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Bretton Woods Observer Autumn 2022
A quarterly critical review of developments at the World Bank and IMF

Published by BRETTON WOODS PROJECT
Working with NGOs and researchers to monitor the World Bank and IMF

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1. G20 review calls for increased MDB lending as World Bank ignores
urgent need for policy changes
2. ‘Uber Files’ and ‘Back off BlackRock’ campaign expose ‘pink
washing’ as the heart of corporate women’s economic empowerment
agenda
3. Quota reform needed at IMF in order to address 21st century
challenges
Guest analysis by Lara Merling, Global Development Policy Center,
Boston University
4. IMF seeks to ‘unleash’ private climate finance, as experts
question ‘de-risking state’ model
5. Pakistan calls for climate reparations, as CSOs push for fresh SDR
allocation to ease multiple crises
6. What are the World Bank and IMF Annual Meetings?
7. IMF debt sustainability analysis in times of compounding crises:
Still unfit for purpose
8. World Bank’s failure to disclose details of climate finance
accounting opens its claim to be leading green financier to scrutiny
Guest analysis by Jason Farr, James Morrisey, and Christian
Donaldson, Oxfam
9. World Bank’s accountability mechanisms, still a long way to go
10. Nigerians set for higher bills as Bank pushes for removal of
‘inefficient’ energy subsidies


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FINANCE/analysis

G20 review calls for increased MDB lending as World Bank ignores
urgent need for policy changes

SUMMARY
- G20 independent review of MDB capital adequacy frameworks calls for
reforms to enable increased lending
- World Bank crisis response framework proposes continuation of
market-led approach and related reforms
- Bank stresses its capital structure was not developed to respond to
multiple crises, raising the possibility of future capital increase

In July the G20 published an independent review of multilateral
development banks (MDBs) capital adequacy frameworks (CAFs). The
review follows a 2015 G20 Action Plan on Balance Sheet Optimization
and, as summarised in a Devex article in July, proposed that MDBs
undertake a concerted effort to boost their lending, including a
decreased reliance on external credit rating assessments. The review
stressed the proposed recommendations would result in increased
lending capacity by MDBs during times of extreme resource
constraints, thus improving global crisis response.
Also in July, the World Bank published a report titled Navigating
Multiple Crises, Staying the Course on Long-term Development, broadly
outlining the institution’s response to “the crises affecting
developing countries.” The report follows the Bank’s ‘Proposed
Roadmap’ launched in April in response to the war in Ukraine. It sets
out four interlinked pillars, combining crisis response and long-term
development: (i) Responding to food insecurity; (ii) protecting
people and preserving jobs; (iii) strengthening resilience; and (iv)
strengthening policies, institutions and investments.
The Bank’s report makes for sombre reading and identifies the crises
as composed of the consequences of the “COVID-19 pandemic, the war in
Ukraine, food and nutrition security, high energy prices, tightening
financial conditions, risk of debt distress, and climate
disruptions.” While increased inequality is referenced, it is not
included in the elements comprising the current crises. Also notable
by its absence is the austerity crisis and mention of the lack of
progress on economic transformation (see Observer Winter 2017-2018),
with many countries still dependent on commodity exports, and long-
term decline of state capacity resulting in no small part from World
Bank and IMF-supported policies such as privatisation of health,
education and other essential public services (see Observer Summer 20
22, Summer 2021, Winter 2020).
Optimising MDB balance sheets: Whither the optimisation of
development impact?
Rodolfo Lahoy of Filipino civil society organisation IBON
International spoke for many communities and individuals negatively
impacted by World Bank policies in stressing that, “the Bank talks of
crisis response but remains silent on its own responsibility for
crises. Each day that passes that the Bank leaves its development
approach unchanged, even evading responsibility for policy failures,
the more we can understand why social movements are sceptical about
its continued operations in the Global South.”
The World Bank’s crisis response framework makes it clear that
additional capital made available through changes to its CAF  will
not result in urgently needed increased development impact. It is
telling that the report fails to consider any links between the
crises it identifies and the Bank’s reliance on private sector-led
and financialised approaches to development (see Observer Spring 202
2; Dispatch Springs 2020). It is disappointing, for example, that
references to the evolving food security crisis fail to engage with
the well-documented impacts of the financialisation of food
production and related financial speculation on food prices (see
Observer Summer 2022, Spring 2020).
Likewise, while the report highlights that “delivering and
administering vaccines remains an urgent need,” it refrains from
commenting on the catastrophic consequences of the unwillingness of
some of its principal shareholders to support – and World Bank
President David Malpass’s opposition to – the temporary waiver of
intellectual property rights (TRIPS) to facilitate urgently needed
production of Covid-19 vaccines in middle- and low-income countries
(see Observer Summer 2022, Spring 2021). It also fails to engage with
the well-documented negative impact of Bank-supported privatisation
of public services, including health services (see Observer Summer 20
22). The implications of these shortcomings are heightened by the
fact that pillar three of the proposed approach focuses precisely on
crisis and pandemic preparedness and support for “adaptive social
protection systems”, rather than on universal coverage.
Response anchored on GRID-enabling institutional reforms
Civil society concerns are further exacerbated by the proposed focus
of the Bank’s Green, Resilient, Inclusive Development (GRID)
approach, with the report emphasising that “WBG interventions under
Pillar 4 will focus on long-term policies to advance the GRID agenda
and help rebuild better.” This is despite long-term civil society and
others’ criticisms of the Bank’s Maximising Finance for Development
framework (see Observer Summer 2017), which has now been incorporated
into GRID, as discussed during last April’s Spring Meetings Civil
Society Policy Forum. Worryingly, the report emphasises throughout
that the Bank’s responses will be heavily reliant on development
policy financing (DPF), an instrument which requires conditions (i.e.
‘prior actions’) in return for budget support loans or grants, and
falls outside the institution’s social and environmental safeguards
(see Dispatch Springs 2021) ), as outlined in a civil society
submission to December’s DPF retrospective. It is evident that DPF
will continue to be actively used to imbed reforms the Bank considers
necessary to create a business enabling environment, thus further
contributing to long-term negative consequences of what Professor
Daniela Gabor from the University of Bristol calls the Wall Street
Consensus, i.e. the ‘derisking’ of private sector investments by MDBs
and governments (see Observer Autumn 2022, Dispatch Annuals 2021).
The document highlights that the World Bank projects the disbursement
of $170 billion (with $60 billion in ‘climate co-benefits’) in
support of its crisis response during the next 15 months (April 2022
to June 2023). However, it stresses that the proposed 15-month
financing plan “will stretch WBG finances and limit availability of
World Bank financing in later years,” raising the prospect of a
future capital increase on the horizon (see Observer Autumn 2018).
The Bank’s proposed crisis response framework makes it clear that the
G20 proposal does nothing to address the fundamental need for MDB
policy reforms required to ensure increased resources contribute to
solutions to the multiple crises faced by humanity and the poorest in
particular.
bit.ly/WBGLending

