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Bretton Woods Observer Spring 2024
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. Undemocratic gentleman’s agreement will further challenge next IMF
managing director
2. World Bank embarks on pilot phase of Business Ready Project,
disregarding civil society concerns
3. IDA21: Moving beyond a focus on ‘historic’ replenishment
Guest analysis by Maria Jose Romero, Eurodad
4. Indonesia JETP’s promotion of renewable energy privatisation
opposed by unions and civil society
5. World Bank project fails to protect Tanzanian pastoralists from
serious human rights abuses
6. Sri Lanka’s continued debt crisis highlights urgent need for wider
reform
7. Civil society raises concerns about Resilience and Sustainability
Trust’s green conditionality as Fund conducts interim review
8. Opportunity lost: World Bank’s Roadmap fails to chart path to
better development outcomes
9. Better ways to reduce the pain of debt crises for developing
countries?
Guest Comment by Penelope Hawkins, UNCTAD
10. World Bank land tenure approach contributes to displacement and
food insecurity
11. World Bank makes developing countries wait on Loss and Damage
Fund demands


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IFI GOVERNANCE/analysis

Undemocratic gentleman’s agreement will further challenge next IMF
managing director


SUMMARY
- EU countries’ backing of Kristalina Georgieva for a second term
will likely set in motion the next steps towards her reappointment
- EU support proves yet again that the ‘gentleman’s agreement’ is
alive and well and represents another lost opportunity to reform the
governance of the Fund
- Civil society reiterates calls for the IMF to ensure a transparent,
merit base selection process for the next managing director

In September, the term of the current IMF Managing Director (MD)
Kristalina Georgieva will expire. On March 14th, the IMF board
launched the formal process for appointing a new MD, with nominations
open for three weeks and closing in early April, ahead of the IMF and
World Bank Spring Meetings. While French Finance Minister Bruno Le
Maire and Ireland’s Paschal Donohoe, who leads the Eurogroup of
eurozone finance ministers, were both rumoured to have considered a
run, no formal candidacies have been put forward so far. The race
seems pretty much tied up as European Union finance ministers already
endorsed Kristalina Georgieva for a second term in early March. Civil
society organisations rejected this move, which proves yet again that
the “gentleman’s agreement”, an unwritten agreement that has ensured
for 80 years that the IMF managing director has been a European and
the World Bank president a US national, is alive and well (see Inside
the Institutions, What is the ‘gentleman’s agreement’?). This means,
in practice, that no other candidates – particularly from the Global
South – are likely to emerge, as Georgieva seems on track to get
backing of majority shareholders of the IMF, meaning the doors are
already shut before the process even begins (see Inside the
Institutions, IMF and World Bank decision-making and governance).
Global civil society and countries from the Global South have long
called for an end to this illegitimate, neo-colonial agreement and
for a more democratic appointment process. This should ensure the
selection of the next managing director is undertaken in accordance
with a merit-based, open and transparent process, underpinned by
criteria involving a demonstrated commitment to international human
rights, feminist principles, green and equitable development, as well
as candidate engagement with civil society to outline IMF priorities
and publicly available shareholder votes. Lack of governance reform
will result in increased pressure for the IMF Assuming she is
re-appointed, Georgieva’s next term will likely be even more
difficult than her first. Her first term was marked by numerous
crises, from the unequal Covid-19 pandemic recovery and the economic
and social spillovers from conflicts in Ukraine and Palestine, to the
dramatic increase in capital costs and worsening debt crisis for low-
and middle-income countries. These crises further exacerbated
existing global challenges such as climate change, rising inequality,
and the related increase in social and political instability as well
as fragmentation of the multilateral order (see Observer Summer
2022). Her efforts to tackle these overlapping systemic crises –
including a historic Special Drawing Rights (SDRs) allocation in
2021, the launch of a new Resilience and Sustainability Facility
(RST; see Observer Spring 2022), and securing critical financial
support for countries like Ukraine and Argentina – were seen as key
achievements. However, the Fund continues to be dictated to a large
extent by geopolitical factors related to its unequal governance,
with the MD often left to walk a fine line trying to manage
increasingly contested shareholder interests. The allocation of SDRs
(see Briefing, Reconceptualising Special Drawing Rights as a tool for
development finance) was determined by US domestic politics rather
than global needs and, due to the IMF’s anachronistic quota system,
was unequally distributed based on the relative size of countries’
IMF shareholding. Similarly, while the RST provides concessional
finance, in order to access to it, countries must have other loan
programmes with the IMF and accept austerity policies (see Observer
Winter 2022), combined with questionable green conditionality from
the RST itself, limiting their fiscal and policy space to address
their vulnerability to climate change in the first place (see
Observer Spring 2024). Amid these difficult economic conditions, and
a particularly volatile global peace and security landscape,
Georgieva as leader of the Fund will face increased pressure from
states in the Global South to reform the global economic architecture
to tackle a world mired in systemic crises. In the New Agenda for
Peace, the UN Secretary General expressed concerns about the security
implications of a fragmented geopolitical landscape. The
internalisation of geopolitics in the international financial system
through the continuation of the ‘gentleman’s agreement’ creates
further tensions in the multilateral system. A product of this
unspoken agreement, Georgieva will continue to be perceived as the
instrument of western control of the Fund, particularly as the IMF
has a history of applying different rules for countries friendly with
western governments. More recently, this was seen when shareholders
supported a change in the Exceptional Access Policy to allow more
funding to Ukraine, while conditioning Pakistan’s most recent IMF
bailout on an arms deal with Ukraine. Regardless of her expertise and
efforts, Georgieva’s new mandate does not represent the change needed
but rather more of the status quo, affecting her ability to be an
effective leader in tackling existing crises, thus contributing
precisely to the dynamics outlined in the UN’s Agenda
for Peace. A new civil society letter sent to the IMF board on 26
March called on the next IMF managing director to prioritise policies
and systems that are gender transformative, equitable,
environmentally sustainable, and consistent with international human
rights norms. The letter notes the MD’s objectives for the next
mandate should include: A new SDR allocation to help meet urgent
financing needs for developing countries in ways that do not create
additional debt burdens and undue policy conditionality; promotion of
progressive taxation; support for sustainable debt resolution instead
of austerity conditionality; reform of the IMF’s quota formula to
accurately reflect the changes in the global economy; and committing
to establish a human rights policy with ex ante and ex post impact
assessment of all IMF’s policies and programmes.
tinyurl.com/MDCampaign2024


