As the World Bank and IMF approach the Spring Meetings in Washington DC from 15-20 April, it’s difficult to escape the conclusion that – despite endless talk of reforming the international financial architecture since the outbreak of the Covid-19 pandemic – the Bretton Woods Institutions (BWIs) and their wealthy country shareholders have largely failed to rise to the challenge, much to the chagrin of Global South countries and civil society. As we approach the 80th anniversary of the Bretton Woods Conference in July, the BWIs’ governance structures – which were forged in the aftermath of WWII – remain largely unreformed.
The World Bank’s internal reform process in 2023 ended with a whimper, begetting potentially contradictory metaphors (an Evolution Roadmap that yielded an Evolution…Playbook?), minor tweaks to the Bank’s mission and vision, and precious little additional concessional financing – ignoring longstanding concerns regarding inequitable governance structures that favour wealthy shareholders (see Dispatch Annuals 2023; Observer Summer 2023).
Meanwhile, the IMF’s 16th review of quotas, which concluded in December 2023, failed to deliver on the long-delayed redistribution of IMF quotas needed to reflect the increased importance of emerging market countries in driving global growth. In the end, it agreed an equi-proportional increase that further entrenches the IMF’s flawed quota formula, where the US retains a de facto veto over key governance decisions (see Inside the Institutions, IMF and World Bank decision making and governance). This raises the stakes for the 17th review, which shareholders have committed to complete by mid-2025.
This lack of progress has taken place even as multiple crises, including increased conflict, climate change, a growing Global South debt crisis, political instability and geopolitical fragmentation, threaten to further erode trust in multilateralism. In this context, the BWIs seem to have few answers other than to keep trying to entice private capital into development and climate finance efforts – a strategy that has had limited success since the launch of the Bank’s Cascade approach in 2017 (Observer Summer 2017).
With EU countries signalling support for a second term for IMF Managing Director Kristalina Georgieva, whose current term ends in September (see Observer Spring 2024), the long-standing “gentleman’s agreement” – which has seen every head of the IMF be a European and every World Bank President be a US citizen since the BWIs’ inception – looks set to continue (see Inside the Institutions, What is the ‘gentleman’s agreement’?).
The failure of recent reform efforts to address longstanding governance failings was not lost on the Group of 77 developing countries, which noted in the outcome document of the Third South Summit, held in Kampala, Uganda, in late January: “We note with great concern that the international financial architecture has not kept pace with a changing global landscape and has failed to deliver the financing or stability needed to achieve the Sustainable Development Goals, and call for urgent reform of the international financial architecture,…and to broaden and strengthen the voice, participation, and representation of developing countries in international economic decision-making.”
Whither a ‘better’ Bank?
The World Bank is likely to command much of the limelight at the Spring Meetings. Having officially assumed his post in June 2023, this is Ajay Banga’s first Spring Meetings as Bank President. With Banga’s vision for a “bigger and better Bank” unveiled at the 2023 Annual Meetings in Morocco last October (see Dispatch Annuals 2023), this Spring Meetings feels critical for decision making. Despite the slimmed down agenda – the rationale for which remains unexplained – discussions of significant importance to States and populations of the Global South will take place, including on a substantial 21st replenishment for the International Development Association (IDA21), the Bank’s low-income country arm, operationalising the Evolution Roadmap, and outlining what is really meant by bigger and better Bank.
Developments in recent months have brought fresh concerns for civil society about the current direction of travel. Financing for struggling countries is urgently needed, and so the IDA21 policy package, which will be discussed in DC and fully developed over the summer, will be watched eagerly. IDA is arguably the most critical opportunity for the Bank to put financing behind its thematic strategies, as noted by the Bank itself in a November 2023 mid-term review of IDA20, which asserted that “policy commitments are effective in continuing to mainstream key priorities.” However, this replenishment has been framed as “SimplifIDA” by Banga himself: An opportunity to remove what he deems unnecessary rules and processes to create – in theory – a more effective and efficient Bank, in addition to his hopes for it to be the largest replenishment “of all time” (see Observer Spring 2024). Despite this optimistic call to action, many donor countries have already signalled cuts to overseas development assistance, putting this goal in jeopardy.
SimplifIDA is indicative of how, in practice, hard-won gains on critical thematic areas, including gender and disability inclusion, already seem to be disappearing into a muddle of rejigged buzzwords like ‘lenses’ and ‘pillars’, which risk watering down the response to critical issues. The deprioritisation of issues from ‘special themes’ to ‘lenses’ with few or no policy commitments could directly result in reduced funding for such issues in the Bank’s poorest borrowing countries, and less attention on thematic strategies. Following more than a yearlong consultation process and extensive engagement with civil society, the Bank’s much awaited 2024-30 Gender Strategy is slowing before it crosses the line for official release. While civil society await details of implementation plans, the potential loss of gender as an IDA21 ‘special theme’ could signify the start of a worrying side-effect of Banga’s simplifying exercise, whereby strategies collect dust rather than encouraging concrete WBG commitments.
