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It was a week that mostly happened all in one night. The big news out of the World Bank and International Monetary Fund annual meetings was that Kristalina Georgieva survived a scandal around the bank’s Doing Business report — and according to an IMF statement last week, she will remain in her post.
But the meetings also provided insight into just how big the global debt burdens are getting and sparked hope that the World Bank is putting its weight behind efforts to replenish the key International Development Association fund for the world’s lowest-income countries, to the tune of $100 billion. The bank is warning that global development is being set back by a decade, calling the trend a “tragic reversal.”
Climate change is also becoming unavoidably urgent. The upcoming COP 26 will be decisive, with skeptics casting a quizzical eye over lofty speeches amid limited action on reducing greenhouse gas emissions and financing nations’ transition to a green future.
ICYMI: 5 things to watch at the World Bank-IMF annual meetings
She’s a survivor
You had probably already heard that Georgieva held on to her job at the helm of IMF, despite allegations of data manipulation in the 2018 Doing Business report during her time at the World Bank.
Timothy Ash, a strategist at BlueBay Asset Management, tells me he’s been chatting with IMF staffers who are unhappy that their institution's credibility has been harmed. “Some people will argue that it smacks of a big cover-up,” he says.
The World Bank and IMF are more vital than ever. Last week, IMF warned of slower global economic growth and higher inflation, saying the outlook for low-income countries in particular has “darkened considerably” because of the COVID-19 pandemic. In addition to that grim prognostication, a World Bank report also found record levels of debt in lower-income countries, hitting $860 billion in 2020.
Read: World Bank warns of record debt levels in low-income countries
The cloud ...
The drama surrounding Doing Business cast a long shadow over the meetings. Two experts told me that warring factions had “sucked the energy out” of the events and that development issues were “eclipsed” by the scandal.
Michael Klein, a former World Bank vice president, says the entire Doing Business saga — yes, it now qualifies as a saga in my eyes — points to the geopolitical realities at play at global institutions, especially between the United States and China.
“To think you can put a reform in place in which political pressure goes away and can be perfectly managed, I think, is naive,” he said. Rather, leaders of institutions will have to find a balance.
Catch up: IMF warns low-income countries face darkening economic prospects
… And a silver lining
The other big story of the past week, experts tell me, involves IMF’s Resilience and Sustainability Trust, which is going from idea to reality. My colleague Adva Saldinger reported on a meeting of finance ministers from the G-20 group of nations, explaining why the trust fund could be a lifeline for many nations — and not just the lowest-income ones. Middle-income countries, too, may get relief.
The fund is still being developed, and civil society groups are scrambling to shape the outcome. “With the RST, we want to see that when the IMF is designing the trust, that it is really prioritizing the needs of the borrowing countries more than the creditors,” says Nadia Daar, the head of Oxfam International’s Washington office. The terms of loans need to be as concessional as possible, with fixed low-interest rates to ensure long-term predictability, she says.
The RST could become the premier way for wealthy countries to rechannel excess Special Drawing Rights to nations in need and to help shore up financing for climate issues, so this is a space to watch — especially with COP 26 right around the corner.
More: Ahead of COP 26, philanthropic climate change pledge drive gains speed
Under pressure
With Lebanon looking increasingly fragile, both politically and economically, the new government is restarting talks with IMF to give the country some chance at rebuilding from its financial collapse. Yet analysts warn that political pressure from the country’s international donors could lead to a deal with far fewer economic reforms than IMF may demand.
What's in store: As Lebanon restarts IMF talks, experts fear needed reforms won't come
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Can the G-20 get serious about debt?
Debt was a recurring theme of the meetings. Rising debts in lower-income countries come as their growth is expected to lag advanced economies in the two-track recovery, with IMF estimating that for emerging markets and developing countries, economic output is expected to remain 5.5% below the pre-pandemic forecast in 2024. Meanwhile, foreign direct investment in LMICs nosedived 14% last year to $435 billion — “the lowest level in a decade,” the bank says. This is making it harder for many LMICs to pay back their mounting bills.
While many repayments to government creditors were suspended during the pandemic, private loans were not, but even this grace period is coming to an end. World Bank President David Malpass says there needs to be a “comprehensive approach” for getting this under control.
Yet Jean Saldanha, director at poverty reduction group Eurodad, notes the lack of appetite for serious action from G-20 heads of state and government, who are due to meet later this month in Rome: “With the level of debt overhang, countries are being pushed into the corner — and with their hands behind their back,” she told me over Zoom.
‘Hybrid’ really means ‘mostly online’
Despite IMF’s immense determination earlier this year to get back to in-person meetings, most of the week’s events were held online due to the pandemic. “Hybrid” is apparently code for “lots of Zoom meetings.”
Apropos the pandemic, you may be wondering why vaccines have yet to be mentioned here. Well, it’s because there isn’t much news. Despite a lot of talk, the past week saw little in the way of new commitments. While many may believe that bottlenecks are being resolved, the reality remains that less than 5% of the population in Africa is fully vaccinated.
Sorry for ending on a bit of a downer — but I take permission from Mo Ibrahim, who was chastised for not being more upbeat in his closing remarks during a panel discussion with Georgieva this week.
“What we’re seeing is the stress in the global institutions [and] global system, the lack of cooperation,” said Ibrahim, a telecom billionaire and philanthropist. “I’m not optimistic about what’s going on, because I’m really worried.”
About the author
Shabtai Gold
Shabtai Gold is a Senior Reporter based in Washington. He covers multilateral development banks, with a focus on the World Bank, along with trends in development finance. Prior to Devex, he worked for the German Press Agency, dpa, for more than a decade, with stints in Africa, Europe, and the Middle East, before relocating to Washington to cover politics and business.