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KNOWLEDGE/news

World Bank embarks on pilot phase of Business Ready Project,
disregarding civil society concerns

TThe World Bank has started the pilot 1 phase of its Business Ready
(B-READY) project – the successor of the discontinued Doing Business
Report (DBR; see Observer Summer 2023, Summer 2021, Autumn 2020) –
which will collect and analyse data on 51 economies, while ignoring
civil society concerns. Bank watchers argue that B-READY is just a
form of “label washing” (see Dispatch Annuals 2023), and as noted in
a CSO submission to the consultation process of its first iteration,
the Business Enabling Environment (BEE) project, is being developed
without challenging DBR’s flawed “private-sector first” agenda (see
Observer Spring 2022). “When the whole world is looking for solutions
to build a more sustainable, equitable, and peaceful world, the World
Bank is doubling down on failed ideas. As it is written, B-READY
promotes a race to the bottom in labour standards and governance, and
it will leave our peoples (particulary women) and our countries less
prepared to meet the challenges of the day,” said Joel Odigie of ITUC
Africa. While the Bank plans to revise its methodology based on its
results, there is currently no open consultation process planned or
additional review by the Bank’s board of directors.
tinyurl.com/B-ReadyUpdate

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IFI GOVERNANCE/analysis

IDA21: Moving beyond a focus on ‘historic’ replenishment
Guest analysis by Maria Jose Romero, Eurodad

SUMMARY
- The 21st IDA replenishment will take place in 2024
- Discussions to date have focused on calls for a ‘historic’ IDA21
replenishment
- Focus on size must not detract from calls for urgently needed
policy reforms to support ecologically sustainable and just economic
transformation

