+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Bretton Woods Observer Winter 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 +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ 1. COP29 sees MDBs climate finance take centre stage, as civil society brands new climate finance goal a ‘betrayal’ 2. IMF’s PRGT review places the burden of financing the program on low-income countries 3. Trump election may add pressure to reverse World Bank’s prohibition on support for nuclear power 4. The B-Ready index: the World Bank’s bluewashing of labour rights Guest comment by Rougui Diallo, International Trade Union Confederation (ITUC) 5. New report debunks claims that inadequate MDB transparency results from private sector concerns 6. World Bank’s Mission 300: a path to power, for whom? 7. CAO report finds IFC non-compliant with its own GHG emissions obligations 8. Who’s afraid of the grassroots? IMF policymaking in the era of social discontent 9. MIGA’s new guarantee for voluntary carbon markets risks shielding big polluters 10. World Bank goes full steam ahead on agribusiness, but new CAFOD report highlights gendered harms of Bank’s approach 11. BWIs use frozen Russian assets as part of $50 billion support to Ukraine 12. UN’s Fourth Financing for Development Conference takes place at key moment for international financial architecture reform ===================================================================== ENVIRONMENT/analysis COP29 sees MDBs climate finance take centre stage, as civil society brands new climate finance goal a ‘betrayal’ SUMMARY - Rich countries agree to provide a paltry $300 billion in public finance by 2035, as Small Island States and Least Developed Countries stage walkout - MDBs commit to provide $120 billion a year in climate finance to low- and middle-income countries by 2030, as part of public finance goal - MDBs champion private investments and carbon markets, despite debt crises in many climate vulnerable countries Multilateral development banks (MDBs) have successfully positioned themselves as key actors in the global climate finance architecture, as efforts to agree a new global climate finance target floundered at the UN Framework Convention on Climate Change’s (UNFCCC) 29th Conference of Parties (COP29) in Baku, Azerbaijan, in November. Global civil society group Climate Action Network International (CAN-I) called the outcome a “betrayal” by rich countries of “people and planet.” COP29 agreed a hugely controversial New Collective Quantified Goal (NCGQ) for climate finance, with developed countries proposing only a marginal increase of $300 billion in public climate finance by 2035 – well below the $900 billion per year called for by Least Developed Countries and the Alliance of Small Island States, who staged a dramatic walkout at the close of COP29 negotiations on 23 November. Kenya’s climate envoy Ali Mohamed lamented, “While the New Collective Quantified Goal appears in writing, its delivery is left to the uncertain goodwill of public and private actors. No guarantees exist that climate finance will come as grants, not debt-loading loans for vulnerable nations. Africa demanded clear targets for mitigation, adaptation and loss & damage management. We received none.” Ten MDBs, including the World Bank, announced a new joint climate finance target at the start of COP29 on 12 November, with their joint statement noting, “we estimate that by 2030, our annual collective climate financing for low- and middle-income countries [LMICs] will reach USD 120 billion.” The NCQG’s $300 billion goal includes MDB climate finance to LMICs that is attributable to developed countries via their paid in capital. According to a blog from Joe Thwaites of US-based National Resources Defense Council, using 2022 reporting as a baseline, “the amount [of MDBs climate finance] attributable to developed countries would be $84 billion” by 2030. “By strengthening the role of MDB finance in the new climate deal, developed countries managed to get away from their obligation to provide public finance in the form of grants at scale to developing countries, cutting these countries’ hopes to effectively deal with climate impacts and transition to a clean energy future,” said Mariana Paoli of UK-based civil society organisation (CSO) Christian Aid. “It not only risks worsening their debt, but it shifts the burden from developed countries to the private sector-first approaches. This reverse in the narrative is pervasive and morally wrong because what will guide finance is where profit can be found and not the needs of developing countries, especially those communities who are most marginalised,” Paoli added. Rich countries’ strategy to channel climate finance via MDBs risks worsening debt crisis As noted in a report from Netherlands-based CSO Recourse on the eve of COP29, 70 per cent of MDBs climate finance to LMICs in 2023 was provided as loans, and just 4 per cent as grant financing. This is an urgent concern, as the NCQG result comes amid what debt groups have called the “worst debt crisis ever.” In 2023, debt servicing consumed 38 per cent of budget revenues and 30 per cent of government expenditure across the Global South, with low-income countries seeing their highest debt payments since 1998, surpassing spending on health, education and climate action. Beyond this, there are serious concerns about MDBs’ approach to climate action. “The development banks’ climate finance figures should be read with great caution,” said Petra Kjell Wright from Recourse. “We found financing for projects involving fossil fuels, human rights violations, and environmental destruction. This raises serious questions about whether the MDBs’ current approach is genuinely helping to address climate change for the most vulnerable people and places.” Despite being observers of, rather than parties in, the UNFCCC, the World Bank and other MDBs continue to grow in prominence in the climate finance landscape: the Bank has long been the host of numerous carbon credit trust funds (see Inside the Institutions, What is the role of the World Bank in carbon trading markets?); established the Climate Investment Funds in 2008, which were initially meant to serve as a temporary bridge while a UN-based climate fund was established (see Observer Summer 2019); and most recently secured an agreement to host the Fund for Responding to Loss and Damage (FRLD) over the next four years (see Observer Winter 2023), with its role as host and trustee confirmed at COP29. The Bank’s claimed climate finance has grown dramatically in the past decade, reaching $42.6 billion in fiscal year 2024, ending 30 June. However, in an op-ed by Kjell Wright