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

The World Bank-International Monetary Fund annual meetings kick off today, marking their 80th anniversary and providing an opportunity to evaluate how these institutions are evolving. Global leaders will gather against a backdrop of considerable challenges in the global fight against poverty driven by rising debt, conflict, and climate shocks. While some of the world’s wealthiest countries are back on a growth path, poverty levels remain higher than before the pandemic in the world’s poorest economies, according to the World Bank’s Poverty, Prosperity and Planet Report. Some 8.5% of the global population lives in extreme poverty in 2024, which means about 692 million people worldwide survive on less than $2.15 a day. Looming over the meetings — and perhaps shaping what is or isn’t accomplished — is the upcoming U.S. presidential election. While World Bank President Ajay Banga said at a press conference last Thursday that internal discussions about the future U.S. administration are not taking place, it’s widely expected that the election will be a frequent topic of conversation. “The big kind of shadow lurking over these annual meetings are the U.S elections. Every hallway conversation will be about what these two different paths mean for multilateralism. That’s kind of a daunting overhang,” Clemence Landers, a senior policy fellow at the Center for Global Development, told Devex. The election presents a risk so it could either spur swift action or the opposite — a moment for pause to see what happens, David McNair, executive director of global policy at ONE, told Devex. “This is a kind of threshold moment” that could be the last moment to push forward the work on reforming the Bretton Woods institutions and broader changes to the global financial system, he said. Most bank watchers expect few announcements at the meetings, and they may serve as more of a checkpoint on a number of pressing matters — including the upcoming climate summit, the Group of 20 largest economies’ summit, and the replenishment of the World Bank’s International Development Association, its fund for the poorest countries. The focus will also be on gender — including the bank’s new gender policy — and agriculture and food security. Here’s a look at what you can expect: Ongoing reforms The World Bank’s reform process, known as its evolution road map, has been underway for about two years, and the meetings will serve as an update on its progress. Banga’s leadership may also come under scrutiny. The bank’s reform efforts, and similar ones at other MDBs, are aimed at creating a better, bigger, and more effective bank. Banga focused his early tenure at the bank on fixing the plumbing, or trying to streamline operations and improve efficiency. That has included reducing paperwork, requiring fewer approvals on bank projects, and the removal of bureaucratic hurdles. The bank has shortened the average time it takes for a project to go from development to financing to 16 months from 19 months, with a target of 12 months, Banga said. In some projects, it is already doing approvals much more quickly, including a couple of cases where it has grouped projects into a platform that can streamline approvals, he said. The bank on Thursday unveiled its new corporate scorecard, reducing the number of indicators to 22 from more than 150 in the previous version, to measure the World Bank's progress and set goals more effectively. The scorecard revamp is part of the bank’s broader reform efforts and is intended to streamline the reporting process, shift from a focus on inputs to outcomes, and help improve the bank’s operational vision. Questions remain about the long-term impact of these changes, some of which are ongoing. A significant piece of the reform agenda, which has garnered a lot of attention, is making the bank and other MDBs bigger by increasing their lending capacity — doing more with the money they have. A recent report from Fitch Ratings, a major credit rating agency, suggests that MDBs could lend an additional $480 billion without jeopardizing their AAA rating. That doesn’t mean they will. “It certainly improves mood music and applies pressure to shareholders and MDB management,” Chris Humphrey, a senior research associate at ODI, told Devex. The bank recently announced some changes, including a further reduction in its equity-to-loan ratio to 18% from 19%, potentially leading to about $30 billion in additional lending over 10 years. The bank previously lowered the ratio by 1% in 2023. The move, which would generate more funding if implemented, stopped short of the 17% some advocates sought. One point to note is that while the bank has stated it can drop the amount of equity it is required to keep on hand, it hasn’t done so yet. In the most recent fiscal year, the World Bank’s International Bank for Reconstruction and Development’s equity-to-loan ratio was about 21.5%. In response to a question from Devex, Banga chalked up the lending lags to challenges of getting countries to agree on projects, making them bankable, and securing approval. “So there is a lead-lag time that you see happening over time,” he said. “A lot of this is not just what we want to do. It’s also a demand issue, it’s not just the supply of capital.” Addressing some of those demand factors — including the oversight and reviews required by shareholders, the environmental and social safeguard processes, and a need for better coordination and project preparation — are likely to feature in an upcoming G20 road map on MDB reforms that is expected to be agreed upon soon, Humphrey said. The bank also announced changes to its financing terms to reduce costs for borrowing countries. These include grace periods on certain fees, lower rates for short-term loans, and providing the lowest pricing to smaller, vulnerable states. It also revealed plans to offer 50-year loans for projects focused on global public goods, such as climate change, global health, and pandemics. “My attitude to this capital adequacy thing is to keep looking at new instruments and ways to squeeze in the balance sheet,” Banga said at a Reuters event last week. IDA replenishment The World Bank’s IDA fund for the poorest countries is seeking unprecedented financial support from donors this year. IDA provides grants or very low-cost loans to countries that often have no other sources of financing to pay for education, health care, and other basic social services. For many of the borrowing countries, it