This year will see the 21st replenishment of the World Bank Group’s
International Development Association (IDA) – the Bank’s arm that
provides concessional and grant finance to low-income countries
(LICs). In December, World Bank President Ajay Banga argued that the
institution’s shareholders must make “the next replenishment of IDA
the largest of all time.” IDA21 takes place in the context of a
polycrisis that has severely impacted the capacity of many LICs to
respond. Indeed, the context is more dramatic than it was in 2021,
the year of the previous replenishment. Banga’s call comes at a
difficult time, in which IDA’s principal donors have stressed their
own fiscal constraints, and with some significant IDA donors such as
the US and UK facing general elections this year. The lack of
appetite for additional overseas development assistance commitments
by key donors is evident in the WBG’s controversial Evolution Roadmap
(see Observer Spring 2024), which has been so far focused on balance
sheet optimisation and financial innovations via further expansion of
the ‘private finance-first’ approach to development (see Observer
Summer 2023, Summer 2017). As IDA-eligible countries face mounting
financing needs to respond to the polycrisis, IDA is indeed an
essential financing source. Yet, as is the case with the Roadmap, a
focus on a ‘historic’ IDA21 replenishment risks obscuring the
essential emphasis on the policy framework that IDA21 must have to
actually deliver much-needed socio-economic transformation of
countries in the Global South. Unfortunately, it is difficult to
argue that IDA has delivered in this regard. As a July 2023 report
from US-based Center for Global Development (CDG) stressed, “of the
81 countries that were part of [IDA] in 1996 only 17 have graduated.”
As with the Roadmap, a central question remains: ‘More money for
what?’ For instance, the issue of jobs and economic transformation
(JET) – a Special Theme of IDA20 – is central to all countries, but
even more so to IDA countries, many of which are fragile and conflict
affected. Revamped Results Management System (RMS) indicators should
provide clear evidence of additionality through sustainable, decent
and quality job creation. Any JET RMS must also develop a robust
methodology to assess the degree to which Bank policies and
programmes support economic transformation – e.g. decreases in
commodity dependence, increases in economic diversification, and
support for technological innovation and domestic technological
production. Economic growth and private sector finance leverage
performance are inadequate indicators of positive development impact.
IDA support to private sector operations in the spotlight In 2017,
IDA allocated $2.5 billion for a Private Sector Window (PSW)
dedicated to subsidising private sector projects financed by the
International Finance Corporation (IFC), the Bank’s private sector
arm, and the Multilateral Investment Guarantee Agency (MIGA), the
World Bank’s risk insurance arm. In the context of IDA20, civil
society questioned the continued support of this window, given the
risk of diverting scarce concessional finance, in the absence of
robust evidence of its development additionality.Notably, and
relevant to the focus on the need for a historic replenishment, this
broke with previous practice, as IFC was in the past a contributor to
IDA resources. A report by the Bank’s Independent Evaluation Group
(IEG) in early 2024 appeared to show improved disbursements of the
PSW in IDA20′ and has since been used by its supporters. However, the
report, as is the case with the Bank more broadly, conflates
contributions to ‘market development’ with development outcomes,
namely, improved human development and economic transformation. Even
by PSW’s own measures, CGD’s Charles Kenny identified three key
shortcomings exposed by the report: (i) It has been very slow in
utilising its IDA resources; (ii) it hasn’t stopped a slide in
overall IFC commitments in the world’s poorest and most fragile
countries; and (iii) IFC’s projects in those countries are performing
worse than ever – in the first half of the 2010s, over half of IFC
projects in IDA countries were rated ‘satisfactory’, while now it is
only 36 per cent. Yet, the IEG presents an overall supportive tone on
the PSW, missing an opportunity to demand a rethink of this IDA
window and to question the relevance of the variables used to
determine whether project results are satisfactory. IDA21 offers a
platform to discuss the development model that the Bank will promote
in LICs. This includes how the Bank will build resilient, national
public finance infrastructure and high quality universal public
services. Yet, this debate will take place only if the Bank’s
management and shareholders, alongside the wide range of stakeholders
that advocate for an IDA replenishment, go beyond the size of its
financial envelope. As the lacklustre IDA graduation and economic
performance data make plain, additional IDA grant and concessional
recourses, as important as they may be, are insufficient. IDA21 must
contain a strong and measurable focus on evidence-based policies that
support IDA countries to break the cycle of dependency on development
finance, and to undertake ecologically sustainable and just economic
transformations long sought by the populations and states of the
Global South. tinyurl.com/IDA21Replenishment

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INFRASTRUCTURE /news

Indonesia JETP’s promotion of renewable energy privatisation opposed
by unions and civil society

SUMMARY
- Indonesia’s Just Energy Transition Partnership promotes a
trajectory toward private ownership of renewable energy
- Unions and civil society are resisting Bank and major shareholders’
push for energy privatisation