in African Arguments published on 14 November, she noted one of the main problems with MDBs’ climate finance, “is a lack of transparency on what is being counted. For example, Oxfam could not verify 40% – that’s $7 billion – of what the World Bank claimed as climate finance for one fiscal year. The Asian Infrastructure Investment Bank (AIIB) declared that they reached their target for 50% of their financing approvals to be for climate finance in 2022, three years…[before] their 2025 deadline, but failed to make the relevant data public. Meanwhile, the African Development Bank (AfDB) has not published any public record at all of what it counts as climate finance.” The MDBs’ loan-based climate finance totals dwarf pledges to the Bank-hosted FRLD, which total just $731.5 million, with only three countries making new pledges at COP29, despite the trillions in damages already being wrought by the climate emergency in LMICs. False solutions abound in a world on fire, with the MDBs at the wheel With global temperature rise passing a 1.5°C increase above pre-industrial levels this year, the World Bank and other MDBs continue to lead the way in cheerleading for policy solutions that have thus far failed to bend the global greenhouse gas emissions curve. The World Bank’s pavilion at COP29 was replete with talks about carbon credits as well as efforts to crowd in the private sector into climate finance efforts. This included a new initiative from the Multilateral Investment Guarantee Agency (MIGA), the Bank’s political insurance arm, to insure carbon credits, despite the fact many have been shown to have negligible impact in reducing emissions (see Observer Winter 2024). The World Bank and other MDBs continue to promote private finance as a solution for climate action, in alignment with their often criticised ‘billions to trillions’ approach (see Observer Summer 2023). World Bank President Ajay Banga jetted into Baku for a single day, in order to promote the Bank’s support for private investment in climate action in an event co-hosted by the IMF and the Financial Times on 12 November, where he was particularly gushing about the Bank’s efforts to create asset classes out of MDBs loans, in order to sell them as securities to Wall Street investors. In a string of Bank-hosted events on private sector ‘climate finance’, the trade-offs associated with this approach for countries and citizens – including long-term contracts that leave governments responsible for guaranteeing private sector profits, and rising energy and other prices for consumers – were largely skated over (see Report, Gambling with the Planet’s Future). The Bank’s obsession with foreign direct investment appears undimmed, largely ignoring calls to strengthen local currency lending and domestic private sector investment. In contrast, as noted by PowerShift Africa advisor Fadhel Kaboub, “100 Global South trade unions representing more than 100 million workers signed a joint declaration at COP29, saying that climate finance must reclaim and restore public assets and services, calling for a just and equitable transition.” In their statement, unions called for, “a public pathway approach to addressing climate change, one that requires a major policy shift away from the current ‘privatise to decarbonise’ policy towards a bold pro-public framework.” With the Bank and its MDBs peers in charge of climate finance, however, climate justice seems sure to remain firmly on the side-lines. tinyurl.com/MDBsCop29 ===================================================================== FINANCE/news SUMMARY - Review introduces a tiered interest rate mechanism for LICs in the context of increased demand, higher interest rates and the absence of offsetting donor pledges - CSOs demand instead an SDR interest rate cap to reduce the cost of lending and sale of gold reserves to address the funding gap The IMF’s policy review of the Poverty Reduction and Growth Trust (PRGT), its concessional lending programme for low-income countries (LICs), announced shortly before the October Annual Meetings in Washington DC, represents an attempt to “restore the self-sustainability” of the Trust in the context of increased demand, higher interest rates and the absence of offsetting donor pledges. Since the Covid-19 pandemic, the PRGT is under strained demand, with annual lending commitments increasing to an average of 5.5 billion Special Drawing Rights (SDRs; see Inside Institutions, What are Special Drawing Rights (SDRs)?), compared with about SDR 1.2 billion in the previous decade. The review includes policy changes involving a self-sustained annual lending envelope calibrated at SDR 2.7 billion and a new tiered interest rate applied to around half of all LICs eligible for PRGT funding. The new mechanism will impose an interest rate of 0.7 of the SDR interest rate (SDRi) for countries that do not face elevated debt vulnerabilities limiting their access to international financial markets, and 0.4 of the SDRi for countries that face elevated debt vulnerabilities, have limited access to international financial markets, or are a small or micro-state. Access limits will be kept at their current levels of 200 per cent of quota share annually, meaning a country cannot borrow annually more than twice the amount it contributes to the Fund. Amid ongoing systemic crises, including food insecurity exacerbated by the war in Ukraine, the growing impact of climate change, rising debt vulnerabilities in LICs and alleged pressures on rich countries’ budgets leading to a decrease in official development assistance, the PRGT review was immediately met with criticism, with the Vulnerable Twenty (V20) Group – the most affected by these changes – calling “for a discontinuation of this tiered mechanism to avoid overburdening LICs” (see Dispatch Annuals 2024). While the Fund maintains that the tiered interest rate mechanism will reflect “a modest, concessional” rate and will “enhance the targeting of scarce PRGT resources to the poorest LICs,” the SDRi has been continuously on the rise – reaching 4.1 per cent as of May 2024, due to the tight monetary policy pursued by advanced economies to curb inflation. An SDRi cap would help prevent the Fund’s lending activities from becoming prohibitively expensive at a time of multiple shocks to the global economy. While the new set annual funding is more than twice the pre-Covid-19 average and will facilitate generation of SDR 5.9 billion (about $8 billion) in additional PRGT subsidy resources, this falls short of the $40 billion demand estimated by the IMF for this year. Civil society has argued the Fund could solve this problem by selling some of its gold reserves. “We