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In this issue

- Quota reform needed at IMF in order to address 21st century
challenges
by Lara Merling, Global Development Policy Center
- Pakistan calls for climate reparations, as CSOs push for fresh SDR
allocation to ease multiple crises
- IMF debt sustainability analysis in times of compounding crises:
Still unfit for purpose
- World Bank’s failure to disclose details of climate finance
accounting opens its claim to be leading green financier to scrutiny
by Jason Farr, James Morrisey, and Christian Donaldson, Oxfam

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RIGHTS/news

‘Uber Files’ and ‘Back off BlackRock’ campaign expose ‘pink washing’
as the heart of corporate women’s economic empowerment agenda

Following outcry from civil society organisations (CSOs), UN Women
has put on hold a controversial partnership with BlackRock, the
world’s largest investment fund manager. Nearly 600 CSOs signed a
letter in August demanding its termination, citing BlackRock’s
history as a “morally bankrupt” institution and major investor in
fossil fuels and weapons manufacturers.
This case reflects increasingly brazen attempts at corporate capture
of development and global governance spheres via ‘pink washing’,
allowing corporations to position themselves as empowering women,
while undertaking actions that harm them in search of profit.
This has not stopped the International Finance Corporation (IFC), the
World Bank’s private sector arm, from partnering with Uber and
touting the gig economy for “empowering women economically”. The
recent ‘Uber Files’ is a case in point, with Uber claiming it
empowers women, while undermining labour rights (see Observer Summer
2021).
In response to the ‘Uber Files’, University of Birmingham’s Professor
Kate Bedford stressed “[IFC’s involvement] matters because the World
Bank Group is highly influential in international development.”
bit.ly/PinkWashing

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FINANCE/analysis

Quota reform needed at IMF in order to address 21st century
challenges
Guest analysis by Lara Merling, Global Development Policy Center,
Boston University

