The International Monetary Fund released a pretty dire warning yesterday for vulnerable countries, saying rising U.S. inflation and a faster pace of policy tightening by the Federal Reserve “could rattle financial markets.”
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My colleague Shabtai Gold tells me the fund is cautioning that should the U.S. scenario play out badly, emerging markets will have to allow their currencies to depreciate and central banks will have to raise interest rates.
The warning also said countries with high levels of foreign-currency-denominated debt need to take swift action to reduce their exposure.
So what does this all mean? In short, low- and middle-income countries face rough seas ahead if U.S. inflation does not significantly moderate and if the Fed moves to hike rates more quickly than previously expected. Goldman Sachs is now predicting four rate increases this year rather than three.
IMF’s blog reminded member states that they could turn to the fund for help — though such programs require that governments fall in line with the fund’s policy prescriptions.
The World Bank has warned about unsustainable debt in low-income countries, particularly as the COVID-19 pandemic continues to batter economies. The last tranche of IMF debt service relief for the world’s low-income countries ended in December.
The bank’s economic outlook is due today. We’re covering its release in Invested, our development finance newsletter — so sign up and receive the latest edition today.
Background reading: World Bank warns of record debt levels in low-income countries
Brain drain
Britain's Foreign, Commonwealth & Development Office saw 94 technical advisers from the now-dismantled Department for International Development depart since the office's inception in September 2020 through November 2021, a freedom of information request has revealed. And to replace them it hired … zero.
Critics of the merger of the U.K. development department into FCDO are fearful that FCDO is losing development expertise, for which DFID had earned a strong international reputation. That’s compounded by an expected “strategic workplace review,” which could thin the ranks even more.
Read: Nearly 100 DFID advisers have departed FCDO. Who has replaced them?
+ Devex Pro subscribers can get up to speed with our comprehensive look ahead to 2022 in U.K. aid and review how FCDO fared in its first year, which is described as a year of “upheaval and crisis.”
Meanwhile, the picture for climate staffers isn’t much better.
High street hopes
Turning to difficulties for another major British development institution, my colleague David Ainsworth has found Oxfam GB saw income fall by £32 million ($43.5 million) between 2020 and 2021. The pandemic takes a lot of the blame, as the charity was forced to close its iconic shops, which can be found on nearly every high street in England and were a significant source of funding.
But COVID-19 isn’t the whole story: Oxfam GB also saw its income fall the year before.
A restructuring has already seen the charity cut £16 million from its cost base, and it plans to cut another £5.6 million from April 2022.
It’s been a rough few years for Oxfam GB, which has arguably never fully recovered from the sexual abuse scandal which broke in 2018 and shook the entire sector. In May 2020, Devex reported its plans to lay off 1,450 staff and withdraw from 18 countries.
Devex Pro: Oxfam GB sees income fall for second straight year
More for Pro subscribers: We’ve set out to understand what has happened since Oxfam’s sexual abuse scandal broke, and what it could mean for the global development sector. This is part of our ongoing #AidToo investigation.
+ Not yet a Pro subscriber? Try Devex Pro for free for 15-days and get essential analysis, data-driven funding insights, and access to the world’s largest global development job board.
New money
Development funding: It’s not just for the G-7 anymore. A new Devex analysis looks at nine countries in Asia that have joined the ranks of international development donors alongside China and Japan.
Devex analyst Miguel Antonio Tamonan reveals who the up-and-coming donors are, and tracks where in the world their money is going and what it’s being spent on.
Devex Pro: 9 emerging Asian donors give $20B a year. Who are they?
+ For more practical business development and resource mobilization advice, including funding insights, sign up to Money Matters.
This land is whose land?
“For national governments pursuing their climate commitments, securing land tenure for their rural populations would lay the foundation for effective, sustainable climate action.”
— Rachel McMonagle, climate change and land tenure specialist, LandesaInclusivity — or a lack of it — was a key grievance of climate justice campaigners at last year’s COP 26 summit. Three months on from the conference, McMonagle writes in an op-ed for Devex that it needs to improve if the fragile agreement is to succeed, namely because of the importance of land rights to securing numerous strands of climate action.
Opinion: Securing land rights is key to fulfilling the COP 26 pact
In other news
After soldiers in Kazakhstan were photographed wearing distinctive blue U.N. helmets, a U.N. peacekeepers spokesperson clarified that they were not part of any official U.N. mission. The unauthorized use of U.N. uniforms resulting in death in international conflicts is classified as a war crime. [RFE/RL]
Escalating humanitarian crises in Afghanistan, Haiti, Lebanon, and Venezuela are highly likely in 2022, according to a survey by the Council on Foreign Relations. [CFR]
West African nations say they’ll sever diplomatic ties with Mali over the country’s election delay following a military coup last year. [Reuters]
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About the author
Michael Igoe@AlterIgoe
Michael Igoe is a Senior Reporter with Devex, based in Washington, D.C. He covers U.S. foreign aid, global health, climate change, and development finance. Prior to joining Devex, Michael researched water management and climate change adaptation in post-Soviet Central Asia, where he also wrote for EurasiaNet. Michael earned his bachelor's degree from Bowdoin College, where he majored in Russian, and his master’s degree from the University of Montana, where he studied international conservation and development.