is a critical financial lifeline, especially as many face debt challenges and high interest rates. The bank wants IDA to be $100 billion for the next three years, though many recipient nations and advocates argue that at least $120 billion is required. Reaching either number may be challenging, several sources tell Devex. The challenge is compounded by a pileup of other replenishments, with nearly a dozen major development funds seeking money from donors over the next two years, according to the Center for Global Development. Alongside that are domestic financial pressures that have led key donors to cut aid budgets. Major IDA contributors are also facing currency devaluations, with Japan, one of the biggest donors to IDA, needing to increase its Yen contribution by roughly 25% just to match what it gave in the last replenishment. Denmark recently announced a 40% increase in its IDA contribution, and there could be a few more early announcements at the meetings, though uncertainty remains, particularly given the U.S. election and its potential impact on pledges by IDA’s biggest donor. Development experts have also warned of possible tradeoffs between the size and type of funding it can provide. A bigger IDA could be achieved by providing more loans and fewer grants or charging higher rates for lending, for example. At an IDA Forum on Tuesday, the bank will discuss the IDA policy package — guidance on what it should prioritize and how it will lend. Negotiations on those priorities and the funding numbers will continue until the replenishment on Dec. 5 and 6 in South Korea. Debt There might be some movement on debt at the meetings, though it might not be what some development advocates hope for. While the G20 Common Framework on Debt continues to move at a glacial pace, with widespread agreement that it has not adequately addressed the crisis, attention will likely focus less on debt restructuring — eliminating some of a country’s debt — and more on helping them address liquidity issues. The World Bank and the IMF believe that many countries are not insolvent or on the brink of default, but high debt payments make it challenging for them to borrow money and grow. There are proposals on the table for how to tackle these issues — including a version of a Bridge proposal put forward by a group of economists earlier this year, which would involve the IMF and World Bank lending more to those nations to help them manage liquidity constraints. However, some debt experts worry that would merely kick the can down the road, leading to an insolvency crisis in coming years, they told Devex. Climate With the 29th United Nations Climate Change Conference, or COP29, in Baku, Azerbaijan, just two weeks away, the World Bank meetings will set the stage for critical climate discussions, including setting a new global climate finance goal. “The World Bank meetings are probably the last point before COP where there is a chance for finance and climate ministers and development ministers to come together and send a sort of really big political signal on a way forward to break the impasse of this really big gulf between the needs that countries face and the actual finance available,” said Rob Moore, associate director of E3G, at a press briefing. The World Bank has made progress on climate finance, committing to allocate 45% of its financing to climate-related projects by 2025 and providing $42.6 billion — its largest contribution ever — in 2024. The bank has also embedded climate into its mission statement. However, a recent Oxfam report casts doubt on the bank’s climate finance claims, finding a discrepancy between what was budgeted for climate projects and what was spent. The report highlighted a potential $41 billion unaccounted for, but the bank refuted the claims as inaccurate while admitting it must improve its methodology. Experts also anticipate advocacy around the role the World Bank plays in climate change, especially as countries facing severe climate shocks struggle with significant debt burdens. The world’s poorest and most climate-vulnerable countries collectively spend twice as much repaying their debts as they receive in climate finance, according to a recent analysis from the International Institute for Environment and Development. “The bank itself, and the IMF, will certainly be trying to make themselves look as lovely as possible for channels for climate finance,” said Hannah Ryder, CEO of Development Reimagined, adding that there’s debate around whether they are best suited to the task, especially when it comes to the loss and damage fund. Collaboration A major theme at the meetings will be collaboration — among MDBs, with the private sector, and more. Both IMF chief Kristalina Georgieva and World Bank’s Banga have emphasized the importance of greater cooperation, and shareholders have echoed the sentiment. “An additional important ongoing step in Evolution is deepening the work of MDBs as a system,” Jay Shambaugh, under secretary for international affairs at the U.S. Treasury, said in a recent speech. Banga on Thursday touted a new co-financing digital platform launched six months ago by a group of 10 MDBs to improve project sharing and collaboration. The platform has 85 projects in the pipeline, with the first few nearly financed, he said. “The result of that platform is you reduce the administrative burden, you reduce the transaction cost. You better coordinate financing across MDBs that are very often jointly financing projects on the ground and you ultimately create better development impact,” Banga said. In April, a group of MDBs signed a viewpoint note to work more closely together, setting goals such as scaling up their financing capacity and delivering more on climate initiatives. The World Bank meetings offer an opportunity to track progress on these fronts. The World Bank has signaled a desire to enhance collaboration with the private sector. It announced a consolidation of its guarantee instruments, and Banga has convened a private sector innovation lab to provide suggestions. The bank’s private sector arm, the International Finance Corporation, is exploring securitization platforms and ways it could shift to a model where it initiates projects but eventually sells part of them to other investors, rather than holding them on its balance sheet. Despite little evidence that the bank’s efforts have moved the needle, the chorus around private capital mobilization appears to continue. Jesse Chase-Lubitz contributed to this article.