SUMMARY
- As IMF leadership gathers for Annual Meetings, progress must be
made on quota review due for completion in 2023
- Current quota formula in urgent need of reform to enable countries
to respond to escalating crises
- IMF legitimacy at stake as risks of fragmentation to multilateral
order increase

The IMF is a multilateral institution with global membership, yet the
countries that chose its leadership do not make up a majority share
of the global economy, or the world’s population. So why do they get
to run the show? A “gentleman’s agreement” dating to 1944, grants an
American the role of World Bank leader, and reserves IMF leadership
for a European (see Background What is the ‘gentleman’s agreement’?)
The responses to the ongoing crises, particularly interest rate hikes
in advanced economies that are harming the rest of the world,
reinforce suspicion these countries are looking out for their own
interests.
The power dynamics between countries’ formal and informal in?uence
over other decisions at the IMF are similar. The US holds suf?cient
voting power to veto major decisions within the Fund, and along with
other members of the G-7 and the European Union has an overall voting
majority. The voting power of countries is determined by their quota
share, adding to it a number of “basic votes” evenly distributed
amongst all members. Basic votes only make up 5.5 per cent of the
total, with voting power closely tracking quota distributions (see
Inside the Institutions IMF and World Bank decision-making and
governance). Quotas are also used to determine the distributions of
Special Drawing Rights allocations. These require an 85 percent
majority, making them subject to US veto. This results in the
inequitable distribution of SDRs, which have largely gone to high-
income countries to the disadvantage of those that urgently need
additional non-debt resources to respond to the evolving crises (see
Observer Autumn 2021, Spring 2021).
At the IMF, countries are represented by 24 executive director of?ces
that represent its 190 members. Eleven of?ces are controlled by one
single country that holds a majority of the votes within that of?ce.
This distribution further dilutes the voices of middle- and low-
income countries, with Sub-Saharan African countries represented by
only two executive directors.
Quota reform remains elusive, re?ecting the IMF’s democratic de?cit
IMF quotas, assigned to members when they join the IMF, are supposed
to re?ect their relative importance within the global economy and
determine contributions to the Fund’s resources. IMF quotas are
periodically reviewed but in the last 30 years, only two reviews
resulted in a quota increase (see Observer Summer 2019, Winter 2018).
The US veto power has meant that recent changes to the size and
distributions of quotas resulted in tweaks to the formula,
maintaining the US veto (see Observer Winter 2019).
Claims that linking contributions to voting power is necessary to
safeguard resources are questionable. To meet ?nancing needs, the IMF
turned to separate arrangements with speci?c countries, which does
not grant them additional voting power. Furthermore, the IMF’s
preferred creditor status means there is little reason for concern
about non-payment from borrowers, as such a move has acutely negative
impacts on their perceived creditworthiness.
Access limits and policies on IMF fees are still based strictly on
quota shares. The IMF charges penalty fees – known as surcharges (see
Inside the Institutions What are IMF surcharges?) – to countries that
borrow above 187.5 per cent of their quota or with outstanding debt
after 36 months –  56 months in the case of credit under the Extended
Fund Facility (see Observer Winter 2022). The IMF defends this as
required to discourage excessive use of resources by a small number
of countries. However, with quotas not increasing to match needs, it
is almost the norm for loans to exceed that threshold: as of July 202
2, 12 out of 16 active loans exceeded 187.5 per cent of each
borrower’s quota. This situation is likely to worsen, as the global
economic outlook darkens.
The IMF’s own metrics and evaluations concede that few of its
programmes succeed on their own terms, and in most cases, programme
countries fail to meet the IMF’s growth projections (see Observer
Autumn 2022). The austerity measures imposed by the IMF are linked to
worse outcomes on poverty and inequality (see Observer Summer 2022).
Yet, the countries at the receiving end of programmes that fail, or
harm, people have no means to hold the IMF accountable (see Observer
Summer 2022). Over the last 20 years, of a total of 275 completed IMF
programmes, only 7 were in advanced economies, and 117 were in Sub-
Saharan Africa, a region that only holds 3.5 per cent of voting
shares.
As the IMF takes on the issue of climate change, it means that
advanced economies, historically large emitters, will guide and
decide the IMF’s approach. Climate Vulnerable Forum countries, which
control only about 5 per cent of votes –  despite being home to over
1.4 billion people – will have no say in shaping IMF’s policy (see
Observer Autumn 2022).
For the US and its peers to live up to their commitments on
supporting multilateralism and a “rules-based” order, they need to
support reforms of the IMF’s governance structure that allow all
countries to have a voice in how the rules are made. Only an IMF that
is responsive to the needs of all members and not just creditor
countries, as well as accountable when it fails, can maintain its
legitimacy. The ongoing review of IMF quotas, to be concluded at the
end of 2023, is the perfect opportunity to deliver on these needed
reforms.
bit.ly/QuotaReformIMF

