The Annual Meetings of the World Bank Group (WBG) and the International Monetary Fund (IMF) – i.e. the Bretton Woods Institutions (BWIs) – took place between 21-26 October in Washington DC, on a muted celebration of their 80th anniversary. Rightly so, as there was little to celebrate, with the World Economic Outlook (WEO) highlighting “stable yet underwhelming global growth…expected to reach 3.1 per cent five years from now – a mediocre performance compared with the pre-pandemic average.” While the world is experiencing global disinflation, the WEO noted that “disruptions to production and shipping of commodities – especially oil – conflicts, civil unrest, and extreme weather events have led to downward revisions to the outlook” in emerging markets and developing countries (EMDCs).
The Meetings took place amid tangible tensions and shareholder fallout from the Ukraine, Gaza and Lebanon conflicts. Differentiated treatment in terms of conditionality and funding of countries in conflict, with the IMF changing the rules to fund Ukraine but not doing the same for the conflict in the Middle East, has further exposed cracks in multilateral cooperation. With South Africa soon taking over the presidency of the G20 – the fourth consecutive presidency from the Global South – calls for international financial architecture reform will continue, yet there is a palpable gap between talk about reform of the BWIs and the very real struggle to pass even incremental changes.
Amidst this bleak economic forecast, the world’s total public debt is set to exceed $100 trillion for the first time, according to the IMF’s October Fiscal Monitor. However, while there was talk about debt during Annuals, there was no real breakthrough on debt restructuring in the G20 Common Framework, despite efforts to paint Zambia and Ghana as successes. While civil society organisations (CSOs) called in various Civil Society Policy Forum (CSPF) events for new and extended debt service suspension initiative (DSSI) as a bridge to a new debt workout mechanism under the UN auspices, the IMF continues to present debt dynamics as a ‘liquidity’ issue rather than an insolvency crisis, refusing to inject more reserves into the global system via a new Special Drawing Rights (SDR) allocation (see Inside Institutions, What are Special Drawing Rights?). The path to meaningful debt restructuring for fiscal relief is further complicated by the reluctance of countries in debt distress to enter restructuring processes for fear of losing market access, incurring higher borrowing costs and harming growth and investment, amid the lack of a well-functioning debt workout mechanism and fears of IMF over-reach.
Low-calorie IDA21 bento boxes indicative of Bank’s failed management-led ‘evolution’
The fruits of the Bank’s work on its Evolution Roadmap over the past couple of years – the 21st replenishment of the International Development Association (IDA21), the Bank’s low-income country arm, and the Corporate Scorecard – were presented in near final form during the Annual Meetings (see Dispatch Annuals 2024). The Bank’s newly released Scorecard raised concerns regarding the process by which it was created, as staff could not provide a clear rationale or theory of change for narrowing down 150 indicators to only 22. Indicators such as those to measure economic transformation are missing in the current version of the Scorecard (see Observer Autumn 2024). Moreover, there remains confusion as to whether the Corporate Scorecard was developed in consultation with the Bank’s independent accountability mechanisms, and whether CSOs will be able to provide feedback. Another glaring omission, particularly in light of efforts to dramatically increase lending, is the absence of any metric on improved accountability or redress. Some verbal assurances were given during Annuals about the Scorecard remaining a ‘living document’, yet no clear consultation process or path for modification were formally announced.
On IDA21, desire for the “largest of all time” replenishment has been somewhat scaled back, though early pledges trickled in throughout the week. Despite such pledges, CSOs remain concerned that funds must be used effectively in a replenishment that has been simplified with fewer policy commitments. Following draft documents published on 15 October, time to influence final decisions is limited, with the fourth replenishment meeting happening by the end of October and the pledging meeting scheduled for early December (see Observer Autumn 2024). As with the Scorecard, the rationale for which elements have been included in the IDA21 policy package, which the Bank released as ‘bento boxes’, lacked clear explanation.
The results of a review of the IMF’s concessional lending programme, the Poverty Reduction and Growth Trust (PRGT), were announced just before the Annual Meetings, with a new annual lending envelope calibrated at SDR 2.7 billion (about $3.6 billion), more than twice the pre-Covid-19 average. While the intention is commendable, the PRGT continues to be severely underfunded, with no new substantial shareholder pledges made during the Meetings. The IMF could solve this problem by selling some of its gold reserves, but this option has received strong pushback from the US – the Fund’s biggest shareholder – according to whispers in the corridors of the Fund. In the absence of new donor pledges, and the inability to access its reserves, the Fund has introduced a new interest rate mechanism that maintains interest-free lending to the poorest countries, while ensuring a sufficient degree of concessionally for others, effectively creating a tiered mechanism for lending in low-income countries (LICs). As expected, the V20 group which will be most affected by these changes, called for a discontinuation of this tiered mechanism to avoid overburdening climate vulnerable countries already facing debt challenges (see Dispatch Annuals 2024).
International financial architecture – more of the same
The Fund’s biggest self-declared achievement – completing the surcharges review – shows just how ineffectual the multilateral space has become in meeting the challenges of the moment. As a result of sustained pressure from civil society, the G77 and G24, UN bodies, UN human rights experts and leading economists calling for an end to surcharges, the IMF decreased its time-based surcharges and quota threshold, and committed to review its surcharge policy every five years (see Observer Autumn 2024). By the Fund’s own estimates, these reforms will lower the combined total borrowing costs for all IMF members by $1.6 billion per year, while reducing the number of countries paying surcharges in 2026 from 20 to 13. While this may appear significant when looking at absolute numbers, the actual reduction in surcharges for countries paying both level-based and time-based surcharges decreased marginally from 3 to 2.75 per cent.