need more concessional and grant-based financing for developing countries, not less. There are other ways to address the concerns about self-sustainability the review raises, like an SDR interest rate cap and the sale of IMF gold reserves, but it should not come as a surprise that an institution in which the V20’s 55 countries collectively hold less than 6% of vote shares makes decisions that completely ignores their voice” noted Emma Burgisser, Economic Justice Policy Lead at Christian Aid. IMF’s gold reserves are currently heavily undervalued, with a book value of about SDR 3 billion according to the Fund’s own internal accounting value, but their market value is currently over $176 billion (SDR 131 billion). Selling only a small proportion would solve IMF’s funding issue – an option preferred by many shareholders – but is so far not feasible due to strong pushback from the US. tinyurl.com/PRGTReview ===================================================================== ENVIRONMENT/News Trump election may add pressure to reverse World Bank’s prohibition on support for nuclear power Donald Trump’s election to lead the World Bank’s largest shareholder may impact the Bank’s long-standing prohibition of support to nuclear energy. Calls to revisit the Bank’s policy have been growing, with six new countries endorsing a declaration to triple nuclear energy production by 2050, including several from the Global South. In September, 14 of the world’s biggest banks stated their support for those efforts. International Atomic Energy Agency Director General Rafael Mariano Grossi spoke to World Bank executive directors during the October Annual Meetings, highlighting that World Bank support for nuclear energy would bring it in line with the ‘new consensus’ reached at COP28 in Dubai. Those calls and optimism are contradicted by civil society concerns about the approach, including its impact on delaying decarbonisation. The Financial Times reported in October that, “advisers within the office of World Bank President Ajay Banga are keen to find workarounds [to the prohibition],” and highlighted that “the Republican chair of the House Financial Services committee, Representative Patrick McHenry, has introduced legislation requiring the US Treasury to push the World Bank to lift its ban on nuclear power.” While the bill hasn’t passed, the article noted staffers are “cautiously optimistic that the Bank’s stance could change soon.” Such optimism no doubt reflects Trump’s support for investment in nuclear energy. The US’ approach to the Bank’s position on the topic may also be influenced by security arguments highlighting the leadership of China and Russia in the sector. tinyurl.com/TrumpNuclear ===================================================================== FINANCE/Commentary The B-Ready index: the World Bank’s bluewashing of labour rights Guest comment by Rougui Diallo, International Trade Union Confederation (ITUC) SUMMARY - World Bank’s Business Ready index includes new measures on workers’ rights and protection - Reductionist approach ultimately rewards countries driving down labour rights in favour of business, as evidenced in Indonesia, Georgia and the Philippines This fall, the World Bank unveiled its new Business-Ready (B-Ready) index, a successor to the controversial Doing Business Report (DBR), which was discontinued in 2021 amid a data manipulation scandal (see Dispatch Annuals 2023; Observer Summer 2023, Winter 2021). Promising a more comprehensive assessment of countries’ business environments, the new index goes beyond considering only the regulatory environment and includes measures of the quality of public services and enterprise survey data. Still, the B-Ready index maintains the approach that made the DBR a ‘darling’ of investors and a closely monitored product for policymakers: a simple ranking that reduces complex processes in the business lifecycle to mere numerical scores. While this reductionist approach might work for operational business tasks, such as measuring electricity access, its application to labour relations has fundamental flaws. The index revives the controversial ‘employing workers’ indicator – previously removed from the DBR after years of criticism from the global labour movement and international organisations for rewarding countries with the lowest level of regulations, including violators of workers’ rights – which is intended to make their economies friendlier to business. The revamped B-Ready now includes indicators to measure whether countries guarantee fundamental workers’ rights – from freedom of association to occupational safety – and provide key social protection schemes such as unemployment and health insurance. However, ITUC’s new analysis reveals that by treating labour policy as a purely technocratic issue, stripped of social and political context, B-Ready perpetuates its predecessor’s pro-business, deregulatory agenda, fostering a race to the bottom on labour standards. One major methodological flaw lies in B-Ready’s reliance on a handful of lawyers to evaluate complex labour institutions and relations. Georgia, the top scoring country in the labour section, scores full points for mandating social consultation in setting or updating the minimum wage, even though the country has not updated its minimum wage since 1999. Furthermore, it is rewarded for having a minimum wage rate that falls far below subsistence level. This disconnect between the legal frameworks that protect workers and their implementation permeates the entire labour section of the index. While enterprise surveys capture regulatory impacts on firms, the index ignores real-world consequences for workers. Countries can score highly by maintaining minimal social costs for employers, creating a façade of worker protection without meaningful implementation. In short, B-Ready allows governments to appear compliant while effectively undermining labour rights. Smoke and mirrors: how B-Ready’s privatisation logic undermines workers’ rights and protections The stark disconnect between international institutions and local realities is vividly illustrated in Indonesia. While the World Bank and IMF lavishly praise the labour market reforms in the country’s 2020 Omnibus Law on Job Creation, Indonesian workers have waged a four-year battle against its assault on worker protections. Last October, their resistance culminated in a Constitutional Court victory, ruling the law conditionally unconstitutional – the second such ruling since 2021. This gulf between technocratic praise and ground-level resistance reveals how dangerously divorced international financial institutions (IFIs) remain from the human