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ENVIRONMENT/news

IMF seeks to ‘unleash’ private climate finance, as experts question
‘de-risking state’ model

SUMMARY
- New IMF staff note argues IMF can play a “catalytic role” in
mobilising private climate finance
- Academic experts argue approaches to decarbonising finance must go
beyond ‘de-risking’ to green ‘credit allocation policies’

The IMF released a new staff climate note in August entitled
Mobilizing Private Climate Financing in Emerging Market and
Developing Economies, which laid out the IMF’s potential role in
helping to increase private finance flows to finance climate action
and decarbonise financial markets. An accompanying blog co-written by
IMF Managing Director Kristalina Georgieva on 18 August argued, “we
need a major shift to harness public and, especially, private
[climate] financing. With $210 trillion in financial assets across
firms,…the challenge for policymakers and investors is how to direct
a big share of these holdings to climate mitigation and adaptation
projects.”
The staff note, which is not official IMF policy, followed calls by
the US Treasury for multilateral development banks to develop plans
for mobilising private climate finance by the UN Framework Convention
on Climate Change’s 27th Conference of Parties (COP27) in November in
Egypt, per reporting by Reuters in July. BlackRock CEO Larry Fink
also called for the World Bank and IMF to do more to de-risk private
climate finance in emerging markets at a July meeting of the G20’s
finance ministers.
However, the staff note included a series of warnings about the
challenges such an agenda faces. Efforts to de-risk projects to
entice private sector investment may lead to significant contingent
liabilities, with states footing the bill (see Observer Autumn 2022).
The note also acknowledged the unhelpful role that investor-to-state
dispute settlement claims currently play in protecting fossil fuel
investments and frustrating climate policy (see Observer Autumn 2022,
Winter 2020). It  pointed out that large private climate finance
inflows that are not accompanied by increased domestic capabilities
in low-carbon manufacturing or large critical minerals endowments
could themselves have a destabilising impact on countries, leading to
current account deterioration and affecting their balance of payments
outlook.
The IMF staff note suggested, “The IMF can play an important role…
[in mobilising private climate finance] through its instruments,
including surveillance, capacity development, risk assessments, and
climate diagnostic tools. In addition, the RST [the IMF-based
Resilience and Sustainability Trust] can act as a catalyst in
leveraging private sector financing” (see Observer Autumn 2022). The
note argues key levers governments can pursue to attract private
climate finance include announcing and implementing climate-related
policy reforms; public investment in green infrastructure to create
investment opportunities; and developing relevant green taxonomies to
support the low-carbon transition.
Beyond the Wall Street Climate Consensus? Experts call for green
‘credit allocation’ approaches
In the face of growing calls to de-risk green investments for the
private sector, macroeconomic policy experts have called for
different policy pathways to manage the transition to a decarbonised
global economy more effectively. A new working paper from academics
Katie Kedward, Daniela Gabor and Josh Ryan-Collins published in early
August called for a shift to an ‘allocative green credit policy
regime’, as an alternative to the market-led ‘de-risking’ of private
investments, with such a regime being “organised around green
industrial policy objectives and democratically agreed green
missions.” The paper “draws on post-war credit policy regimes…but
also deals with the specific challenges posed by market-based
finance.”
“It’s great to see that the IMF acknowledges that local fiscal
resources should only be derisking private flows in combination with
policies to increase domestic green manufacturing capacities,” said
Gabor of the IMF staff note. “The next step is for the IMF to take
this seriously and set out a framework for this more developmental
derisking.”
bit.ly/PrivateClimateFinance

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ENVIRONMENT/news

Pakistan calls for climate reparations, as CSOs push for fresh SDR
allocation to ease multiple crises

SUMMARY
- Non-debt forms of financing essential, as many countries on front
line of climate change face ‘polycrisis’ that threatens macroeconomic
stability
- Questions remain about how the IMF’s new Resilience and
Sustainability Trust will align resilience aims with Fund’s rigid
limits on spending

