IFI governance


Spring Meetings 2022 Preamble: War in Ukraine risks deepening divergent recovery as World Bank and IMF prepare for Spring Meetings

14 April 2022

World Bank Group President David Malpass, IMF Managing Director Kristalina Georgieva, and US Secretary of the Treasury Janet Yellen at the 2021 Spring Meetings. Credit: World Bank / Heather Elliott

As World Bank, IMF, and government officials meet in a hybrid format for the World Bank and IMF Spring Meetings during the week of 18 April, there is little doubt that the war in Ukraine will take centre stage in the discussions. The war has exacerbated concerns about an uneven and uncertain recovery from the Covid-19 pandemic (see BWP Annual Report 2021, Our World 2021). Last September, the UN Conference on Trade and Development (UNCTAD) stressed that, “Many countries in the South have been hit much harder [by the pandemic] than during the global financial crisis, while their now-heavier debt burden reduces their room for fiscal policy…[I]nternational rules and practices lock developing countries into pre-pandemic responses and a semi-permanent state of economic stress.”  

With a complex and unstable global geopolitical landscape exacerbated by the war in Ukraine as the backdrop for this year’s Spring Meetings, priorities for the Bank and the Fund have shifted since the Annual Meetings in October 2021 (see Dispatch Annuals 2021). While there are several official events on debt, food security and risk, and uncertainty, such as the discussion with IMF Managing Director Kristalina Georgieva and World Bank President David Malpass on 19 April titled “The Way Forward: Responding to Global Shocks and Managing Uncertainty“, it remains to be seen whether progress will be made across a series of themes of pivotal importance to the Bank and Fund’s ability to meet their commitment to an equitable, just and ecologically sustainable recovery. Of particular importance will be whether concrete steps are finally taken to address the deteriorating debt situation of low- and middle-income countries. While no action is expected during the Meetings, the Fund’s reaction to calls for another allocation of Special Drawing Rights (see Dispatch Annuals 2021; Inside the Institutions What are Special Drawing Rights (SDRs)?) will be watched with interest. The Spring Meetings official schedule has a substantial focus on fintech and central bank digital currencies indicating that financialisation (see Observer Spring 2022), ‘financial deepening’ and other avenues continue to play an important role in the BWI’s pandemic response and the repercussion of the Ukrainian conflict.    

War in Ukraine will have significant spill-over effects

Russia’s invasion of Ukraine has exacerbated this already challenging context, with an IMF blog on 15 March outlining the three channels through which the war will impact the global economy: “One, higher prices for commodities…will push up inflation further…eroding the value of incomes and weighing on demand. Two, neighbouring economies in particular will grapple with disrupted trade, supply chains, and remittances as well as a historic surge in refugee flows. And three, reduced business confidence and higher investor uncertainty will weigh on asset prices, tightening financial conditions and potentially spurring capital outflows from emerging markets.” 

Many countries in the South have been hit much harder [by the pandemic] than during the global financial crisis, while their now-heavier debt burden reduces their room for fiscal policy…[I]nternational rules and practices lock developing countries into pre-pandemic responses and a semi-permanent state of economic stressUN Conference on Trade and Development (UNCTAD)

A 16 March UNCTAD Rapid Assessment of the impact of the war on trade and development also painted a deeply troubling picture, stressing the ripple effects on the ‘two Fs’ – food and fuel. The report noted that in 2018-2020, wheat imports from the Russian Federation and Ukraine accounted for 32 and 12 per cent of total African wheat imports respectively, adding that, “As many as 25 African countries, including many least developed countries, import more than one third of their wheat from the two countries, and 15 of them import over half.” Compounding the challenges, UNCTAD highlights that intra-African trade is unlikely to be able to make up the shortfall given production and transport constraints. The assessment also underscores the strong correlation between past food price rises and political instability and conflict.  