impact of their policy prescriptions. This growing distance is hardly surprising, given neither the World Bank nor the Fund undertake ex ante or ex post human rights impact assessments. Indonesia’s pursuit of higher B-Ready rankings demonstrates how these metrics distort policy priorities in favour of a broader privatisation agenda. Taking advantage of the Covid-19 pandemic, President Joko Widodo’s administration rushed through labour flexibilisation policies while accelerating privatisation. The Omnibus Law expands precarious work arrangements and weakens minimum wage protection, providing employers greater flexibility in managing their workforce, and minimising wage and termination costs in line with B-Ready prescriptions. It facilitates dismantling state-owned enterprises like Perusahaan Listrik Negara (PLN), the power utility, to benefit private providers (see Observer Spring 2024). The state shifted social costs from employers to the government, creating under-financed schemes that undermine universal social protection. Despite its poor standing in the ITUC’s Global Rights Index, these worker-hostile policies helped Indonesia reach the top 10 in the B-Ready’s labour category – mirroring the DBR’s pattern of rewarding countries with deteriorating labour rights. To cite another example, the Philippines, where trade unionists face deadly persecution, ranks sixth in B-Ready’s labour metrics – a striking illustration of how the index’s technocratic measurements mask brutal realities. In its most recent ruling, Indonesia’s Constitutional Court gave the government two years to draft a new employment law, offering Indonesia a chance to prioritise workers’ rights over ranking competitions. Yet, as long as the B-Ready index continues to reduce labour rights and relations to simplistic scores that diverge from the ground realities, policymakers will face pressure to contend for the approval of international investors over workers’ rights and well-being. tinyurl.com/BeReadyIndex ===================================================================== IFI GOVERNANCE/news New report debunks claims that inadequate MDB transparency results from private sector concerns SUMMARY - Publish What you Fund report sheds light on persistent lack of adequate disclosure of private sector finance by development finance institutions and multilateral development banks - Report stresses that publicly available market information provides more detail than MDB and DFI platforms n October, Publish What You Fund (PWYF) released its What Works report – an update to its April Crowding in publication. While the World Bank redoubles its faith in the faltering ‘billons to trillions’ agenda (see Dispatch Annuals 2024), the report raises additional doubts about the success of private capital mobilisation (PCM) efforts to date. The findings also contradict claims by the International Finance Corporation (IFC), the World Bank’s private sector lending arm, and other Development Finance Institutions’ (DFIs) assertions that their resistance to disclosure of private sector investments results from private sector concerns. Adding to skepticsim about the ‘billions to trillions’ agenda, a 30 June G20 Independent Expert Group report highlighted that, “MDBs have had PCM ratios of about 0.6 per dollar of their own commitments.” As evidenced by the difficulty in securing a “historic” 21st replenishment of the International Development Association (IDA), the World Bank’s low-income lending arm, the World Bank and other MDBs are under intense pressure to make the ‘billions to trillions’ dream a reality (see Observer Winter 2024, Autumn 2024). Kate Geary of Netherlands-based civil society organisation (CSO) Recourse noted, “in recent years, MDB lending has grown more complex, and the more convoluted the financial product, the more obscure.” In that context, the report stressed that current PCM reporting by MDBs and DFIs remains unsatisfactory as it lacks the details required to evaluate the effectiveness of PCM strategies, and made several recommendations to address current shortcomings. Flawed argument exposed: private sector platforms more transparent than MDBs According to the report, the call for methodological changes was welcomed by private investors. This is significant as MDBs and DFIs often use alleged private sector concerns to rebuff civil society calls for adequate disclosure. David Pred of US-based CSO Inclusive Development International lamented, “In the RCBC case in the Philippines, IFC refuses to disclose to the Complainants third party assessments of environmental and social harm…[which] have direct bearing on the lives of the affected communities and…are being buried under the bogus pretext of data privacy laws and client confidentiality agreements.” The report underlines that, “DFIs are overstating the level of concern around commercial confidentiality and other disclosure constraints.” It highlights the case of loan information platorms LSEG Loan Connector and DealScan, which contain more detail than MDB reporting, stressing, “The disclosures contained within DealScan strongly suggest that blanket claims of commercial confidentiality are simply inaccurate.” Dustin Schafer of German CSO Urgewald said, “The IFC’s lack of transparency is particularly striking. For almost all of the projects supported by the Private Sector Window of the Global Trade Finance Programme, not even the recipient financial institutions or countries can be identified on the IFC disclosure website. While this lack of transparency is generally unacceptable, it is particularly so given the use of scarce IDA resources to subsidise trade finance with its questionable development impact and high fossil fuel exposure.” The report calls for DFIs to robustly evaluate the effectiveness and implications of their PCM strategies (see Observer April 2024; Briefing, Civil Society calls for rethink of World Bank’s ‘evolution roadmap’ as part of wider reforms to highly unequal global financial architecture). Debunking the ‘confidentiality’ argument also contributes to demands for greater transparency made by organisations working to uphold the rights of, and which seek remedy for, communities negatively impacted by DFI private sector activities (see Observer Winter 2019). As Geary stressed, “without transparency, there can be no accountability. Communities adversely affected by MDB and DFI investments find it impossible to uncover who is funding the project, and so who they can to turn to for remedy. This must change – and commercial confidentiality is no excuse.” tinyurl.com/PWYFReport ===================================================================== iNFRASTRUCTURE/news