As calls for climate reparations grow amidst the worsening climate
crises, the stark gap between them and global economic governance
remains yawning – with Pakistan offering a poignant illustration.
Following historic monsoon flooding – which impacted one-third of the
country’s districts and caused an estimated $10 billion in damages –
Pakistan’s climate minister Sherry Rehman said in a September
interview with UK newspaper The Guardian, “There is so much loss and
damage with so little reparations to countries that contributed so
little to the world’s carbon footprint that obviously the bargain
made between the global north and global south is not working.”
Rehman’s words echoed a growing chorus of Southern voices calling for
climate reparations and debt relief to address loss and damage from
climate change (see Observer Winter 2021).
However, the conditions associated with Pakistan’s recently restarted
IMF Extended Fund Facility (EFF; see Observer Summer 2022, Spring 202
2, Winter 2021) – the
Fund’s executive board approved a $1.1 billion disbursement in
September as part of the country’s efforts to ward off a sovereign
debt default – demonstrated the macroeconomic straight-jacket in
which many low- and middle-income economies find themselves. The
mini-budget approved as part of the restarted EFF requires widespread
tax increases, the removal of consumer fuel subsidies, and power
sector reforms, while also setting rigid limits on public spending,
in line with wider IMF austerity prescriptions (see Observer Autumn 2
020). Although Pakistan’s government did a U-turn on previously
announced plans to scrap tax exemptions on imported solar power
components (see Observer Spring 2022), other tax exemptions for green
technology were removed from Pakistan’s IMF-backed budget, raising
questions about the IMF’s commitments to align its lending operations
with national climate goals (see Observer Autumn 2021).
Debt-free finance to face the climate emergency and inter-linked
crises found wanting
Pakistan is facing its plight as the IMF is preparing to launch its
new Resilience and Sustainability Trust at the 2022 Annual Meetings
this month (see Observer Spring 2022). The Trust will make use of
‘rechannelled’ IMF Special Drawing Rights (SDRs), which will be lent
to the Trust by IMF member states who have surplus SDR reserves. IMF
Managing Director Kristalina Georgieva hailed the RST as the third
pillar of the Fund’s lending, which will “help build
resilience against long-term risks to balance of payments stability,”
including those related to climate change, after its establishment in
April. However, the Trust’s eligibility requirements, which require
countries to have another IMF lending programme in place, raise
questions about how the IMF will promote resilience to climate shocks
while insisting on rigid limits to public spending. The RST will also
provide financing via loans – albeit highly concessional ones with
long grace periods – rather than grants.
An alternative solution, one which would not further increase
countries’ debt, would be a new issuance of SDRs. Research published
in April by US-based think tank CEPR shows that the 2021 issuance of
$650 billions of SDRs (see Observer Autumn 2021) was widely used by
at least 105 IMF members to help cushion the blow of the initial
pandemic, including $80.4 billion worth of SDRs used for fiscal
purposes by at least 69 countries. A civil society letter to the IMF
board sent in early October called for a “new general issuance of at
least $650 billion worth of debt-free Special Drawing Rights (SDRs)”,
noting, “The great majority of the world’s countries are struggling
amid multiple historic, overlapping, and generally worsening crises.”
bit.ly/PakistanClimate

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ACCOUNTABILITY/news

What are the World Bank and IMF Annual Meetings?

BWP’s latest Inside the Institutions looks at the World Bank and
International Monetary Fund Annual Meetings, one of two official
yearly events bringing together governors, officials, civil society,
academics and journalists to discuss major economic developments and
global governance. This piece offers an insight into the Civil
Society Policy Forum, a crucial opportunity for civil society to
engage with the Bank and Fund, but not without significant criticism
relating to accessibility and limited slots for panel events.
bit.ly/BWIsAnnuals

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FINANCE/analysis

IMF debt sustainability analysis in times of compounding crises:
Still unfit for purpose

SUMMARY
- IMF operationalises new Debt Sustainability Analysis framework
while methodology kept confidential
- A history of over-optimistic IMF assessments casts doubt on whether
latest changes will make a difference
- Compounding economic, climate, health, and food security crises
call for comprehensive large-scale debt workout

