Global financial leaders are digging into a long to-do list after International Monetary Fund (IMF) and World Bank member countries sent them a clear message on what is needed to tackle overlapping crises: vast amounts of additional money.
It’s a big ask, and one that may prove too tall an order to fulfil, at least in the near term.
US Treasury Secretary Janet Yellen met with senior officials of the Group of Seven industrialised countries and multilateral development banks to press the case she laid out ahead of IMF and World Bank annual meetings for major reforms aimed at greatly increasing MDBs’ lending capacity and harnessing far more private capital to address climate change and other global needs.
At Tuesday’s meeting she called for the World Bank and other MDBs to set “ambitious private capital mobilisation targets” and to improve their reporting on these efforts.
World Bank President David Malpass said at the meeting that the bank would use the “full suite” of its financing and guarantee instruments “to unlock larger volumes of private finance for quality, sustainable infrastructure.”
Last week’s IMF and World Bank meetings laid bare the increasing pressures on developing countries from inflation, energy and food shortages fuelled by Russia’s war in Ukraine, slowing growth, mounting debt problems and growing vulnerability to climate shocks.
They also highlighted the inadequacy of the IMF’s and World Bank’s current structures — designed at the end of World War Two to focus on rebuilding peacetime economies — to deal with current global calamities.
Opposition from Russia stalled new agreements from the G20 and the IMF and World Bank steering committees.
“The crisis of multilateralism has hit its worst point,” said Kevin Gallagher, who heads Boston University’s Global Development Policy Centre. “This is not a time for incremental change.
We need to seize this moment or it’s only going to get worse.”
Some civil society groups and even US lawmakers are calling for a second, massive issuance of International Monetary Fund reserve assets to assist member countries, following a $650bn distribution of Special Drawing Rights last year.
The action is akin to a central bank “printing” money, allowing some poorer countries to access underlying dollars, euros, yen, sterling and yuan currencies.
Argentina and other countries are also pushing the IMF to stop imposing surcharges on larger loans that are not repaid quickly, a move backed by some IMF leaders that could save affected countries billions of dollars.
But Yellen, who manages the United States’ controlling share in the Fund, rejected the idea of a new SDR allocation as inappropriate, saying that more existing SDR reserves needed to be loaned to poorer countries first.
Washington also remains opposed to suspending IMF surcharges.
The IMF has recently created new lending tools, including a new facility to help countries deal with war-related food shocks, but Managing Director Kristalina Georgieva has said it soon could face larger demands on its remaining resources of about $700bn as growth slows and more countries face debt pressures.
The IMF’s war chest stood at about $1tn before the Covid-19 pandemic struck in early 2020.
“We are far from being constrained,” Georgieva said at the start of the annual meetings, but added that she may seek to accelerate a contentious review of the IMF’s main quota resources before the current deadline of December 2023.
The World Bank’s steering committee on Saturday backed the US call for change, and asked World Bank leadership to deliver a roadmap for revamping the bank’s institutional and operational framework by the end of the year. – Reuters