In November 2022, Indonesia began implementing its Just Energy
Transition Partnership (JETP), aiming to mobilise $20 billion over
three-to-five years. The funding is expected to come from the
International Partners Group, co-led by the US and Japan, along with
contributions from international financial institutions. In return,
Indonesia committed to accelerate the retirement of coal plants and
advance renewable energy sources to achieve net-zero by 2050. The
World Bank is involved in the JETP, with the UK offering a sovereign
guarantee to enable the Bank to provide an additional US$1 billion in
financing to Indonesia. Even in the absence of direct financing for
the JETP, the influence of the World Bank is apparent in the
conditions tied to a 2021 loan. These conditions mandated that
Indonesia’s state-owned energy company, Perusahaan Listrik Negara
(PLN), divest ownership of renewable energy-generating facilities
upon the expiration of relevant power purchase agreements. This
influence is also reflected in the 2023 Country Climate and
Development Report, which envisages the World Bank’s private
sector-led approach in the power sector since the 1990s, aiming for
the unbundling of the existing state-owned power monopoly to increase
private sector involvement. This follows a similar case in South
Africa, where the policy reforms undertaken as a part of the JETP led
to the ‘unbundling’ of Eskom, South Africa’s state-owned energy
utility, to create a more privatised, market-based electricity sector
(see Observer Winter 2022). In the case of Indonesia, the JETP is
designed to accelerate the growth of for-profit independent power
producers (IPPs), with state-owned energy PLN primarily becoming a
buyer of electricity from privately-owned generators. As the Trade
Unions for Energy Democracy argue, “electricity will no longer be
seen as a public good generated for human development and
nation-building; rather, electricity will become a commodity that PLN
is legally obligated to purchase from private companies.”
This privatised model raises concerns regarding both achieving
Indonesia’s green transformation and ensuring a just transition for
workers (see Observer Summer 2023). In effect, this model relies on
using limited public financing to attract private investment for the
transition, with the Bank and other multilateral development banks
playing a supporting role in these initiatives. However, this model
has been falling short: Private capital has not materialised in
Indonesia and South Africa. And this is only the tip of the iceberg:
There is substantial evidence to show that citizens themselves are
bearing the costs associated with guaranteeing private sector returns
(see Observer Summer 2023). The JETP’s investment plan also revealed
that only $1.3 billion out of an estimated $95.9 billion projected
for 2023-2030 is allocated for early coal retirement and phaseout, as
private investors prioritise more profitable ventures. Moreover, the
plan fails to address the closure of captive coal power plants,
creating emissions loopholes (see Observer Winter 2023). The failings
of the Bank’s private sector model, combined with the urgency of the
climate crisis, have led civil society, academics, and trade unions
to advocate for alternative models. As Andri Prasetiyo, Senior
Researcher on Climate Policy and Finance of Senik Centre Asia argues,
“The push for privatisation, influenced by international financial
institutions such as the World Bank, must be swiftly reversed, as it
will only perpetuate a system that puts profit before people,
jeopardising not only equitable development but also environmental
sustainability and social justice.” tinyurl.com/IndonesiaJETP

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RIGHTS/news

World Bank project fails to protect Tanzanian pastoralists from
serious human rights abuses

World Bank project fails to protect Tanzanian pastoralists from
serious human rights abuses A report by US-based Oakland Institute
launched in September 2023, finds the World Bank has failed to hold
Tanzanian authorities accountable for serious human rights violations
related to the expansion of the Ruaha National Park, a Bank financed
project started in 2017 to develop less visited tourist destinations
in Tanzania. In February 2023, locals filed a complaint with the
World Bank’s Inspection Panel (IP) to stop the human rights abuses.
However, in the seven months since the complaint was filed, World
Bank project financing has continued, with approximately $35 million
disbursed since the investigation process started in July 2023. Even
if the IP meets its timelines, all funds will likely be disbursed
before the investigation can have a tangible impact on the lives of
the villagers. “If the Bank has any intent of holding the government
accountable for blatantly violating the Bank’s own safeguards, it
must immediately stop funding the REGROW project and hold the
government accountable,” said Anuradha Mittal, Executive Director of
the Oakland Institute. tinyurl.com/TanzaniaEvictions

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FINANCE/news

Sri Lanka’s continued debt crisis highlights urgent need for wider
reform

SUMMARY
- Sri Lanka’s 17th IMF programme unmasks failures of previous
IMF-induced policy reforms
- Human rights costs of country’s return to IMF highlight need for
debt cancellation and reform of debt workout mechanisms