In July, massive protests engulfed Sri Lanka as the debt-distressed
country sank deeper into crisis. Two months later, the IMF announced
a $2.9 billion package for Sri Lanka, and shortly thereafter another
$1.3 billion loan to Zambia, which had defaulted on its debts in 202
0. The latter comes with tough conditions: According to the loan
agreement, Zambians will have to shoulder “a large, front-loaded and
sustained fiscal consolidation.” But further interventions from the
Fund may soon be needed. Based on the IMF’s latest numbers from 29
August, eight low-income countries are already in debt distress and 2
9 at high risk. Meanwhile, Pakistan’s climate disaster risks
unravelling their recent IMF loan restart (see Observer Autumn 2022).
Against this backdrop, on 8 August the IMF published a staff guidance
note to operationalise its new Sovereign Risk and Debt Sustainability
Framework for advanced and emerging market economies – a process
which is key to determining whether countries’ debt is ‘sustainable’
as global economic headwinds worsen (see Observer Spring 2021). With
rising inflation and interest rates compounding the economic,
climate, health, food and fuel crises, the time for the establishment
of a long-demanded comprehensive multilateral sovereign debt workout
mechanism has never been more urgent. Yet, with increasing complexity
of the creditor landscape, the international sovereign debt
architecture remains a melange of inadequate and insufficient
attempts, including the expired Debt Service Suspension Initiative
(DSSI) and the hardly-used G20 Common Framework (see Observer Summer
2022, Spring 2022).
While comprehensive multilateral solutions may not currently be
politically feasible, decisive action is needed to prevent a domino
of defaults. However, the IMF’s unfounded optimism about countries’
ability to service debts, along with unrealistic fiscal consolidation
targets and resistance from large private and multilateral creditors
to debt haircuts, has meant that the debt restructuring has fallen
short.
Determination of liquidity vs solvency crisis is highly political
While the Fund has released its overall framework for debt
sustainability analysis (DSA), its precise methodology remains
“strictly confidential”, with the argument that it is “market-
sensitive” and nondisclosure “avoids disruptive
reactions…particularly if judgement is needed.” This continued lack
of transparency is problematic, as the DSA framework is “legally and
macroeconomically biased towards…underestimating sovereign insolvency
problems,” according to Dr Karina Patricio of University of Leeds
(see At Issue, Autumn 2022), resulting in a “persistent pattern…that
underpins the widespread trend of post-pandemic austerity in the
Global South.” This bias has created a history of self-admitted
“heroic” over-optimism, which “can involve pretending that countries
face illiquidity and not insolvency, letting creditors avoid
significant upfront losses and blithely dissembling that debt can
simply be rolled over and extended,” wrote former US IMF
representative Mark Sobel in the Financial Times in August. As a
result, private sector lenders have repeatedly been paid off with
IMF-backed public funds, while the local population bears the burden
of ensuing austerity and deepening inequality (see Dispatch Springs 2
022; Observer Autumn 2020). As the IMF itself has noted, these
dynamics contribute to social unrest.
Research by Boston University’s Global Development Policy Center has
also shown that DSA is far from politically neutral: Borrowing
countries with high foreign direct investment from Western European
private lenders face harsher austerity conditions, while those whose
trade and diplomacy align with Europe get lighter ones. Moreover, the
lack of adequate early restructuring extends a debt crisis, leading
to prolonged suffering and frequent failure of later IMF programmes,
as evidenced by the Fund’s 2018 Review and a 2022 report from
Germany-based civil society organisation (CSO) Erlassjahr. While
Zambia’s announcement called for a large-scale debt restructuring, it
remains unclear how much will be cancelled or simply rescheduled by
ten years, as highlighted by Tim Jones, of UK-based CSO Debt Justice,
on Twitter.
Effective DSA needs transparency and developmental lens
A lack of transparency in sovereign debt is a major hurdle to more
realistic assessments, something leading IMF and World Bank
economists have stressed. The arguments for not disclosing its
analysis then seem specious, especially given the major signalling
power of the Fund’s debt sustainability assessment as the “lender of
last resort”. Making its criteria public and assessments more
conservative would create greater legitimacy and accountability. It
might also enable the Fund to make a credible assertion that it will
not rescue a country without serious debt restructuring, including by
private creditors, thus eschewing the current moral hazard-inducing
expectation that IMF-facilitated official debt relief will eventually
enable private debt repayment, something over 100 experts called out
in September.
A DSA fit for the current global context requires “a view of debt
sustainability that is conducive to long-term development strategies
and is based on consistent macroeconomic policies and the
sustainability of the balance of payments in the longer term, rather
than short-term debt service goals,” writes Patricio. Otherwise,
there is a significant risk that many low-income and climate-
vulnerable countries will remain trapped in a spiral of debt,
austerity, and bailouts from which they are unlikely to emerge (see
Observer Autumn 2022), while the prospects of regaining the fiscal
space needed for achieving sustainable development, realizing human
rights, and responding to climate change effectively fade into the
distance.
bit.ly/IMFDebtAnalysis

