The meetings in Morocco raised urgent questions on financial reform, global debt and the need for climate finance
The annual meetings of the world’s most influential multilateral financial institutions, the World Bank (WB) and the International Monetary Fund (IMF), concluded on October 15, 2023 in Marrakech, Morocco. The tone was set from the start: States of ‘crisis’ — economic, climatic and conflict-related — are the new normal and global financial architecture transformations need to centre this.
It is now widely acknowledged that global climate investment of at least $4-6 trillion per year is required to achieve the transition to a low-carbon economy. The WB and IMF’s claims to adapt and adopt new models of operation as a response headlined this year’s annual meetings.
About 60 per cent of the world’s poor will be living in fragile and conflict-affected countries, according to WB estimates. Against this backdrop, new WB president Ajay Banga highlighted the Bank’s vision to “end poverty on a livable planet.”
In a session on the need for a ‘new playbook’ and the ways of achieving it, Anna Bjerde, managing director of operations at WB, listed some of the concrete steps the organisation plans to take to address the crises of today:
Malawi’s Minister of Finance and Economic Affairs, Sosten Gwenge, drew attention to the problems faced by countries like his at the same panel. Malawi was hit by a devastating cyclone earlier this year.
“[The] key challenge is that we do not have fiscal or economic buffers to absorb shocks,” he said. “So, if any crisis occurs — floods or cyclones — the agenda to tackle poverty becomes a challenge. We need to look at the financial model, if it is responsive enough [and] start looking at shock-responsive interventions”.
Though WB has been supportive, there is a need to re-examine and fix the problem of “idle resources” — money, which countries possess but are ‘unable’ to disburse quickly when required, Gwenge added.
The Townhall with Banga and civil society organisation (CSO) representatives brought together differing views on climate. Banga highlighted the WB’s climate finance has tripled from $11 billion to $39 billion. Direct investments in fossil fuels have been slashed to only $180 million, he said — 0.2 per cent of the previous year’s total commitments.
The WB has recently worked to increase adaptation financing as well, its share being equal to that of mitigation, said Banga.
Yet, many CSO representatives found the climate question inadequately addressed. While the numbers stated by Banga signal progress, the WB continues to indirectly support fossil fuel expansion and several impacts of WB-funded programmes and projects on communities remain unresolved, audience members pointed out.
Basani Baloyi from the Institute for Economic Justice in Johannesburg raised the issue of the exclusion of civil society from the proceedings of the WB-supported Just Energy Transition Implementation Plan (JET-IP) in South Africa. The JET-IP aims to deliver a finance package from G7 countries to fossil-dependent emerging economies like South Africa to decarbonise and shift to clean energy.
Baloyi urged Banga to address this, pointing out that key activities such as human rights impact assessments for coal power plant closures were being excluded from the regulatory process. She emphasised the lack of transparency and accountability, urging the Bank to facilitate “a just transition, not just a transition.”
Banga did not comment, stating he was unaware of the details but promised to learn more.
In a session on the delivery of climate action on the ground, IMF’s Managing Director Kristalina Georgieva detailed the Fund’s efforts to implement its climate strategy, including:
SDR is a reserve currency introduced by the IMF and discussions on it for addressing global crises were contentious. The primary criticism has long been that SDR allocation is based on a country’s IMF quota, which is based on their economic positions, resulting in the largest share of SDRs being allocated to already wealthy countries.
IMF voting and SDR shares should reflect the relative changes in economic weight of its members to facilitate increased access to SDRs for Global South countries, Senegalese development economist Ndongo Samba Sylla said in a panel discussion on IMF and SDR reforms.
Sylla called for the application of ‘one country, one vote’ within the IMF and SDR allocations based on need, not on IMF quotas.
However, a change in the actual quota shares within the IMF in the current regime is highly unlikely, according to former IMF executive director Paulo Batista. He went on to give examples of what could be accomplished in a year, such as increasing basic votes, establishing a third IMF chair for Sub-Saharan Africa, lowering IMF surcharges or interest rates, and improving SDR reallocation.
A representative from the United Kingdom charity Christian Aid in the audience brought up the unfulfilled promises to review the IMF’s quota regime made at the WB-IMF spring meetings and the G20 summit in New Delhi, India last month.
The 15th general review of IMF quotas was essentially a failure and mentions of bringing in sub-Saharan chairs in response to such asks — though arguably necessary — were attempts to obscure technical questions for media and CSO, she added
The WB recently unveiled its Evolution Roadmap (ER), with an emphasis on leveraging private sector money for climate change mitigation and adaptation.
Speaking at a Civil Society Policy Forum panel discussion, Maria Hoze of CSO Eurodad put forward a critical analysis of these “new” positions. She stated that the ER has a new language, but at its core, it emphasises the Bank’s age-old playbook. By focusing on the WB as a facilitator of private capital for development and climate finance, the ER does little to address climate change from a rights and justice standpoint, she stated.
She also disputed Banga’s claims of a severe lack of public funding for developmental needs, arguing that this was a false narrative. She used the example of African countries losing millions of dollars each year in illicit financial flows, and getting trapped in unsustainable debt cycles by these very lending institutions.
Hoze also pointed out the proposed “reforms” assume the private sector will be proactive in providing public goods, which is untrue, as evidenced by the costs common people have had to pay in the past when healthcare or education were privatised.
She suggested that the World Bank prioritise the public and acknowledge its role in perpetuating the current situation, calling for an external independent review of the Bank’s new policies. Other panellists also suggested that climate finance be provided on a reparations basis, given that several countries with high climate vulnerability and debt burdens emit almost none of the global emissions that have contributed to climate change.
Presentations and talks from CSO representatives revealed that the critique has long been about structural and systemic issues within the global financial architecture, while the institutions’ responses have been piecemeal and snail-paced.
The annual meetings provided an opportunity for these key stakeholders to demonstrate their commitment to the causes of justice and climate change, but the outcome, according to many CSOs, was disappointing. “We need to be careful about how and by whom global financial architecture is dictated,” Basani Baloyi said.
Given that the $100 billion for combating emissions has yet to be provided by developed countries to developing countries, the call for a shift in the systems governing climate finance appears significant.
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