The conflict in Ukraine and its impact on food prices also affect other ongoing – and underfunded – humanitarian responses. In addition to deflecting attention from numerous other Fragile and Conflict-Affected States such as Afghanistan, Yemen, Mozambique and Myanmar, a 6 April Stockholm International Peace Research Institute (SIPRI) blog outlined that the rising food prices, exacerbated by the war, would impact the provision of emergency food assistance globally, with the World Food Programme (WFP) sourcing half of its wheat from Ukraine. The blog brought attention to the situation in 13 underfunded humanitarian operations, citing a Chatham House report that found that, “people in need of humanitarian assistance reached an all-time high in 2020 of 243 million across 73 countries.” Echoing calls for a dramatic reformulation of food security and agricultural policies globally, SIPRI stressed that, “Estimates show that 811 million people are hungry globally and that global food production could feed 10 billion people…No one should face starvation in 2022 in a world of plenty where there is enough food to feed everyone” (see Observer Spring 2020, Spring 2018). On 13 April the heads of the World Bank, IMF, the World Trade Organization and the World Food Programme released a joint press release warning of the damaging impacts of the interplay of the pandemic, climate change and the food crisis deepened by the war in Ukraine on the most vulnerable. It noted that the World Bank has calculated that each one per cent increase in food prices will result in an additional 10 million people thrown into extreme poverty worldwide. In a general call to action, the leaders appealed to countries to resist export restrictions that might impact WFP food purchases, and urged the international community to, “urgently support vulnerable countries through coordinated actions ranging from provision of emergency food supplies, financial support [including through grants], increased agricultural production, and open trade.”

While the US Congress passed a spending bill that included $13.6 billion in support to Ukraine on 11 March, the war has also heightened pre-existing concerns about ‘donor fatigue’ amid what UNCTAD projected was, prior to the war, a $17.9 trillion financing gap for 2020-2025 to achieve the Sustainable Development Goals.  

In light of the central role fossil fuels have played in the war and the World Bank and IMF’s dubious record on supporting the changes in energy policy required to avert a climate catastrophe (see Observer Spring 2022, Summer 2021), significant doubts remain that much progress will be made during the Spring Meetings to address the shortcomings of their approach. Civil society will be closely monitoring whether the Bretton Woods Institutions (BWIs) begin to back-slide on their climate change commitments, as climate action takes a back seat to immediate crisis response.  

In uncertain times, Global South continues to carry burden of vaccine inequity

The IMF’s Global Strategy to Manage the Long-Term Risks of COVID-19 working paper published in April outlined in detail the impact of the pandemic to date, noting that some studies estimate the death toll at 16 to 20 million, “approximately equal to that of World War I”, and that the “IMF’s World Economic Outlook…projected the cumulative output loss from the pandemic through 2024 to be about $13.8 trillion.” The paper added, “On vaccines, 86 countries did not meet the 40 percent vaccination target by the end of 2021, and disparities in vaccine access and uptake remain significant. Under current trends, over 100 countries are unlikely to meet the 70 percent vaccination target set for mid-2022—and several may never reach it.” While the blog rightly identifies vaccine inequity as a grave concern, it is unsurprisingly silent on the IMF’s and World Bank’s contribution to the crisis in light of their unwillingness or inability to support the majority of their stakeholders in calling for a waiver of intellectual property rights for vaccines and other urgently needed medical supplies (see Observer Spring 2021, Dispatch  Springs 2021).  

Will lack of action on debt further a damaging push for austerity?

Given the challenging context outlined above and the lack of fiscal space among debt-laden middle- and low-income countries, it is expected that austerity will be one of the most prominent themes of discussion across civil society events, with renewed calls for the Fund and Bank to reconsider their approaches. Following global economic hardship in the wake of Covid-19, it is predicted that 154 countries will be forced to implement austerity measures in 2022, impacting 6.6 billion people (see Observer Autumn 2020). There is escalating concern among civil society advocates about the negative effects of IFI-implemented policies such as privatisation, fiscal consolidation and the further roll-back of state capacity on populations in low- and middle-income countries, with little choice but to accept tough conditionalities on loans to service increasing debts. Research published by Boston University in late 2021 found that IMF-mandated austerity is significantly associated with rising inequality and poverty gaps.  

