Climate activists block traffic outside the World Bank headquarters calling on the World Bank to stop financing fossil fuels, during the World Bank and the International Monetary Fund Spring Meetings in Washington, DC, last year April. The World Trade Organisation ministerial meeting in Dubai failed to find an agreement on the “development agenda”, therefore one can infer that the so-called reforms at the IMF and World Bank Spring jamboree will be just talk-shopping incommunicado, the writers say. – Picture Stefani Reynolds / AFP / Taken April 14, 2023
By Ashraf Patel and Mika Kubayi
At the height of Thatcherism in the late 1980s, the slogan “There is No Alternative” (Tina) was the clarion call by the Global North. In a post-Covid climate crisis era, it seems the song remains the same.
The International Monetary Fund (IMF) and World Bank’s annual Spring Meetings next week are taking place in Washington DC amid a fractured world, wars, inflation and the need for a new form of development finance.
However, if the World Trade Organisation ministerial meeting in Dubai failed to find an agreement on the “development agenda”, one can infer that the so-called reforms at the IMF and World Bank Spring jamboree will be just talk-shopping incommunicado.
Some “reforms” and alternatives on the table at the IMF and G21 later this year are far from adequate and fair. Countries in Africa face severe debt crisis, with interest on debt being unsustainable.
The UN has just managed to agree on the Global Tax Treaty, but the details need to be worked on as multinational companies master the tax haven universes, suggesting the Global South voices and the agenda is being muddled.
Global Action Plan (Gaps) in meeting SDGs
1. Debt crisis and interest rate solutions
Unlike the Thatcherite Tina diktat, there must be an alternative for the Global South. According to the Bretton Woods Project (BWP): “There are several improvements that could be made to the existing system, including the effective rechanneling of (more) unused Special Drawing Rights; revised IMF quota limits that replace the existing skewed and outdated ones and help to recapitalise the IMF the abolition of tiered interest rates on the IMF’s Resilience and Sustainability Trust (RST) to support climate-related project, and the elimination of IMF surcharges. The latter is a penalty charge that is expected to impose costs of $2.1 billion on 17 developing countries in 2024 alone. These improvements could be adopted relatively quickly and with limited cost.”
African nations, which are at the epicentre of high interest rates pandemics and can demand these measures to ensure finances, are directed to meeting UN SDGs and not extracted North.
2. Climate “green finance” and carbon market model
According to the principles in the UN Framework Convention on Climate Change, climate finance should adhere to the “principle of common but differentiated responsibilities and respective capabilities”, stated in Article 2 of the Paris Agreement. The principle underscores the need for global climate justice, recognising that cumulative greenhouse gas emissions primarily stem from countries in the Global North and that the impacts of climate change disproportionately burden nations in the Global South.
Yet, the climate finance provided by the World Bank and its multilateral development bank (MDB) peers to lower-income countries are primarily loan-based, according to their own reporting, Green Financing and new Green Austerity model of the World Bank.
Since the UN COP27 agreements on de-carbonisation targets, a flurry of green finance and “so-called Just Energy Transition” programmes have mushroomed. The BWP has warned of the impending Green austerity hidden in such a programme. South Africa’s own $8.5bn (R160bn) Just Energy Transition programme has been ridden with controversy when it was revealed that the G7 Jet was, in fact, expensive loans that needed to be repaid with interest and were predicated on the privatisation of Eskom utility and market-based pricing via regulatory reforms.
The BWP’s “Inside the Institutions” analysis raises concerns about transparency in classifying climate finance, resulting in inflated figures, extending loans to debt-laden economies and imposing “green conditions” tied to austerity measures. The World Bank austerity model goes on via the new Green financing-austerity matrix.
3. World Bank’s IDA 21 initiative faces storms
The World Bank Group’s International Development Association (IDA) – the bank’s arm that provides concessional and grant finance to low-income countries (LICs) – faces several geopolitical storms, with the war in Ukraine and Israel-Palestine war and genocide in Gaza expected to cost tens of billions in reconstruction for the decade ahead, leaving the Global South to compete for scarce developmental capital.
Maria Jose Romero, of Eurodad debt network, unpacks: “Significantly, IDA21 takes place in the context of a polycrisis – including debt, inequality and climate crises – with manifestations that have severely impacted the capacity of many LICs to fund social services, fight climate change and meet their international human rights obligations.”
As an example, the BWP further elucidates: The World Bank’s “development finance” model is increasing being left to the private sector, meaning a profit approach to developmentalism. This is seen in the problematic World Bank’s formal Evolution Road-map.
“The lack of appetite for additional overseas development assistance commitments by key donors is evident in the WBG’s (World Bank Group’s) controversial Evolution Roadmap which has been so far focused on ‘balance sheet optimisation’ and financial innovations via further expansion of the ‘private finance-first’ approach to development.”
Again, this speaks to the same old prescriptions of yesteryear that have led most of the LICs in debt in the first place.
The Global South, via the G77, in its outcome document of the January 2024 meeting of the Third South Committee in Kampala, which brought together 135 members of the G77, noted “with great concern that the international financial architecture has not kept pace with a changing global landscape and … call(ed) for urgent reform of the international financial architecture.”
Unfortunately, as the analysis above makes plain, the roadmap has remained squarely focused on increasing World Bank finance, with little evidence-based analysis of the policies and governance reforms required to ensure better institutions that meet the pressing development needs of low- and middle-income countries (LMICs).
Again, year after year, the G77 has alluded to the inability of the international development system, including the World Bank and IMF, to stimulate the economic transformation necessary to end commodity dependence among LMICs.
4. Modes of IMF consultations to severely indebted nations
Finally, to legitimise the profit-driven development agenda through the World Bank’s evolution roadmap, the IMF engages in problematic country consultation models. With Sri Lanka undergoing one of the largest bailouts.
The recent civil society organisations’ statement in Sri Lanka has opposed the key tenets of IMF consultations: “The grave inequalities in society are widening and more people are trapped in poverty with little hope of recovery. In the face of this, the government selectively applies its austerity measures ensuring that its sacred cows remain untouched and unaffected.”
The trade unions and CSOs have consistently pointed out that much of Sri Lanka’s debt is odious debt and, therefore, illegitimate.
There has been no willingness by the IMF to seriously consider this and the other critical issues raised by civil society.
The unfair and asymmetrical financial policy power of the IMF to impose austerity within a profit developmental model is what is being talk-shopped again at the 2024 IMF-World Bank meetings this coming week. The show goes on via neo-liberal pathways.
The Global South is saying “There must be an Alternative Thuma”.
Ashraf Patel is a senior research associate at the Institute for Global Dialogue and Mika Kubayi a researcher at the IGD