World Bank’s Mission 300: a path to power, for whom? SUMARY - Mission 300 aims to bring electricity to 300 million people in Sub-Saharan Africa by 2030 - Bank’s focus on attracting private investment through energy privatisation raises concerns, as it puts private profits over sustainable energy systems At the World Bank and IMF Spring Meetings in April, World Bank President Ajay Banga announced Mission 300 – a joint commitment with the African Development Bank (AfDB) to provide energy access to 300 million people in Sub-Saharan Africa by 2030 – describing electricity access as a “human right” (see Observer Summer 2024). While the Bank’s commitment to expanding energy access is encouraging (see Observer Winter 2017), its emphasis on governments putting “in place policies to attract private investment” raises concerns (see Observer Summer 2023). The Bank and AfDB are working with 15 Sub-Saharan African countries to develop ‘energy compacts’ – agreements to implement reforms aimed at restructuring power sectors to attract private producers. These compacts will be presented at the Africa Heads-of-State Energy Summit in Tanzania in January, alongside an Africa-wide energy compact. In addition, the Global Energy Alliance for People and Planet and the Rockefeller Foundation – among the partners in Mission 300 – also committed $10 million to establish a technical assistance facility to support implementation of the reforms. However, with civil society organisations (CSOs) still absent from the table, Dean Bhebhe of Kenya-based CSO PowerShift Africa and Rajneesh Bhuee of Netherlands-based CSO Recourse warned in South Africa-based publication Mail & Guardian in November that, “without the active participation of communities directly affected by energy policies, Mission 300 risks failing to secure the buy-in of the people.” Mission 300 draws from the Bank’s broader mission of turning billions of public finance into trillions by mobilising private capital, despite mounting evidence that the promised ‘trillions’ for development are still missing (see Observer Summer 2023). Alongside AfDB commitments, the Bank plans to channel $30 billion from the International Development Association (IDA), its low-income country arm, to help de-risk private investments and attract $90 billion for electrification, focusing on grid extensions and off-grid solar projects. A failed recipe repackaged In Mission 300, the Bank is doubling down on energy privatisation by amplifying de-risking measures and regulatory reforms, with projects like Nigeria’s ‘Distributed Access through Renewable Energy Scale-Up Project’ marking the Bank’s first private-sector-led attempt at distributed renewable energy generation. However, there is no mention of the trade-offs of relying on private finance, even though the Bank’s own research reveals a mixed record of success, at best (see Report, Gambling with the Planet’s Future). At a Mission 300 event during the World Bank and IMF Annual Meetings in October, the Bank praised Rwanda for quadrupling its energy supply through privatisation, but the hefty cost to its government was left unmentioned. As part of a World Bank reform package, Rwanda signed over 20 long-term take-or-pay power purchase agreements to attract private investment in 2010, which drained public resources and raised tariffs – making electricity unaffordable for many. As a donor official noted in a 2020 paper by Benjamin Chemouni and Barnaby Dye, these costly agreements left the government “digging a fiscal hole.” Combined with the high capital costs and risk profiles in Sub-Saharan Africa, the private sector de-risking approach places a significant burden on already indebted governments. The Trade Unions for Energy Democracy argued in an August 2023 report that, “The current neoliberal emphasis is on ‘de-risking’ private investment, whereby public money makes profitable what would not otherwise be profitable. This means that ‘more public investment’ will simply perpetuate the same failed approach, while securing more profit for the private sector. It will not bring about the kind of changes in the energy system that decarbonization will require, and may even make matters worse” (see Observer Autumn 2023). tinyurl.com/Mission300WBG ===================================================================== ACCOUNTABILITY/news CAO report finds IFC non-compliant with its own GHG emissions obligations A report published in October by the Compliance Advisory Ombudsman (CAO), the independent accountability mechanism for the International Finance Corporation (IFC) – the World Bank’s private sector arm – found significant misalignment between IFC’s current practices and its greenhouse gas (GHG) emissions measurement, alternatives analysis, mitigation and disclosure requirements. The report also detailed severe inadequacies in IFC’s climate change policies, noting IFC’s shortcomings are “limiting its effectiveness in contributing to the mitigation of GHG emissions and to efforts to limit global warming.” The report followed a request by US-based civil society organisation (CSO) Bank Climate Advocates (BCA) and others, after the IFC failed to act on a September 2023 CSO letter urging it to “adhere to its board adopted policies…including those applicable to GHG emissions and climate change” (see Observer Autumn 2023). A December 2023 BCA analysis of 350 IFC investments between 2012-2023 revealed IFC-financed projects accounted for well over 168 million tons of GHG emissions per year that could have been avoided had IFC adhered to its own policies. There have been long-standing concerns about the negative climate impacts of IFC’s investments, especially via its financial intermediary investments (see Observer Winter 2023, Winter 2020). “The CAO report substantiates BCA’s findings that IFC is systematically failing to meet its own climate change requirements. Considering the climate crisis, IFC must start adhering to its policies now, and take swift action to bring them into alignment with the Paris Agreement’s 1.5°C objective as its human rights and multiple other legal obligations require,” noted Jason Weiner, BCA Executive and Legal Director. The IFC is expected to review its Performance Standards, i.e. its environmental and social safeguards, beginning in 2025. tinyurl.com/CAOReportIFC ===================================================================== ENVIRONMENT/news Who’s afraid of the grassroots? IMF policymaking in the era of social discontent SUMMARY - IMF’s World Economic Outlook and Regional Outlook for Sub-Saharan Africa were released in October 2024 - They argue for a need to quell public rejection of a new raft of austerity measures