As disagreements over conflicts in the Middle East and Ukraine once again prevented the Development Committee from issuing a communiqué following its gathering at the 2024 Annual Meetings, a chair’s statement summarised the majority of shareholders’ views.
Mohamed bin Hadi Al Hussaini, Finance Minister of the United Arab Emirates and Development Committee Chair, opened the statement by highlighting the challenges faced by developing countries, including limited fiscal space, trade frictions and climate disasters. Members welcomed the new World Bank Group (WBG) Scorecard to enhance its “strategic focus and report on development outcomes flowing from the WBG’s new mission and vision” – all part of the Bank’s shift in focus to speed and impact. However, civil society has pointed out that the Scorecard has significant shortcomings, not least its failure to include an indicator for measuring economic transformation – despite this being a key priority for the Bank’s borrower countries (see Observer Autumn 2024, Spring 2024).
A bigger but not necessarily better Bank
Members welcomed the Bank’s focus on enhancing its financial capacity, especially via a “robust and ambitious IDA21 replenishment” (i.e. the 21st replenishment of the International Development Association, the Bank’s low-income country lending arm) and adjustments to the minimum equity-to-loan ratio and pricing structure at the International Bank for Reconstruction and Development (IBRD), the Bank’s middle-income countries lending arm. However, members clarified that financial capacity is just one aspect of the overall challenge, emphasising that the Bank should evaluate how it can align financial capacity with the WBG’s overarching goals.
They called on the Board and Management to “provide an assessment of the alignment of IBRD financial capacity with the WBG vision and mission.” Although the chair’s statement lacked any further specifics, Brazil’s Finance Minister, Fernando Haddad, said in his own statement that “the institution must adopt a strategic approach to loan pricing that prioritises addressing global challenges over net income.” This approach would require aligning financial mechanisms with sustainable development goals to ensure resources are focused on reducing poverty and addressing pressing issues like inequality and the climate crisis. This echoes civil society’s calls for a clear IDA21 policy framework that promotes green socio-economic transformations in low-income countries (see Observer Spring 2024).
The statement also briefly expressed support for the WBG Gender Strategy 2024-2030 and its implementation plan. However, civil society is concerned about the Scorecard’s application, as the current narrow focus on women’s ‘financial inclusion’ fails to adequately evaluate the Bank’s impact on gender equality. This raises fears of ‘pinkwashing’ through business-as-usual practices, which perpetuate the systemic issues underlying gender inequality (see Observer Autumn 2024, Autumn 2023).
Doubling down on private sector-led approach
Despite Financial Times’ Alan Beattie dubbing the unfulfilled promises of mobilising “trillions” in private finance for climate and development as a “magic pony” in the lead-up to the Annual Meetings, the Development Committee remained fixated on this approach. Members welcomed the focus on mobilising private capital through collaboration with the Private Sector Investment Lab and the WBG Guarantee Platform – asking that “these efforts continue to mitigate barriers, mobilise capital, foster enabling environments, and create new markets through a One WBG approach.” Civil society has long criticised this flawed development paradigm, arguing that it “assumes incentivising private finance is inherently benign and productive, while failing to acknowledge that projects designed to attract profit-seeking private investors may not align with public interest or local priorities, nor support sustainable economic transformation” (see Observer Summer 2023).
Members recognised the “WBG’s leadership and commitment to reaching its climate finance targets and Paris alignment”, noting with encouragement that WBG climate finance reached 44 per cent of total financing last fiscal year. Civil society has, however, flagged significant issues with the transparency of the Bank’s climate finance accounting and its continued focus on private capital mobilisation to tackle the climate crisis (see Inside the Institutions, The World Bank and climate finance). This is echoed in the new Global Challenges Programmes – which members welcomed to enhance country engagement models – yet the recently publicly released programme on the energy transition is based on a private capital-focused approach. This approach faces huge challenges as ‘crowding in’ institutional investors in low- and middle-income countries often depends on significant public subsidies in order to guarantee their profits – exacerbating profit extraction from the Global South to the North (see Report, Gambling with the planet’s future?).
Acknowledging the debt crisis without recognising its systemic roots
Members urged the Bank to address the rising debt crisis, noting that “many developing countries are facing high debt burdens” and calling for ongoing WBG-IMF collaboration on debt sustainability, including implementation of the G20 Common Framework. This reiterates the Development Committee chair’s call at the Springs Meetings 2024, also noted in the Bank’s ‘A Future-Ready World Bank Group’ paper prepared for the Development Committee, that urged global debt management to prevent unsustainable fiscal burdens on the poorest countries. Yet, while members looked forward to the ongoing review of the Low-Income Countries’ Debt Sustainability Framework, the chair’s statement overlooked the Bank’s role in linking debt sustainability assessments to fiscal consolidation, which restricts fiscal space for development. Civil society has called for the Bank to critically reassess its approach by incorporating human rights and environmental criteria into its debt analyses, particularly as its loans, including those targeting private finance mobilisation, add to countries’ debt burdens (see Observer Autumn 2023).
Looking ahead, members looked forward to the upcoming 2025 shareholding review, and attached “great importance to these regular reviews, in line with the Lima shareholding principles.” This is a crucial opportunity to address governance inequalities within the Bank as it celebrates its 80th anniversary, aiming to enhance multilateralism and ensure adequate representation of the Global South.