As the international community struggles to respond to multiple
pressing crises, the case of Sri Lanka presents a cautionary tale of
the costs of the inability of the IMF, the G20 Common Framework (see
Observer Winter 2020) and the wider international system to prevent
and respond to the devastating human rights, social and political
consequences of unsustainable debt. After defaulting on its debt in
2022, in March 2023 Sri Lanka entered its 17th IMF programme. In
March, over 60 trade unions, civil society organisations and social
movements sent a letter to the IMF team visiting the country for the
Second Review of the ongoing Extended Fund Facility (EFF) agreement
highlighting numerous concerns and making several demands, including
the abolition of surcharges and a “transparent and democratic
decision-making process regarding reforms, by providing relevant
information…used to prepare the Debt Sustainability Assessment.” As a
December 2023 Political Economy Research Institute working paper made
clear, the dominant explanations provided by international financial
institutions, and some scholars, failed to adequately acknowledge the
long-term and structural consequences of the liberalising policy
conditions contained in the previous 16 IMF programmes, creating a
growing dependence on expensive and fickle capital market finance.
The paper focuses on another pressing contemporary issue: The
inadequacy of the IMF’s Debt Sustainability Analysis (DSA). The Sri
Lankan DSA reflects a well-documented trend toward overly optimistic
growth projections, which burdens the population with significant
human rights consequences to ensure creditors are paid (see Observer
Winter 2022, Winter 2020). The Sri Lankan case provides yet more
evidence of the urgent need for the IMF to heed calls from the former
UN Independent Expert on foreign debt and human rights, and global
civil society to integrate states’ human rights obligations into
DSAs. Escaping technocratic discussions to address immediate human
needs Worryingly, as noted by University of Jaffna’s Dr. Ahilan
Kadirgamar in a March article in the online newspaper Daily Mirror,
“The hegemonic narrative today is going through change; the
insolvency crisis (inability to repay debt) is now being constructed
as a liquidity crisis (lack of short-term funds to make debt
payments). It is claimed that if there is sufficient sloshing of
funds including new loans to such debt-ridden countries, then debt
restructuring will not be necessary.” This can be seen, for example,
in the Financing for Development Lab’s January proposal titled, “A
bridge to climate action: A tripartite deal for times of
illiquidity.” The question of Sri Lanka’s path to debt sustainability
takes place within the wider context of the IMF’s continued
unwillingness to accept that the current global debt situation must
be categorised as a systemic crisis, requiring real efforts towards
comprehensive resolutions, including debt cancellation and the
establishment of an independent UN-based debt restructure mechanism
(see Observer Winter 2022). As research collaborators of the
Institute for Political Economy, Dr Thiruni Kelegama of Oxford
University and Melanie Gunathilaka of Climate Action Now Sri Lanka
stress, the current system ensures that “repayment is always viewed
through the lens of economic necessity and this exacerbates human
rights violations…. Debt obligations over human rights concerns and
climate justice perpetuate cycles of poverty, violence and
inequality.” tinyurl.com/SriLankaDebt

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ENVIRONMENT/news

Civil society raises concerns about Resilience and Sustainability
Trust’s green conditionality as Fund conducts interim review

Civil society organisations (CSOs) and experts have raised concerns
about the IMF’s Resilience and Sustainability Trust (see Inside the
Institutions, What is the IMF Resilience and Sustainability Trust?),
as IMF staff embark on an interim review 18 months after its
inception, which is expected to conclude in April or May. A letter
sent to the IMF’s executive board on 4 March and signed by 16 CSOs
and experts questioned – inter alia – the suitability of ‘green’
conditionality attached to RST loans. An IMF staff guidance note for
the RST published in November stated that RST conditionality can only
consist of pre-existing climate targets of countries in “exceptional
cases”, raising concerns about a lack of country ownership. In 17 RST
programmes to date, the IMF has promoted – among other measures –
public-private partnerships for climate action, despite previous IMF
and CSO research documenting that the latter arrangement often
includes hidden costs (see Observer Winter 2023, Autumn 2022), as
well a growing number of conditions related to power sector tariffs,
with the letter raising concerns about the Fund’s failure to account
for the “negative distributional impacts” of such ‘green conditions’.
tinyurl.com/RSTUpdate

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FINANCE/news

Opportunity lost: World Bank’s Roadmap fails to chart path to better
development outcomes

SUMMARY
- The operationalisation of the Bank’s Roadmap and calls for a
‘historic’ IDA21 replenishment will be key elements of Spring
Meetings
- Global civil society renews calls for an independent external
evaluation of Bank policies and re-routing of Roadmap to support
economic transformation
- Bigger Bank emphasis continues to detract from focus on better Bank


