Observer Summer 2017), namely that it brings shadow banking into development. The letter argued that the consequences of the MFD agenda go well beyond project-level impacts, stressing that “it seeks to re-engineer poor countries’ financial systems around capital markets that can attract global investors. This deliberate re-engineering of financial systems threatens progress on the SDGs.”
Pre-existing fears of a counter-productive, if potentially initially lucrative (for some), push for the securitisation of development finance through, for example, the transformation of infrastructure into an asset class, and an anti-democratic reordering of the multilateral system were reinforced by the G20 Eminent Persons Group’s (EPG) report on Global Financial Governance, which was submitted to the G20 finance ministers in Bali. As a Heinrich Boell Foundation report stressed, the proposed division of labour proposed by the EPG’s report would continue to side-line the UN system and would likely further “diminish country ownership and repress civil society” by, inter-alia, the “[streamlining of] decision-making within the system” as is the case in the Asian Infrastructure Investment Bank. Echoing concerns raised by the letter submitted by international academics, Heinrich Boell’s report stressed the threats posed by the proposed securitisation of development assistance, noting that, “Securitization is not possible without ‘de-risking’ development projects, but this can involve transferring unsustainable risks from the private to the public sector.”
The Bank’s much-criticised 2019 World Development Report on the changing nature of work further highlights contradictions between the call for greater financial stability that can only be achieved through more equitable and inclusive growth and the Bank’s continued bias toward de-regulated and increased financialised private sector ‘solutions’. The report’s many dubious assumptions and “fuzzy math” as critiqued by ITUC’s Peter Bakvis, (similar critiques of methodology apply to the Human Capital Index), and a Bank official’s casual comments that they don’t like using the term ‘decent work’ as it implies there is such a thing as ‘indecent work’, bring into question the degree to which the Bank is able to meet the Development Committee’s call for the provision of “evidence-based policymaking” (see Development Committee communiqué analysis). Meanwhile, the IMF emphasised worker protections in light of a new report on technological change disproportionately impacting women in the workforce. The divergence between IMF and Bank positions became even more awkward on a CSPF panel on the ‘rePPPeating’ failures of public private partnerships, where IMF staff largely acknowledged CSO concerns while the World Bank declined an invitation to attend.
Given the potentially significant negative developmental, human rights and macroeconomic consequences of the Bank’s approach, many within civil society were disheartened to see that the general capital increase for the IBRD and IFC (the Bank’s middle-income and private sector lending arms, respectively) continued to move forward without addressing the urgent need to review and realign staff incentives and to imbed the Bank’s operations within an explicit World Bank human rights policy (see Observer Summer 2018).
The Human Capital Project: What human rights and state obligations?
The Human Capital Project (HCP) and Index (HCI) were launched to much fanfare in Bali, where meetings and discussions on the very important topics of health and education financing managed the difficult task of avoiding a focus on human rights instruments and state obligations. While the HCI was criticised in some corners, as expected it received a largely positive reception among those who were willing to discount its methodological and theoretical shortcomings (see Observer Autumn 2018). There was little critical commentary on the historically dubious assertions that South Korea and Singapore (both of which do well in the Index, while Singapore scores in the bottom ten of Oxfam’s latest Commitment to Reducing Inequality Index) owe their current status to a focus on health and education or about how the HCP will help countries address the structural barriers to development that go well beyond human capital deficits. Neither was much made of the fact that the HCP was launched alongside an explicit drive for increased IFC support for private sector involvement in health and education and the Development Committee’s support for “new financing approaches” in light of “financial constraints”.
Bali: Imposed silence beyond the gilded halls
The situation in this year’s host country, which many blame on the long-term involvement of Bank and Fund policies, has left Indonesians with little to cheer, as made evident by recent reports, critiques and alternative events held at the side-lines of the meetings (see Observer Autumn 2018).
Indonesian civil society issues ranged from broad critiques to efforts to hold their government and the World Bank accountable for the deficient implementation of the old and new Environmental and Social Framework (ESF) in Indonesia. During a CSPF event, civil society raised myriad concerns, including on forced displacement, lack of access to relevant information, environmental harm and the intimidation by security forces during ESF consultations, only to be waved off by Bank officials as being “misinformed”.
Concerns about intimidation in response to criticism became increasingly poignant throughout the week, as reports flooded in accusing the Government of Indonesia and Balinese police forces for continually disrupting and intimidating the independent civil society initiative of the People’s Global Conference Against the IMF and World Bank (PGC). It was alleged that PGC participants and organisers received anonymous death threats and were tagged as ‘terrorists’. The fact that these events took place on the side-lines of the Bank and Fund’s flagship event, under the spotlight of global media, where one would expect some protection of peaceful critical voices, illustrates very clearly the urgency of addressing persistent concerns about the closure of civil society space and silencing of critical voices.
The Annual Meetings in Bali were marred by these repressive actions and the Bretton Woods Project stands in solidarity with civil society worldwide and the PGC in particular as they struggle to make their voices heard.
Demonstrating the resilience of civil society under pressure, civil society participants from feminist groups resisting the IMF and World Bank’s policies for their harm to women’s rights and gender equality closed the week on an uplifting and inspirational note with a feminist carnival on the sidelines of the official meetings.