and avoid social unrest - IMF plans to convince public of need for reform through an ill-conceived education and communications strategy The International Monetary Fund (IMF) has historically shied away from formally engaging in politics. This position appears to be shifting with the institution’s rhetoric increasingly highlighting the political economy of reform and communication with the ‘grassroots’. The rhetoric, however, is currently a long way from reality. Prior to this year’s World Bank and IMF Annual Meetings in Washington DC, over 70 civil society organisations (CSOs) signed a letter to the IMF executive board highlighting the lack of meaningful consultation on IMF programmes and policies (see Observer Autumn 2024). IMF Managing Director Kristalina Georgieva referred to the letter directly during the Meetings, promising a review of CSO engagement by mid-2025 – a process whereby the voices of civil society and ordinary people are to be “heard and included.” Yet, there is little information on how that will be achieved given a lack of clarity over how the Fund will consult on major forthcoming policy review processes, such as the conditionality and surveillance reviews, the interim guidance note on mainstreaming gender, and the IMF and World Bank’s joint Bretton Woods at 80 Initiative. This uncertainty can be considered in the context of the other major message coming from the Annual Meetings that a “pivot” towards fiscal consolidation is necessary as a result of the much discussed ‘high debt, low growth’ dynamics in the global economy. The rationale for the grassroots turn appears to be the result of a growing fear within the institution that policy measures will be rejected by the population, leading to revolt and unimplementable reforms. This fear is not new. The IMF’s Independent Evaluation Office (IEO) in its ongoing evaluation of the Fund’s fiscal policy advice highlighted that lack of attention to the sustainability and political economy of reforms is a weakness of the institution. In addition, their review of the Fund’s evolving mandate highlighted significant issues with prioritisation of issues and resource allocation. In a year of numerous elections worldwide, the Fund has also adopted something of a defensive stance in the context of increasing rejection of neoliberal orthodoxy from mainstream left parties and more definitively and successfully from the populist far right. The Fund has repeatedly called upon governments not to forget the necessity of fiscal discipline, despite admitting its unpopularity. The direct appeal to the public also comes as a result of what has been referred to as the IMF’s “protest problem”. Over the past year there has been unrest in a number of countries which movement leaders have connected to IMF policies including in Argentina, Bangladesh, Kenya, Sri Lanka and Nigeria (see Observer Autumn 2024). With populations around the globe rejecting the status quo, is the IMF out of ideas? In addition to the Regional Economic Outlook for Sub-Saharan Africa published in October, the Fund’s World Economic Outlook (WEO) cautions that ‘social discontent’ will make reforms unimplementable. It argues that the public are in danger of being swayed by factors such as pre-existing beliefs, prejudices and misinformation, presenting them not as rational actors who are defending their economic interests. The WEO therefore considers all policy directions adopted by the IMF as positive or neutral – contradicted by research which demonstrates that staff’s ideological biases and professional ties have an impact on conditionality – and refuses to consider that fiscal constraints or austerity have demonstrated negative effects. The WEO also seems to disregard the findings of its own working paper, Fiscal Discourse and Fiscal Policy from September 2024, which an IMF blog summed up: “respondents either want to increase spending or maintain it at current levels in their countries. People want more infrastructure, schools, hospitals, and services (education, health, safety).” The WEO concludes that the success of reform is down to an “effective communication strategy” that confronts prejudices, and “fosters trust among all stakeholders and the general population.” This seems to side-step the fact that many countries have repeatedly ended up in IMF programmes, even when they have ‘successfully’ implemented its advice. The Regional Outlook for Sub-Saharan Africa is somewhat more direct. It argues that fiscal consolidation is required, noting that in several countries this should take place with the depth and speed that will certainly risk rejection and social unrest. However, the recommendations are similar to those above. It argues that communication with stakeholders is central to underscore the necessity of reforms and correct the pre-existing beliefs of a population. Interestingly, it argues that policies should be better designed, puts a number of progressive policy prescriptions such as progressive income and property taxes forward, and there is an admission that currently social protection programmes are inadequate and poorly designed. However, it appears that these measures are not treated seriously as an end in themselves: they exist because they are necessary to ensure that broader structural reforms are not rejected. In addition, it is fundamentally contradictory as it claims consultation is key while simultaneously asserting that the public are uneducated about the impact of economic policy or unable to ascertain whether measures are successful or not. Nabil Abdo, of global CSO Oxfam International argues, “instead of planning an austerity charm offensive to make it more acceptable to the public and to the people reeling from its devastating impacts, the Fund, through its review of program design and conditionality policy, needs to significantly change its approach in supporting countries in trouble. This means that IMF supported programs should be designed to enable countries to address their crises while reducing inequalities through progressive economic policies that place the burden of reform on the wealthiest and not on the people who are bearing the brunt of them through the same old crushing austerity policies.” The Fund’s new stated commitment to improve policy design and consultation practices forms part of a broader project to reimagine the role of the institution as Georgieva begins her second term. How this fares very much depends on whether the gap between the institution’s rhetoric and reality persists. tinyurl.com/ConditionalityReview ===================================================================== ENVIRONMENT/News MIGA’s new guarantee for voluntary