While a focus on gender remains evident, so do concerns about instrumental approach

There will be a spotlight on the IMF’s first-ever gender strategy, which aims to mainstream gender across lending, surveillance and technical assistance. The Fund opened an online consultation on 10 February, following a letter from civil society requesting a more meaningful and open process. Civil society groups have responded to the concept note with renewed calls for the IMF to assess the gendered impacts of its conventional fiscal, monetary, structural and labour market policy advice (see Observer Spring 2022). With the final strategy rumoured to be set for release in June, those following the process will be eager to receive additional details about its development from key figures at the Fund. The 13 April CSPF event titled ‘The IMF Gender Strategy: Making the Economy Work for Women?’ with IMF Senior Gender Advisor Ratna Sahay (see Observer Spring 2022) provided useful insights on the Fund’s willingness to respond to key civil society concerns. Many will also be looking to the World Bank mention of their forthcoming Gender Strategy update, with the current strategy for fiscal years 16-23 due to conclude next year. A new strategy could be an opportunity for the Bank to ensure that all forthcoming policy on Covid-19 recovery, the war in Ukraine and the imminent global economic shocks are applied with a gender lens.    

Doing Business Report’s successor fails to embrace new approach to private sector development

Those following the evolution of the World Bank’s cancelled Doing Business Report (DBR) into the new Business Enabling Environment Project (BEEP; see Observer Spring 2022) are disappointed by the Project’s inability to respond to long-standing civil society criticism of the Bank’s approach to its support of the private sector, as outlined in a joint civil society submission during the BEEP consultation period. As detailed in a 10 April Al Jazeera op-ed by authors very familiar with the topic, the way BEEP is being developed confirms that the World Bank will once again fail to respond to the mounting crises by abandoning its conceptualisation of the State principally as a de-risking and service provider agent for the private sector, with important consequences for State capacity to drive urgent economic transformation in middle- and low-income countries which bear a disproportioned brunt of economic, climate and geopolitical shocks. 

New Resilience and Sustainability Trust: Restrictions apply

Following the allocation of $650 billion in  IMF Special Drawing Rights (SDRs) in August 2021, the IMF’s executive board approved the establishment of the new Resilience and Sustainability Trust (RST) on 13 April. The IMF previously made public that the RST is expected to be operational before the end of 2022. Following the August SDRs allocation, the largest in IMF history, civil society welcomed this step to help supplement countries’ reserves, particularly in Africa, to finance the economic recovery from Covid-19. However, the uneven distribution of SDRs by quota share (see Inside the Institutions, IMF and World Bank decision-making and governance) led to calls for SDRs to be rechannelled from wealthier countries to those who need them more.  

The RST is one potential answer to this problem, but civil society has criticised the lack of consultation in the RST’s design (see Observer Spring 2022). At the ‘Rethinking African Accountability and Global Reforms: Options for Use of SDRs for Post-COVID 19 Recovery’ CSPF event on 11 April, panellist Andres Arauz, a former Ecuadorian presidential candidate, criticised the RST as being too narrowly conceived to address the issues of growing inequality and the climate crisis, noting, “We have to step forward to solve technical problems regarding SDR rechannelling for the benefit of people in developing countries”. CSO advocates remain concerned about key elements of the RST’s design, which necessitates countries having another financial or non-financial IMF programme in place, and agreeing on a series of reforms that they will undertake as a condition of RST financing. Rather than providing grants, the RST will offer concessional loans, with a 10-year grace period and 20-year repayment window – a much longer duration than other types of IMF financing. This raises questions about the RST’s compatibility with resolving the ongoing debt crisis. Arauz pointed out that if rich countries donated just 25 per cent of their SDR reserves that would be sufficient to cancel all country debts to the IMF – emphasising the need to reconsider what is politically possibly in terms of SDR channelling.