The roll-out of the World Bank’s Evolution Roadmap is also due to begin at the Spring Meetings, which has also failed to meet reform expectations (see Observer Spring 2024). Thus far, the Bank’s ‘private finance-first’ approach to development has been front and centre of the Roadmap, in addition to balance sheet optimisation. Indeed, new research from the Bretton Woods Project shows that this is a continuation of the Bank’s existing approach, including comprehensive ‘green conditionality’ in the energy sectors of many countries between 2018-2023, to promote a private-led energy transition, which could deepen profit extraction from the Global South to North, while passing costs on to consumers (see Report, Gambling with the planet’s future?).
In civil society spaces, including Civil Society Policy Forum (CSPF) panels, the Bank is likely to face questions over several problematic issues. The key arguments of a forthcoming book by economist Matthew Greenslade, Beyond the World Bank: The Fight for Universal Social Protection in the Global South, will be presented, as part of the wider fight to see the World Bank meet its commitment to support universal social protection, and move away from controversial targeted and means-tested forms of social protection (see Observer Spring 2024). This is part of a wider movement across civil society to see the Bank invert its private sector bias and instead support public services and uphold human rights across its operations (see Observer Summer 2023). On Friday, 19 April, a wide constituency of civil society organisations will join protests outside the venue, calling into question the BWIs’ approach amidst multiple ongoing crises.
Speaking of human rights, the International Finance Corporation (IFC), the World Bank’s private finance arm, will surely expect more heat from civil society during the meetings, amidst yet more scandal relating to the Bridge International Academies case, Oxfam’s revealing 2023 Sick Development report, and recent evidence of human rights abuses within IFC-funded private hospitals in India (see Observer Spring 2024).
Georgieva evokes ghost of Keynes, but Fund has long-since departed from his vision
In a speech at King’s College, Cambridge, on 12 March, Georgieva was invited to reflect on the John Maynard Keynes essay, Economic Possibilities for Our Grandchildren. Georgieva pointed out that Keynes, a noted King’s alumnus and often-lauded UK representative at the Bretton Woods Conference, had successfully predicted an eight-fold increase in living standards, driven by capital accumulation, but had been overly optimistic about the benefits of global growth being shared equitably. Georgieva argued that in order to avoid the onset of a new ‘Age of Anger’ amid rising global challenges, a new multilateralism was needed, which was more representative, and more results oriented. She noted, “In a world of abundant capital accumulation and accelerating technological change, prospects for my grandchildren will hinge on whether we can allocate capital to where it is needed most and will make the biggest positive impact.”
Yet, Georgieva’s speech was strangely blind to the power dynamics that underlie such capital allocation – and indeed that are behind the IMF’s stalled quota review redistribution and the continuation of the “gentleman’s agreement”, which will ensure her likely re-appointment. Revered economist Angus Deaton noted in a reflective March piece in the Fund-published Finance and Development that the tendency to overlook power dynamics is a malaise common in the economics discipline more broadly – and is among the issues that require urgent attention, as has also been underlined in the UN Secretary General’s New Agenda for Peace (see Observer Winter 2023).
Georgieva rather optimistically argued at King’s College that, “For African countries, the key is to attract long-term investors and ensure stable trade flows….This means promoting better growth: from improving the business environment, to raising more revenue, and weeding out inefficient spending.” However, this approach largely re-treads the policy paradigm the BWIs have promoted since the 1980s, which has notably failed to achieve economic transformation in LMICs.
Although Georgieva failed to mention it in her Cambridge speech, Keynes’s proposal for an International Clearing Union at the IMF that – as Jamie Martin noted in his 2022 book The Meddlers – “would automatically provide credits to deficit countries to keep their balance of payments in equilibrium”, was ultimately rejected. Instead, Martin pointed out that US- and Wall Street-backed arguments for “inquisitorial powers” at the IMF won the day at the Bretton Woods Conference, making access to financing conditional rather than automatic, and setting the stage for the paternalistic influence of the Fund in countries’ domestic affairs over the following eight decades. As has been well-documented by civil society, the IMF continues to promote austerity in many countries (see Observer Winter 2023) – contradicting the key tenant of Keynesian economics: That in times of economic downturn, the state must step up its spending in order to increase aggregate demand.
Bypassing the BWIs: Alternate fora for reform
The lack of meaningful reform being offered by either of the Bretton Woods Institutions seems stark in comparison to ongoing conversations in other spaces. The historic Framework Convention on International Tax Cooperation was passed through the UN General Assembly in November 2023 (see Observer Winter 2023), and is now in negotiation following years of advocacy and input from civil society, which many hope could be a step towards filling fiscal gaps left by international tax dodging and unequal systems (see Observer Spring 2023). The monumentally significant UN Tax Convention highlights how plausible resource mobilisation from sources other than private financers could be.
The upcoming UN Summit for the Future, happening in September, potentially opens a door for urgent reform initiatives. Hailed as an “opportunity to enhance cooperation on critical challenges and address gaps in global governance, reaffirm existing commitments including to the Sustainable Development Goals (SDGs)”, it’s yet to be determined how tangible outputs from the upcoming session will be for transformative measures. Elsewhere, Brazil’s 2024 G20 presidency offers space for reform of multilateralism amidst ongoing conflict and crisis, with Brazil noting its intention to put UN and wider international financial architecture reform on the agenda this year. Such processes will put pressure on the BWIs to put their money where their mouth is on structural reform.