carbon markets risks shielding big polluters SUMMARY - MIGA introduced a Letter of Authorisation template at COP29 to de-risk carbon markets for private investors, despite evidence of systemic failures - Civil society warns the move could entrench “junk” carbon credits, shielding polluters from accountability and leaving local communities to bear the costs At the UN Framework Convention on Climate Change’s 29th Conference of Parties (COP29) on 14 November, the Multilateral Investment Guarantee Agency (MIGA), the World Bank’s political risk insurance arm, presented a Letter of Authorisation (LoA) template aimed at de-risking carbon markets for private investors under Article 6.2 of the Paris Agreement. Article 6.2 facilitates bilateral carbon credit trading, i.e., allowing countries and companies to achieve ‘net zero’ targets by purchasing credits from emission-reduction projects in the Global South (see Inside the Institutions, The role of the World Bank in carbon trading markets). This move comes despite evidence that carbon markets have failed to reduce emissions. A January 2023 joint-investigation by The Guardian and other outlets revealed that over 90 per cent of rainforest carbon offsets certified by Verra, the world’s leading certifier, were effectively “worthless”. On 12 November, a coalition of climate justice groups issued a press release stating that carbon markets serve only as “a smokescreen for big polluters to keep on emitting at the expense of people and nature.” Often dubbed the ‘wild west’ due to poor regulation, carbon markets have bred exploitative schemes that mainly benefit foreign dealers at the expense of local communities. While COP29 saw marginal improvements in transparency under Article 6.2, outcomes failed to establish robust accountability measures. A 23 November Climate Home News article argued, “the rules for bilateral trades under 6.2 could open the door for the sale of junk carbon credits.” Meanwhile, while Verra introduced a new carbon credit system to improve project integrity, concerns about the methodologies remain. On 24 November, The Guardian quoted Injy Johnstone, an Oxford researcher, who cautioned “the risk of abuse still remains alive and well.” De-risking ‘junk’ carbon credits? MIGA introduced the LoA to “define legal rights to carbon credits and improve the insurability of investments”, securing enforceable host government commitments through compensation and dispute resolution procedures. The template, still under discussion, states that host countries “expressly [and irrevocably] permit, consent to, and authorize the transfer, sale, or any other disposition” of internationally transferred carbon credits and associated rights. This applies to transfers made by the investor, recipients, or future holders, both within and beyond the host country. The LoA’s provisional language suggests that host governments could face financial liabilities if they modify or revoke credits within the agreed timeframe, with compensation including “the prevailing market value of the affected Credits [and estimated revenue losses].” This potentially poses significant risks for host countries, given the significant problems with carbon credit schemes to date. Indeed, some countries argue that revocation should be allowed in cases of fraud or human rights violations. Although MIGA has environmental and social Performance Standards for the projects it insures, civil society organisations (CSOs) have long questioned its approach to accountability (see Observer Autumn 2020). As some host governments began to regulate carbon markets, like Zimbabwe’s announcement in May 2023 that it would retain half of project revenue and consider voiding existing contracts, US-based CSO Oakland Institute warned in July 2023 that MIGA’s proposed guarantees would “directly benefit investors, developers, and intermediaries in the Global North,” insulating them from host countries’ regulatory measures (see Observer Autumn 2023). Marjorie Pamintuan from Netherlands-based CSO Recourse commented, “MIGA has a history of enabling fossil fuel projects, and it is still supporting fossil gas power plants to this day. With this new LoA, the World Bank Group is yet again contributing to prolonging the fossil fuel era, albeit indirectly, by helping big polluters get a free pass to continue their dirty business. Instead of backing unproven and ineffective voluntary carbon markets, MIGA should be prioritising guarantees for just, clean energy transition projects in the most climate-vulnerable countries.” tinyurl.com/MIGACarbon ===================================================================== LAND/news World Bank goes full steam ahead on agribusiness, but new CAFOD report highlights gendered harms of Bank’s approach SUMMARY -World Bank increases push for agribusiness financing with a $9 billion annual commitment by 2030 - New CAFOD report highlights harmful gendered impacts of current approach to commercialising farming and introducing seed laws At a flagship event during this year’s World Bank and IMF Annual Meetings in Washington DC, WBG president Ajay Banga announced the Bank would make a “strategic pivot” to double its agri-finance and agribusiness commitments to $9 billion annually by 2030. However, an October report, titled Seed Systems and Gender Equality, by UK-based civil society organisation CAFOD, found the WBG’s interventions in agricultural systems can have negative impacts on vulnerable groups, including women. Banga framed the commitment as “fundamentally a jobs initiative”, and noted global food insecurity is predicted to increase by 60 per cent in the coming decades. A blend of public and private finance was central to his proposed solution for scaling up agricultural production. This approach will no doubt raise concerns amongst Bank watchers about the power imbalance between international agri-businesses and smallholder farmers, many of whom have criticised the Bank’s ramping up of private finance solutions as part of the Bank’s Evolution Roadmap (see Observer Spring 2024). Scaling up Bank’s current approach is a risk to gender equality CAFOD’s new report detailing the negative impacts of the World Bank’s interventions in seed systems on gender equality – with women making up 43 per cent of the agricultural labour force – offers a critical opening for civil society to track and expose the social impacts of the Bank’s approach to agribusiness. CAFOD analysed a selection of World Bank agriculture programmes in 2024 to assess their approach to gender, finding that they focus “almost exclusively on promoting the commercial seed market and encouraging farmers to buy hybrid seeds and fertilisers. Yet