The World Bank Spring Meetings in Washington DC later this month are
expected to focus on the progress of the Bank’s Evolution Roadmap
with an emphasis on increasing lending volume, its related Evolution
Roadmap, the streamlining of its Corporate Scorecard, and exploration
of the use of hybrid capital. The 21st replenishment of the
International Development Association (IDA), the World Bank’s
low-income lending arm, will also feature prominetly (see Observer
Spring 2024). At the October 2023 World Bank and IMF Annual Meetings
in Morocco, Bank management presented to its Development Committee an
update of the Roadmap titled, “Ending Poverty on a Livable Planet”
(see Dispatch Annuals 2023). The Meetings also saw the launch of a
new Playbook. While much is being made of the promise of the Roadmap
to transform development finance, the Bank’s executive board and
management have refused to engage with the demands contained in a
July 2023 briefing endorsed by 74 civil society organisations and
academics, which called for an external and independent review of the
World Bank Group’s development effectiveness; the inversion of the
Bank’s private sector bias in order to support global public goods;
and the development and funding of a human rights policy. Efforts to
sidestep the failure of the G7 to meet its overseas development
assistance (ODA) and climate finance commitments have led to the
reviving and reinforcing of the failed ‘billions to trillions’
agenda, and have predicably resulted in a clear focus on creating
bigger rather than better multilateral development banks (MDBs). Some
of the implications of the Roadmap’s heavy reliance on private
finance will feature prominently at the meetings, including the
International Finance Corporation’s (IFC), the Bank’s private sector
lending arm, exit strategy, the establishment of a remedy fund and
allegations of IFC’s retaliation against whistleblowers (see Observer
Winter 2023). Roadmap fails to address persistent lack of economic
transformation in low- and middle-income countries In addition to
being used to obscure the G7 failures mentioned above, calls for the
tripling of MDB financing to $390 billion per year by 2030 –
including through the Roadmap – are also in part a reaction to
increasing pressure on World Bank shareholders from the Bridgetown
Initiative and other calls from the Global South states and civil
society for urgent reforms to the international financial
architecture in the wake of the unequal response to the Covid-19
pandemic and climate crisis. This continues to negatively impact
economic performance, essential social spending and investment in the
green transformation, and has cost countless lives in the Global
South. While calls for reform from the Global South included a strong
demand for a significant increase in development finance with an
emphasis on concessional and grant resources, they also strongly
focused on reform of undemocratic governance structures to create
‘better’ institutions that are more responsive to the needs of low-
and middle-income countries (LMICs). The outcome document of the
January 2024 meeting of the Third South Committee in Kampala, which
brought together 135 members of the G77, “call[ed] for urgent reform
of the international financial architecture.” Unfortunately, the
Roadmap has remained squarely focused on increasing World Bank
finance with little evidence-based analysis of the policies and
governance reforms required to ensure better institutions that meet
the pressing development needs of LMICs. Alluding to the inability of
the current international development system, including at the World
Bank and IMF, to stimulate the economic transformation necessary to
end commodity dependence among LMICs, the Third South Committee
document stressed, “the critical importance of industrialization for
developing countries” and stated the group’s support to “the United
Nations in playing a central and coordinating role in international
development cooperation.” An October analysis by US-based Center for
Global Development (CGD) contrasting the Roadmap initiative with its
predecessor, the Forward Look approved in 2018, concluded that “the
Evolution Roadmap offers more detail than the Forward Look but
nevertheless the level of ambition in most categories is modest.” The
analysis noted the focus on eight ‘Global Challenges’:
Climate/adaptation, fragility and conflict, pandemic prevention,
energy access, food security, water security, digitalisation and
protecting biodiversity and nature. CGD highlighted the shift in
focus from low-income countries (LICs) in the Forward Look to a
stated desire to support middle-income countries (MICs) in the
Roadmap as the greatest difference between the two. As global civil
society prepares to engage with shareholders and World Bank
management on operationalising the Roadmap’s proposals for increased
lending through the use of hybrid capital and a push for a ‘historic’
IDA21 replenishment at the Spring Meetings (see Observer Spring
2024), it remains essential that it continues to support the calls
above by LMICs and their marginalised populations for a ‘re-routing
of the Roadmap’ (see Observer Summer 2023), and to produce
significant changes not only in financing volumes but in the policies
and approaches supported by the Bank and the incentive structures
within it. Responding to the process, Rodolfo Lahoy of IBON
International stressed, “Upon which foundation does the Bank’s
‘evolved’ development mandate stand? It stands on self-ascribed
claims which repeat the same development paradigm that created harsh
crises. It is founded on avoiding discussions of accountability for
economic interventions that undermined social and economic rights,
including to self-determination and development.”
tinyurl.com/BiggervsBetter


