WASHINGTON — The World Bank and International Monetary Fund Annual Meetings have drawn to a close after a week that stressed business over showbusiness, and emphasized continuity in the midst of change at the top.
The 19th replenishment of the International Development Association, implementing reforms connected to the bank’s recent capital increase, and debate over efforts to strengthen the institution’s accountability mechanisms topped the agenda.
Follow reporters Michael Igoe and Sophie Edwards on the ground.
Against a backdrop of global economic turbulence brought on by trade wars and Brexit uncertainty, climate change protests, and protracted conflicts, World Bank President David Malpass has turned his attention inward. The new bank president is choosing to focus on the institution’s country operations during his first six months in office, instead of flashy global initiatives.
Across the street, IMF’s new managing director, Kristalina Georgieva, vowed to step up the institution’s engagement on issues affecting least developed countries, including by bringing the fund’s fiscal policy expertise to bear in fragile states, and by working in close coordination with her former employer, the World Bank.
At the Development Committee meeting on Saturday, ministers from the bank’s shareholder countries reiterated their call for the bank to expand its operations in fragile countries, encourage private sector investment, promote gender equality, and implement the terms of the capital increase package agreed to last year.
As Malpass and Georgieva put their first annual meetings behind them and open a new chapter for the Bretton Woods Institutions, here are a few key issues Devex will be tracking:
IDA19 takes shape
One of the first big tests of Malpass’ presidency will be the replenishment of the World Bank’s fund for low-income countries, IDA, expected to be finalized in December.
For IDA’s 19th replenishment, the bank is hoping to match — adjusted for inflation — the record $75 billion that the fund secured three years ago through a combination of donor contributions and funds raised on the global capital markets. As the bank looks to its shareholders to commit resources to the poverty-fighting fund, those donors are taking the opportunity to shape a policy package that reflects their priorities for the bank’s operations in low- and middle-income countries.
For European donors, in particular, climate change stands near the top of the list.
In 2018, the bank announced new climate targets, but this week civil society groups were adamant that the institution has a long way to go before it can say it is truly aligned with the Paris climate agreement. Within IDA, current negotiations revolve around the portion of concessional finance that should include climate change co-benefits. More broadly, civil society groups — many of which took to the streets in front of the World Bank on Friday in protest — want the institution to stop financing or facilitating fossil fuel projects altogether.
Akihiko Nishio, vice president of development finance at the World Bank, discusses the current state of the International Development Association's 19th replenishment, the various issues IDA has been asked to tackle, and the need for development coordination.
“Public funding can no longer support any kind of fossil fuel projects, and [the] World Bank needs to lead by example,” Nezir Sinani, co-director of the Bank Information Center Europe, wrote to Devex.
Civil society groups have also pushed back against the bank’s use of public concessional funding for private education. More than 170 CSOs and national education unions signed an open letter calling for IDA resources to support public, free education and exclude for-profit enterprises.
The White House, in lieu of pushing strong climate action, has made debt transparency a keystone of its support for IDA19 — and Malpass, a former Trump administration official, has been more than willing to back this cause.
“We would like to see disclosure — disclosure of the terms of loans, disclosure of the requirements on both sides. And that's sometimes not being done,” Malpass said at his press conference on Thursday.
A proposal currently under discussion is to create a new Sustainable Development Finance Policy, which would include provisions in IDA’s financing arrangements aimed at creating incentives — if not conditions — for countries to improve their debt transparency policies.
Humanitarian groups await bank’s fragile states strategy
As the bank continues its push to direct more resources and expertise to fragile and conflict-affected states, the institution is grappling with what that means for its operating model.
For an institution that typically directs its financing through national governments, a key question is how it plans to operate in countries where the national government is either unable to provide services to all of its citizens, or is contributing to the country’s fragility. The bank has piloted partnerships with United Nations agencies and humanitarian organizations in a few countries, and these groups are eagerly awaiting the release of the bank’s first strategy on fragility, conflict, and violence, in hopes it will codify how these partnerships should function, and how the bank intends to coordinate with existing humanitarian response operations in the countries it seeks to engage.
As the World Bank turns its attention to fragile and conflict-affected states, humanitarian groups in those contexts hope the institution will prioritize partnership and coordination.
In order to do that, the bank and its partners recognize it will be necessary to put more World Bank staff on the ground in fragile and conflict-affected states. That means the bank will have to devise new employee compensation and incentive structures to attract its staff to those challenging posts — and it remains unclear what those will look like.
“Aside from ensuring personal safety, we need two things to get staff working in FCV countries. First, we need a mobility package of benefits commensurate with the risk, economic hardship, and family disruption they’ll experience. We’re moving in that direction. Second, those who take the plunge will need credible assurance that an FCV posting will turn out to be good for their careers. Currently that is not a given,” Daniel Sellen, chair of the World Bank Staff Association, wrote to Devex.
Accountability reforms drag on
Doing more in FCV countries brings additional risks, which means the bank needs strong, independent accountability mechanisms, according to the board. This message was intensified after a group of Indian farmers took the institution to the U.S. Supreme Court and won the right to sue over harms linked to an IFC-financed coal plant.
But despite the urgency, the board has been deadlocked for two years over a set of proposed reforms to the Inspection Panel. The sub-committee in charge of the review was expected to reach a decision before the meetings, but members were unable to agree, with some shareholders — notably India and China — and the bank’s senior managers, against giving the panel strong monitoring and dispute resolution powers, insiders told Devex.
CSOs and accountability experts said they fear the protracted negotiations will result in compromise and a weak panel. The bank could lose its position as a “leader on accountability issues” unless independent accountability mechanisms get stronger tools, Steven Mnuchin, U.S. Treasury secretary, warned in his statement.
Committee Chair Jürgen Zattler, executive director for Germany at the bank, told Devex that the committee had made “substantial progress” toward an agreement but would not give a timeline for the final decision. But with a similar board-led review of IFC and MIGA’s watchdog, the Office of the Compliance Advisor Ombudsman, launched this month, CSOs and experts will be watching closely to see whether it becomes similarly politicized.
IFC capital increase ‘not a done deal’
In his speech at the bank’s opening plenary on Friday, Malpass gave an update on the bank’s progress toward implementing its $13 billion capital increase package agreed by shareholders last year, which Malpass helped negotiate U.S. approval for in his former role at the Treasury. But while payments for the IBRD portion have already started trickling in, the IFC’s $5.5 billion boost has not yet been approved, and shareholders have been given more time — until March 2020 — to decide, Malpass said. One of the bank’s executive directors confirmed to Devex that IFC’s budget increase was by no means a “done deal.”
The delay is coming from U.S. senators who have to give IFC increase Congressional approval, according to Scott Morris, senior fellow at the Center for Global Development. While the Trump administration supports IFC’s boost and is “committed to securing the necessary legislative approvals,” according to a Treasury statement released Saturday, some U.S. lawmakers still need convincing, notably U.S. Rep. Maxine Waters, who has raised concerns about IFC’s additionality and transparency. IFC has since committed to being more transparent, but experts say it still needs to disclose more.
“I suspect that the Trump administration and the bank will need to engage with her [Waters] to work through these issues,” Morris said, adding that it seems unlikely to be resolved and reconciled with U.S. spending bills for this year.
In his statement to the Development Committee of the bank and IMF, Mnuchin signaled that working with the U.S. Congress to secure the capital increase would be a priority for the administration.
“The United States remains supportive of the capital package, and we are committed to securing the necessary legislative approvals for both the IBRD and IFC,” he wrote.