they ignored the role of farmer-managed seed systems in enabling small-scale farmers to tackle poverty and enhance food security.” Changes in law that favour commercial seed markets over existing localised seed systems have affected the availability of traditional seed varieties and the quality of seeds women can access. This has, in turn, affected women’s incomes and their food security, and disrupted biodiversity conservation. The report highlights the case of Kenya, where laws prohibiting the sale or even the exchange of seeds leads to penalties and possible jail terms, making women farmers (who are 80 per cent of the agricultural workforce in Kenya) afraid to practice seed saving. These findings echo similar impacts on farmers’ rights in Zambia due to recent Bank-backed reforms (see Observer Summer 2024). Ruth Segal, co-author of the CAFOD report commented, “Banga’s call for a ‘constellation of solutions’ is refreshing. But his focus on agribusiness puts profit, not smallholders, at the centre of that constellation. Our report shows that failing to prioritise smallholders will undermine gender equality and food security.” The report also highlights the Bank’s imposition of ‘for profit’ systems in countries where seeds are not necessarily owned but shared amongst communities. CAFOD found the Bank promoted changes to seed certification laws, making it illegal for communities to “propagate, grow, exchange and sell their own seeds.” This lack of contextual consideration highlights the serious risk of the enormous ‘scaling up’ announced by Banga at the Annual Meetings and brings into question the value of the Bank’s new 2024-30 Gender Strategy (see Observer Autumn 2024). CAFOD found that the metrics used to assess the gender impact of programmes only count the number of women reached, without considering any social, economic and cultural factors affecting women’s role in agriculture. Despite the new Gender Strategy, important Bank programming remains gender blind, as food security is a gendered issue given the prevalence of patriarchal control of land in many Bank borrower countries (see Briefing, Assessing the Bretton Woods Institutions Legacy). tinyurl.com/WBG2030Agri ==================================================================== FINANCE/news BWIs use frozen Russian assets as part of $50 billion support to Ukraine On 25 October, G7 leaders announced a new $50 billion loan to aid Ukraine, backed by profits from frozen sovereign Russian assets. In a communiqué published by world financial leaders in Washington DC at the October Annual Meetings of the IMF and the World Bank, the G7 confirmed their aim to start disbursing funds by the end of the year. According to the announcement, the loans will be repaid with the interest accumulated from immobilised Russian sovereign assets. To date, approximately €210 billion of assets from the Central Bank of Russia are being held in the EU and have been frozen under sanctions imposed over Moscow’s invasion of Ukraine in February 2022. The disbursement was made possible by the Loan Cooperation Mechanism set up by the European Commission, which will allow Ukraine to request financial support in repaying the principal, interest and other costs of eligible loans. This aims to support Ukraine without burdening taxpayers in the G7 countries while also avoiding additional financial burden on Ukraine. The loans will be disbursed through multiple channels, including a Macro-Financial Assistance Loan from the EU, the IMF’s Multi-Donor Administered Account for Ukraine and a newly created Financial Intermediary Fund for Ukraine at the World Bank. This move represents another attempt by Western international financial institutions’ shareholders to engineer creative ways to provide financial support to Ukraine. Previously, the IMF shareholders revised the Extended Fund Facility policy, providing for the first time in history upper credit tranche funding to a country in an active war. Such efforts, alongside the US’s announcement that it will write off $4.7 billion in loans to Ukraine, come in contrast to the lack of support for debt stricken and conflict affected African countries, supporting long-lasting claims of hypocrisy in BWI’s lending decisions (see Inside Institutions, What are the main criticisms of the World Bank and the IMF?). tinyurl.com/UkraineDebt ==================================================================== FINANCE/news UN’s Fourth Financing for Development Conference takes place at key moment for international financial architecture reform The UN’s Fourth Financing for Development Conference (FfD4) will take place between 30 June and 3 July 2025, in the context of calls for reform of the international financial architecture (IFA; see Observer Autumn 2024), including the World Bank and the IMF (i.e., the Bretton Woods Institutions – BWIs; see Dispatch Annuals 2024, Springs 2023; Observer Spring 2023, Spring 2023, Summer 2022). The first FfD conference in 2002 in Monterrey, Mexico, resulted from Global South efforts to reclaim the UN – where each country has an equal vote – as the central forum for IFA discussions, away from the BWIs and other less democratic fora (i.e. the OECD and G20). In September, the Civil Society Financing for Development Mechanism – a coalition of over 800 organisations – reacted to the UN Summit of the Future’s failure to deliver meaningful reform and called on FfD4 to focus on systemic changes, highlighting that IFA reform cannot be led by multilateral lender-driven institutions like the BWIs. As part of the consultation period in October, the Mechanism submitted its input to the draft FfD4 Elements Paper, later published on 22 November. The submission urged FfD4 to “generate actionable multilateral decisions for the removal of the systemic and structural impediments to transformation and the re-design of global economic governance to promote truly democratic multilateralism.” The input will feed into the negotiations that will result on a preliminary text to be published at the end of December. The coalition has also developed a checklist of what should be achieved at FfD4, including to agree a UN Framework Convention on International Tax Cooperation, a UN Framework Convention on Sovereign Debt, and for all workstreams to ensure gender and human rights are cross-cutting themes. The next months will be key in the road towards the conference, with Preparatory Committee sessions happening in February and May. tinyurl.com/IFAReformFfD ==================================================================== The Observer is available in pdf, on the web, and by email. 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