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FINANCE/commentary

Better ways to reduce the pain of debt crises for developing
countries? Guest Comment by Penelope Hawkins, UNCTAD

SUMMARY
- High interest rates and reduced access to global capital markets
add to LMICs’ debt problems
- Complex, protracted and ineffective debt workout processes force
countries to privilege debt servicing over investments in the SDGs
- Efforts to address liquidity problems must be complemented by
reforms to the financial archtecture and sovereign debt system

High interest rates and reduced access to global capital markets have
made it harder for many developing countries to service and roll over
significant portions of their maturing external debt, limiting their
ability to make necessary investments to advance the Sustainable
Development Goals (SDGs) and address climate change (see Observer
Winter 2023, Autumn 2023). With a debt servicing crunch facing
developing countries between now and 2026, there is a need for urgent
intervention. A recent study by the Finance for Development Lab (FDL)
suggests that many of these countries face an illiquidity rather than
an insolvency problem and advocates a response that incorporates
preemptive debt reprofiling combined with upscaled international
investment support to begin funding the green transition. But beyond
the liquidity problem we also need to face a long-overdue, and more
fundamental, reform of the international financial architecture and
sovereign debt system. The low global growth environment, higher debt
costs and geopolitical conflicts already undermine developing
countries’ efforts to advance their development agendas and begin to
take on the climate challenge. So, we need to push for things that
can be done now, but that should not distract us from a reformed,
development-focused international financial architecture (see
Observer Spring 2023). We need both. When it comes to sovereign debt,
the dividing line between illiquidity and insolvency depends largely
on the “pain” that a country is willing to endure to avoid default
(see Observer Winter 2023). And since the costs of default under the
current international financial architecture are high, so are the
“pain thresholds”. Faced with complex, protracted, and ineffective
debt workout processes (see Observer Winter 2021, Winter 2020),
countries are, instead, making the impossible choice to privilege
debt servicing over investments in the SDGs. The FDL’s proposal to
link liquidity relief with an International Monetary Fund (IMF)
programme may not solve the problem given the time taken to negotiate
and implement such arrangements (see Observer Spring 2024). The
proposal has two key questions to answer: Will it be enough? and,
will it deliver relief in time? Unless these questions can be more
definitively answered, the process might only serve to worsen the
situation of citizens down the line. Private credit providers’ share
of developing country debt increased significantly between 2010 and
2021 (they doubled for low-income countries (LICs) to 13 per cent and
are now the dominant source of funding for lower-middle income
countries (LMICs) – see figure V.1 from the Trade and Development
Report 2023). This means that without private sector participation,
any developing country debt workout process is doomed to be too
little and ineffective. Of the 36 Poverty Reduction and Growth Trust
eligible countries currently listed by the IMF as highly indebted or
in debt distress, by the end of 2023, almost a quarter of their
external exposure is to the private sector, only a little less than
the exposure to bilateral creditors (around one third of external
debt). In an environment where debts are being serviced, there is
little incentive for the private sector to take seriously attempts to
reprofile them. Even if the private sector is persuaded to join, as
the G20 Common Framework has shown, lack of comparability of
treatment for different types of lenders creates prolonged and
unproductive negotiations between different creditor groups with high
costs to the country concerned. Much more needs to be put in place to
secure the rapid restructuring of debt to limit long-term damage to
the borrower. Another way the sovereign liquidity problems of the
kind identified by FDL could be addressed would be with a
better-functioning global financial safety net. There are several
improvements that could be made to the existing system, including the
effective rechanneling of (more) unused Special Drawing Rights (see
Briefing, Reconceptualising Special Drawing Rights as a tool for
development finance); revised IMF quota limits that replace the
existing skewed and outdated ones and help to recapitalize the IMF
(see Observer Winter 2022); the abolition of tiered interest rates on
the IMF’s Resilience and Sustainability Trust (RST) to support
climate-related projects (see Observer Spring 2024); and the
elimination of IMF surcharges. The latter are a penalty charge that
are expected to impose costs of US$2.1 billion on 17 developing
countries in 2024 alone (see Observer Autumn 2022, Spring 2022).
These improvements could be adopted relatively quickly and with
limited cost. Additionally, the IMF and World Bank should lead the
way to the universal adoption of contingency clauses in new debt
agreements that provide safeguards in the event of climate
catastrophes, natural disasters, and other crises, increasing
resilience of developing countries to external shocks. Then we will
have made progress in adopting a more development-focused global
financial system. tinyurl.com/FDLProposal