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ENVIRONMENT/analysis

World Bank’s failure to disclose details of climate finance
accounting opens its claim to be leading green financier to scrutiny
Guest analysis by Jason Farr, James Morrisey, and Christian
Donaldson, Oxfam

SUMMARY
- Newly released Oxfam study finds Bank’s claims of climate finance
for FY2020 could be off by as much as 40 per cent, or $7 billion,
based on lack of public disclosure
- Disclosure of the Bank’s climate finance assessments to enable
independent verification is required to have confidence in reported
figures


The World Bank is currently the largest multilateral provider of
climate finance. However, the quality of its climate finance
reporting is woefully poor. A newly released study by Oxfam found
that the Bank’s claims of climate finance for fiscal year (FY) 2020,
totalling $17.2 billion, could be off by as much as 40 per cent, or
$7 billion, based on lack of public disclosure about its project-
level accounting. The study covered the International Development
Association (IDA), the Bank’s low-income country arm, and the
International Bank for Reconstruction and Development (IBRD), the
Bank’s non-concessional lending arm.
This calls into question the Bank’s claims that it has met its
climate finance goals of 28 per cent of its portfolio constituting
climate finance in FY2020, rising to an average of 35 per cent for
FY2021-25 (see Observer Summer 2021).
Climate finance is essential to ensure countries and populations
least responsible for climate change can adapt to its impacts and
transition their economies without compromising the fight against
poverty, but the situation is dire. Currently pledged levels of
climate finance – “developed” countries pledged in 2009 to mobilise
$100 billion a year in climate finance by 2020 – are both inadequate,
and unmet (see Observer Winter 2021). Further, according to the most
recent Organisation for Economic Co-operation and Development data, 6
4 per cent of climate finance in 2020 was delivered via debt
instruments (rather than grants) which have to be paid back. In a
system that is failing so badly, and with climate finance being such
a scarce resource, transparency over what finance is delivered and
what it is used for is essential. This is made more important given
the debt burdens low- and middle-income countries are taking on in
order to access limited climate finance.
The Bank, along with other multilateral development banks (MDBs),
determines what counts as climate finance according to an agreed MDBs
joint methodology, which provides guidance for assessing climate
finance under an array of circumstances and instruments. However, the
level of transparency in its application is wholly inadequate.
Lack of disclosure makes public audit of World Bank climate finance
impossible
Oxfam’s new study sought to replicate the Bank’s reported numbers by
applying the MDBs’ joint methodology to a random sample of 78 of its
FY2020 projects tagged as climate-related. Where the information
provided by the Bank was inadequate to allow for the joint
methodology to be applied, Oxfam made a systematic set of
assumptions. The use of these assumptions caused Oxfam’s estimate of
the Bank’s climate finance to diverge significantly from the reported
figures. The findings from the sample were extrapolated to make
claims about the quality of reporting for the Bank’s entire
portfolio.
On average, Oxfam’s estimates differed from the Bank’s reported
figures by 35 per cent with a confidence interval of 5 per cent. This
means that the Bank could be over- or under-reporting its climate
finance by up to 40 per cent – or $7 billion, given total climate
finance related lending (IDA and IBRD) was 17.2 billion for the year.
In the worst-case scenario, this would mean that the Bank has not met
its claims of providing 28 percent of its finance as climate finance
in FY2020, with only around 19 per cent of its portfolio being
climate-related.
This lack of transparency should be concerning for stakeholders,
especially those in countries and communities who need this climate
finance, but also the Bank’s wealthy shareholders. In the absence of
this information, it is essentially impossible for the public to hold
the Bank and recipient governments accountable for the use of these
funds. Increased transparency would help safeguard against
greenwashing, overreporting, and underinvesting in mitigation and
adaptation.
The Bank is particularly significant among the providers of climate
finance as its practices often set standards for other institutions.
The Bank should set a high bar for other climate financiers by
clearly demonstrating how it calculates and plans to deliver climate
finance and measuring whether its efforts are having positive impacts
on adaptation and mitigation goals.
There are several actions the Bank should take to improve its climate
finance reporting. The Bank should disclose its detailed climate
finance assessments for individual projects, and the evidence and
justifications in support of their calculations in a way that allows
for independent verification. It should also standardise how it
reports on climate finance in projects by providing assessments for
all projects consistently (current practice seems to vary by project
).  All this information should be captured in a public World Bank
climate finance database. By taking these important steps and others
outlined in the report, the Bank would provide evidence to support
its claims and set a much higher standard for all climate finance
reporting.
bit.ly/OxfamClimate

