The G24 communiqué of the 2023 Spring Meetings left no doubt about the gravity of the state of global affairs, opening with a sombre expression of condolences over the human suffering resulting from crises worldwide, including rising extreme poverty, food insecurity, migration and forced displacement. At the root of the food and fuel crisis, the G24 identified two driving forces: “Geopolitical conflict”, widely on display at the Spring Meetings as well (see Dispatch Springs 2023), and financial markets creating unnecessary volatility disconnected from actual supply levels (see Observer Summer 2022). This – together with spill-over effects from advanced economies’ monetary tightening, which the G24 admonished as “much faster than expected” – has led to a desperate situation for many emerging market and developing economies (EMDEs), who in turn are now calling for an expansion of the IMF’s food shock window and Resilience and Sustainability Trust (RST), barely a year after they were established. In the same light, likely having realised the limited scope of Special Drawing Rights (SDRs) rechannelling even to the RST, the G24 echoed calls from civil society for another general allocation of SDRs together with a commitment to greater rechannelling. To lift another unnecessary burden on struggling EMDEs, the G24 also reiterated its previous demand for a formal comprehensive review and revision of the Fund’s “regressive and pro-cyclical” surcharges (see Dispatch Annuals 2022; Inside the Institutions What are IMF surcharges?; Observer Winter 2021), with the clear expectation that this should lead to “a suspension of surcharges to support countries with severe BOP [balance of payments] constraints, a significant permanent reduction…or their elimination.”
Stronger multilateralism needs governance reform at IMF and World Bank
The G24 made clear that structural changes are necessary not only to prevent the further erosion of the Bank and Fund’s legitimacy, but also to reinvigorate multilateralism overall, noting, “Multilateralism can only emerge if there is an expanded consultation process between developed and developing countries, the broader UN system and the Bretton Woods Institutions for a more balanced governance structure.”
At the IMF, this means “a meaningful quota increase and quota share realignment agreement this year,” which the G24 argued would enable a “well-resourced, quota-based IMF at the center of the global financial safety net, capable of playing the role of international lender of last resort.” The G24 left no doubt that “the fundamental goal of quota and governance reform should be to enhance the voice and representation of EMDEs,” through a shift from advanced economies to EMDEs, including by “protecting the share of least developed countries,” “recogniz[ing] the growing weight of EMDEs in the global economy”, and creating “a third chair for Sub-Saharan Africa.” The call for additional staffing resources for executive directors representing a large number of countries also highlighted the strain this task puts on them to do justice to their constituents; a challenge overrepresented rich countries do not face.
The G24 also welcomed the World Bank’s Evolution Roadmap discussion and noted it looked “forward to a more efficient and inclusive WBG” (see Observer Spring 2023). Although the group urged the Bank to provide clear definitions and selection criteria “consistent with the WBG’s…comparative advantage and in line with the SDGs” when contemplating broadening the mandate, it included a laundry list of issues including water, food, energy, human capital, digital and debt germane to consideration of an expanded Bank mission. The G24’s call for close cooperation both with other multilateral development banks (MDBs) and the UN’s Green Climate Fund and their emphasis on the “centrality of country ownership” in the Bank’s operations indicated a concern regarding duplication and the Bank impinging on other development banks and funds.
Unfortunately, the communiqué also mirrored the widespread narrative of a financing gap that can only be filled by the private sector, and rather than challenge the Bank’s failed “billions to trillions” agenda, the G24 doubled down on it: “A real evolution requires additional financial capacity to avoid an unfunded enhanced mandate. We welcome the plan to leverage private financing and urge the doubling of efforts in areas such as private capital mobilization.” The group also toed the line on “optimizing (the WBG’s) balance sheets,” while maintaining its AAA rating and implementing the recommendations from the G20 MDBs Capital Adequacy Framework review.
The G24 also stressed concerns that greater and more concessional lending to middle-income countries as a result of the Bank’s shifting mandate might come at the expense of poorer countries, the struggle to adequately replenish both the Bank’s IDA and the Fund’s Poverty Reduction and Growth Trust (PRGT) being an early indication of this challenge.
Evolution wanted: Debt, climate change, tax and trade
The communiqué closed with comments on several key topics, including the deteriorating debt situation. This time, in addition to the usual calls for a better-coordinated debt workout mechanism and private creditor participation, the communiqué cautioned that domestic debt restructuring can and likely will create domestic financial market instability.
Compared to the Annual Meetings, climate change was less prominently discussed, with the G24 reiterating calls on advanced economies to step up their commitments and welcoming the establishment of a new Loss and Damage fund agreed at COP27 in November 2022 (see Observer Winter 2022). Energy security remains a concern. Yet again, the Bank’s “catalytic role to play in crowding-in private finance to scale-up and support efficient green public investments” was praised, albeit without new proposals on green industrial policy.
At the Annual Meetings, the G24 welcomed the OECD tax deal, but this time, they made a much more comprehensive call for “the creation of a more effective, inclusive, sustainable and equitable international tax architecture, scaling-up international tax cooperation, fighting illicit financial flows and combating aggressive tax avoidance and evasion.” The November 2022 UN resolution on a potential UN Tax framework was welcomed, with hopes “that this would open the door for negotiations on international tax cooperation agreement…that could address the urgent issues that have so far been excluded from the OECD workstream.”
Trade was back on the agenda too, as “many EMDEs experience unequal distribution of the benefits of trade, limited market access and unfair trade practices,” the latter including “some recent policies meant to resuscitate domestic production or meet net-zero targets,” a clear dig at the EU’s Carbon Border Adjustment Mechanism and the US’s Inflation Reduction Act, widely criticised as protectionist “friend-shoring” that excludes most developing countries from newly-created green subsidy regimes. Thus, the G24 urged “that measures taken to combat climate change should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.”