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LAND/news

World Bank land tenure approach contributes to displacement and food
insecurity

SUMMARY
- Bank’s push for security of land tenure helps facilitate landgrabs,
amid displacement of millions and financialisation of agricultural
sectors in Global South states
- Bank’s promotion of investment in agribusiness can also contribute
to food insecurity

The theme of the World Bank’s upcoming Land Conference, happening in
May, is “Securing land tenure and access for climate action”, and
according to its Land 2030 Global Partnership Umbrella Program, the
Bank is working “to assist developing countries in achieving land
tenure security for all men and women.” However, in practice the
Bank’s efforts to increase security of tenure have “only reinforce[d]
land inequalities…and [the] disenfranchisement of rural peoples”,
according to Gail Corduna of the People’s Coalition on Food
Sovereignty (PCFS). The forms of land tenure – the rules and
arrangements connected with owning land, especially land used for
farming – the Bank has promoted have undercut existing traditional
forms of land tenure. Its promotion of private markets for land,
Corduna explained, “have meant land is easily transferable, and
therefore potentially alienable from the communities that depend on
it for their survival.” The transferability of land along with the
liberalisation of agriculture and finance the Bank and IMF have
pushed on Global South states have facilitated investment in
agribusiness and driven the financialisation of national agricultural
sectors. This has privileged the profits of investors while actively
undermining the livelihoods of local communities (see Observer Spring
2020), threatening the long-term social and environmental
sustainability of agricultural systems, and worsening existing
imbalances of power. Further, as R. Leshma Manogna and Nishil
Kulkarni of Birla Institute of Technology And Science – Pilani note,
the opening of national agricultural sectors means that dispossessed
communities may face higher food prices as speculators drive up the
price of basic staples in international markets as they did in 2022 –
causing not a food supply crisis, but rather a food price crisis (see
Observer Summer 2022). Financialisation drives land grabbing The
effects of this financialisation on smallholder farmers and local
communities around the world has been profound. According to PCFS, in
the decade after the 2007-8 financial crisis, 12 million people were
displaced by land grabs, predominantly in the Global South. This rate
of dispossession has only increased since the pandemic, as high
global food prices have driven record profits for corporate
agriculture. The Bank claims its promotion of private investment in
agriculture helps end poverty and hunger. However, in many cases,
according to Jennifer Clapp of the University of Sheffield and S.
Ryan Isakson of the University of Toronto, the financialisation of
agriculture can contribute to food insecurity, as crops grown locally
by agribusiness enterprises are sold in international markets, where
the greatest profit can be realised. Further, the World Bank is
implicated in land grabbing through more than just pushing reforms to
facilitate the commercial exploitation of land. The International
Finance Corporation (IFC), the Bank’s private finance arm, has been
involved in financing the acquisition of land through financial
intermediaries in, according to PCFS, over 30 countries, which has
been linked to the displacement of hundreds of thousands, including
in Ethiopia, Sierra Leone, Guinea and Gabon (Observer Summer 2017).
tinyurl.com/WBGLandTenure

====================================================================

ENVIRONMENT /news

World Bank makes developing countries wait on Loss and Damage Fund
demands After being confirmed as the interim host of the new Loss and
Damage Fund at COP28 in November, the World Bank has yet to confirm
it will be able to be meet the extensive list of conditions put
forward by developing countries during negotiations (see Observer
Winter 2023). According to a February article in online publication
Devex, the Bank will confirm by June whether it can meet these asks.
However, civil society advocates said there is a chance the process
may be further delayed. “Without significant changes to its policies
and procedures, the World Bank is not fit for purpose to host the L&D
Fund,” said Brandon Wu of ActionAid USA. “Any delays in meeting the
conditions set by the Fund’s Transitional Committee to ensure the
Bank can serve the purposes of the Fund, rather than vice versa, are
a major red flag.” The Loss and Damage Fund’s first board meeting is
now slated to take place in April, after wealthy countries stalled in
appointing executive directors to the new fund.
tinyurl.com/LDFundDelay

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