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ACCOUNTABILITY/news

World Bank’s accountability mechanisms, still a long way to go

SUMMARY
- 57 CSOs submit comments to the Draft operating procedures for the
Accountability Mechanism and Inspection Panel
- CSOs highlight concerns about the proposed mechanisms, including
lack of clarity on the structure

In response to the World Bank comment period for the Draft operating
procedures for the Accountability Mechanism and Inspection Panel
after a five-year reform process, in September a group of 57 civil
society organisations (CSOs) and individuals submitted
recommendations to improve the draft operating procedures.
In September 2020, the World Bank’s executive board announced a
series of changes to the institution’s accountability system (see
Observer Autumn 2021). These included the creation of a new
Accountability Mechanism (AM) that would host the existing Inspection
Panel (IP), the independent accountability mechanism for the World
Bank’s public-lending side, and a newly created Dispute Resolution
Service (DRS; see Observer Spring 2020). While civil society welcomed
the establishment of the DRS, it voiced concerns about the risk of
the AM undermining the IP’s independence and the notable lack of a
remedy mechanism to address damages to affected communities (see
Observer Summer 2022).
World Bank lags behind other MDBs, missing critical aspects of
effective monitoring and remedy
CSO concerns about these mechanisms date from the designing stages of
the AM. The comments on the consultation process stressed that the
draft procedures include “multiple provisions that are inconsistent
with and far behind standard practice at other [Multilateral
Development Banks’] accountability mechanisms”, including the need
for the Board to approve both a decision to investigate and to access
the dispute resolution mechanism.
The submission emphasised the need to allow cases where not all
issues are resolved to be eligible for a compliance investigation by
the IP, which would be in line with the standard procedures at other
AMs, such as the Compliance Advisor Ombudsperson of the International
Finance Corporation (IFC), the Bank’s private sector arm.
As part of the comments, CSOs also urged the World Bank to provide
the DRS with an explicit monitoring mandate, noting this is “critical
to…the effectiveness of a dispute resolution function itself.”
Some of the many other problematic issues highlighted included: The
inability of the AM and IP to recommend the suspension of projects
when, during a dispute resolution or investigation process, they
become aware of imminent or irreversible damage; and the lack of
guiding principles or a description of the roles of the AM and IP in
facilitating remedy.
Commenting on the process, Shankar Limbu, of Nepal-based CSO
LAHURNIP, noted, “World Bank Projects do not recognize international
law and human rights standards that guarantee the rights of
Indigenous Peoples in the project cycles, including sanctioning the
loan and grant…. It must be rectified by recognizing the collective,
and individual rights of Indigenous Peoples enshrined under these
standards, which should be the core basis of the Bank, IP, DRS, and
other associated mechanisms, when the World Bank considers investing
in the Indigenous Peoples’ lands, territories and natural resources.”
bit.ly/WorldBankIAM

=====================================================================
CONDITIONALITY/news

Nigerians set for higher bills as Bank pushes for removal of
‘inefficient’ energy subsidies

World Bank President David Malpass has expressed renewed support for
energy sector reforms that will remove fuel subsidies and increase
energy costs for most Nigerians, as part of Nigeria’s Energy
Transition Plan. In a readout of a September meeting between Malpass
and Nigerian Vice President Yemi Osinbajo, Malpass expressed
“readiness” to support the reforms. According to media outlet Pulse,
the Nigerian government plans to end subsidies by June 2023.
The Bank has been pushing energy sector reforms that remove
‘inefficient’ fuel subsidies, despite the Bank’s own economists
recognising that “rising prices continue pushing millions of
Nigerians into poverty.”
This renewed support for liberalising energy prices will likely be
met with serious concerns from civil society, which previously
denounced wider Bank-backed market-based reforms (see Observer Autumn
2021). Nigeria’s federal government suspended the removal of
subsidies earlier this year following threats of protest by groups
such as the Nigerian Labour Congress.
bit.ly/NigeriaSubsidies

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