While the IMF board of governors committed to producing a new quota formula by June 2025, the prospects look grim as countries struggle with a timely implementation of the 16th Quota Review – with only 30 out of 191 members ratifying the changes domestically thus far (see Observer Autumn 2023). Tensions on quota reform are palpable, with the US prioritising the approval the 16th review before November’s presidential elections, while China pushes for the preparatory work on a new formula to start in parallel to the national ratification process.
A new allocation of SDRs continues to remain outside the realm of political possibility, despite the acute need for financing, and renewed calls for a new allocation from the V20, the UN Pact for the Future, and the recently relaunched Bridgetown Initiative 3.0 (see Dispatch Annuals 2024). These calls show that, while the SDRs system – where SDRs are allocated according to IMF quotas – is far from fair or equitable, a new allocation would still provide much-needed fiscal breathing space for low- and middle-income countries (LMICs). Moreover, while in May the IMF greenlit the use of SDR-based hybrid capital instruments at multilateral development banks (MDBs), imposing a limit of 15 billion SDRs for rechannelling through MDBs, these mechanisms have lost momentum, with the Fund’s blessing having little to no impact in sparking new shareholder interest.
The lack of transparency and stakeholder consultations during major IMF processes and policy reviews resulted in an open letter where over 70 economic justice, human rights, environmental and feminist civil society organisations called for a review of the IMF’s 2015 Guidelines on the IMF staff engagement with CSOs. While IMF Managing Director Kristalina Georgieva opened the Annuals CSO townhall committing to review this policy in 2025, it remains to be seen – given other policy review delays – whether that will be brought to a successful and timely completion.
World Bank identity crisis: development actor or private capital de-risker?
Despite the launch of the Bank’s new gender strategy earlier this year (see Observer Autumn 2024) and fanfare around a ‘gender day’ on 24 October at the Annual Meetings, the dots joined between the strategy, the Corporate Scorecard gender indicators and IDA21 ‘cross cutting gender lens’, formed an unconvincing synthesis offering breadth but little depth. The Bank revealed a plan to focus on the “use of broadband, social protection, and access to capital” to increase women’s participation in the global economy by 2030, with a distinct focus on mobilising private actors, including “regulators, financial institutions, fintech companies, incubators, accelerators, and private equity funds” to achieve these goals, despite the overwhelming evidence that the provision of public services is what is needed to facilitate gender equality. Academic Maren Duvendack concluded on a CSPF, “Overall, the effects of financial services on core economic poverty indicators such as incomes, assets or spending, and on health status and other social outcomes, are small and inconsistent.” with Senior Advisor to the Canadian Executive Director, Marc Gurstein, responding that “access to financial services doesn’t hurt. It doesn’t come at the expense of interventions elsewhere“, despite having just heard evidence financial inclusion programmes can and do, in specific instances, lead to gender-based harm.
Jobs were also presented as something of a silver bullet to a “looming crisis” at the Annual Meetings. While job creation is a priority for shareholders, CSOs are more concerned that structural transformation must come first in order to facilitate the creation of decent jobs. At an official event, World Bank President Ajay Banga announced the Bank would double its agri-finance and agribusiness commitments to $9 billion annually by 2030, and noted the importance of creating jobs for a stagnating workforce, before swiftly adding that “poverty is a state of mind, not just a state of being,” to the disbelief of many in the audience. In a CSPF panel called ‘Wither Economic Transformation: The World Bank Scorecard and Its Development Mandate’, two Bank economists on the panel responded to concerns about the gaping hole in the Scorecard on measuring economic transformation of countries with reassurances that economic transformation was dealt with through its ‘jobs’ indicator. And in a flagship event on gender called ‘Women Transforming the World’, Banga presented transitioning women from informal work to “real work” as a priority for tackling gender inequality amidst serious roll back of gender equality progress. This called into question the quality and rigour of the new ‘outcomes’ focus of the Bank (which refused this week to commit to the International Labour Organisation’s (ILO) definition of ‘decent work’ as its goal), if it considers basic statistical targets like formal employment rates as directly indicative of achieving enormous development goals such as gender equality and economic transformation.
The private sector-led agenda continues to drive the BWIs’ approach to climate. Work remains to be done for the World Bank to increase transparency on climate finance and Paris Alignment methodologies, while the IMF is yet to respond to calls from the V20 for a replenishment of the Catastrophe Containment and Relief Trust to increase grant-based debt relief for climate vulnerable countries. Instead, derisking private capital remains the BWIs’ go-to policy solution to solve climate change. 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, Georgieva still asserted that the private sector will shift to renewable energy because it’s “pure survival” during the 25th plenary session of the Annual Meetings, despite precious little evidence that this is actually happening. This statement comes amid extensive research and advocacy from CSOs and more recently, the G20 Expert group on climate, which has consistently documented the false promises of the Cascade approach and its compounding impact on inequality.
The BWIs’ 80th anniversary has proven to be yet another missed opportunity for meaningful reform of the international financial architecture. In an apparent attempt to avoid International Financial Institution (IFI) governance becoming a focus of the 4th International Conference on Financing for Development (FfD4) in 2025, the Bank and the Fund are circumventing UN-led processes by producing separate vision papers such as “A future-ready World Bank Group”, proposed by the Development Committee, and launching an advisory group tasked with “developing a long-term view on the future of the world economy, international cooperation, and the roles of the Bank and the Fund.” This parallel, exclusive approach will likely create even more geopolitical tension, with some African officials signalling in private conversations that it’s time to stop relying on Bank and Fund for policy prescriptions, if they are to achieve economic transformation. Moreover, in the 16th BRICS Summit, countries announced plans for a new digital currency bill as a way to conduct trade without relying on the US dollar, signalling further fragmentation of the multilateral system, amid gridlock at the BWIs.