5 things to watch at the World Bank-IMF annual meetings

Starting Monday, the World Bank and International Monetary Fund are holding their annual meetings — under the shadow of a scandal around the bank’s Doing Business publication, which has embroiled IMF chief Kristalina Georgieva and threatens the credibility of both institutions.

The timing of the crisis — with IMF’s board conducting a probe on Georgieva, its managing director and a former chief executive at the World Bank — could distract from the core work of the gatherings, which will see attendees participating in person and virtually this year due to the COVID-19 pandemic.

“Doing Business has been a long-standing concern,” said Rishikesh Ram Bhandary, an assistant director of the Global Economic Governance Initiative at Boston University’s Global Development Policy Center. “I hope a moment like this promotes a rethink.”

On the line is the reputation of both organizations as providers of unbiased analysis and data from around the world. Meanwhile, experts are still hoping that the meetings help move the needle on issues such as COVID-19 vaccine distributions, reallocation of resources to lower- and middle-income countries struggling with shrinking fiscal space, and rising debt around the world.

Here’s what Devex is watching for in the week ahead — and more on how the scandal may impact the meetings:

1. Will more financing be unlocked for COVID-19 vaccines?

Only about 4% of people on the African continent are fully vaccinated, a gap that has come to epitomize the major disparity between higher- and lower-income countries. Amanda Glassman, a senior fellow at the Center for Global Development, said part of the problem stems from the lack of global leadership on the vaccine rollout.

“Who is leading?” she asked, pointing out that multiple bodies — from the World Health Organization to donor countries — have roles but that no one has taken the helm.

The World Bank is charged with the operations side of the vaccine rollout, and Glassman said this has appeared to improve from where it was several months ago, when money to support the effort was moving out the door at a much slower pace.

“They seem to finally understand the role they play — that it’s not country by country, but a global response,” she said.

Eric LeCompte, the executive director at Jubilee USA Network, which advocates for debt relief, said he is watching the meetings in Washington for signs that the world’s wealthiest countries will commit more to financing the vaccine rollout.

“The G-20 failed over the summer to solve the financing issue,” he said, referring to the group of industrial and emerging-market nations. “We are at a point now where the G-20 is really in a make-or-break moment.” The group will see its finance ministers meet during the World Bank-IMF event, and its leaders will hold high-level talks at the end of the month in Italy.

LeCompte said he worries that if the World Bank and IMF meetings don’t spur governments into action now, the rollout will suffer further delays, potentially derailing WHO’s goal of vaccinating 70% of each nation’s population by the middle of next year.

2. Will there be debt relief for middle-income countries?

Part of the problem around vaccine financing is that nations are already seeing rising debt levels. They have also faced a global economic slowdown and increased government expenditures over the past 18 months, constraining their ability to spend.

LeCompte said he is particularly concerned about rising poverty rates in middle-income countries and wants to see more concrete action from the World Bank. “What’s missing, moving forward, is developing solutions to the challenges that developing middle-income countries face,” he said.

Moreover, a number of these countries are ineligible for many types of debt relief. The United Nations Development Program says 72 developing economies are “highly debt-vulnerable,” with some facing the prospect of debt crises that will last for years.

IMF is warning that governments must ensure they can pay back their debts while also saying that they may need to maintain fiscal support to help their economies weather the pandemic — and this is a difficult balancing act.

In a recent speech, Georgieva said that debt levels around the world had reached about 100% of global gross domestic product but that this was hurting some countries more than others.

“Many started the pandemic with very little fiscal firepower. Now they have even less room in their budgets — and very limited ability to issue new debt at favorable terms,” she said. The question is: Can IMF find ways to shore up countries’ spending power and get them through the pandemic downturn?

3. Will Special Drawing Rights be redistributed?

In August, IMF issued the largest distribution of Special Drawing Rights in its history, with a total worth of $650 billion. The allocation of the reserve assets is based on nations’ quotas in the fund, so the world’s richest countries got the largest pieces of the pie.

“For these annual meetings, we are quite keen to see movement on how rich countries will utilize their SDRs to maximize the impact of this issuance,” said Nadia Daar, the head of Oxfam International’s office in Washington.

Talks are likely to extend beyond the annual meetings, but one concern among experts is that advanced economies could use an SDR redistribution as an excuse to back off other donations or support for concessional lending.

Daar also said the reallocation must ensure that the SDRs — which came without any conditions when IMF issued them — do not suddenly become weighed down with restrictions that inhibit countries’ ability to use them. “We want this to be as concessional and as conditional-free as possible,” she said.

Finally, Bhandary said he worries that any mechanism IMF might use for moving around the SDRs — such as the existing Poverty Reduction and Growth Trust or a future trust being considered — could lock out middle-income countries, which will be particularly problematic if the fund is expected to also help deal with the climate crisis. He noted that some Caribbean nations might be considered too high-income for concessional loans but that they are on the front lines of environmental issues.

“Climate change is finally making us rethink, and it’s underscoring the need to go beyond income as we think about access to these concessional instruments,” he said.

4. Will there be any movement on replenishing IDA?

No specific public announcement is expected on the replenishment of the International Development Association, a pivotal World Bank fund that provides assistance to the lowest-income nations.

The fund is running out ahead of schedule, after the bank “front-loaded” assistance from the previous round of recapitalization in 2019. African leaders are pushing for the new round to reach $100 billion.

The latest negotiations on the replenishment, taking place a year before they were originally due, are set to continue until December. But the annual meetings could give some hints as to whether the process is on track.

5. Will the Doing Business scandal overshadow everything?

In the days leading up to the annual meetings, Georgieva has found herself appearing before IMF’s board to defend her time at the World Bank, amid allegations that she applied pressure to staffers to help China improve its ranking on the Doing Business index — which compared countries based on policies seen as favorable to the private sector — in 2018.

The scaling-up of tensions between Washington and Beijing makes the China aspect of the allegations particularly problematic and politicized. So far, U.S. President Joe Biden’s administration has remained coy, declining to support Georgieva or denounce her.

According to a copy of a statement by Georgieva to the board Wednesday, which was obtained by Devex, she noted that the Doing Business publication was the subject of multiple “controversies” relating to the methodology even before her time, but she insisted she did nothing wrong.

“I had absolutely no interest in boosting China’s ranking,” she said in the statement, while also arguing that her role in the report was limited, as she was the chief executive at the bank overseeing numerous functions. “My involvement was the result of my overall management responsibilities.”

She took issue with several aspects of the external probe by law firm WilmerHale into Doing Business, including the allegation that she thanked a staff member for working on the publication and “doing your bit for multilateralism,” which had been described in the lawyers’ report as a possible sign that she promoted data manipulation to keep China on board with bank activities.

“I don’t recall it, but it should not come as a surprise when used to praise the work of staff in a multilateral organization,” she said in the statement.