By Bodo Ellmers

As the World Bank and the International Monetary Fund (IMF) celebrate their 80th anniversaries, the pressure is mounting to reform these two central pillars of the international financial architecture (IFA). In debates at the UN, such as the 2023 SDG Summit, emerging markets and developing economies (EMDEs) in particular have reiterated their calls for a major overhaul of the IFA. The G24, the body of EMDE´s at the Bretton Woods institutions, has presented a comprehensive list of reform targets at the 2024 Spring Meetings. Civil society organisations have campaigned on a wide range of issues including debt cancellation climate justice, the abolition of IMF surcharges and governance reforms. Developed countries remain focused on reforming the World Bank reform in line with the Evolution Roadmap. Geopolitical tensions, most notably the ongoing war between Russia and Ukraine, prevented any of the governing bodies from adopting a communiqué by consensus.

A Better and Bigger World Bank?

The World Bank´s evolution process aims to make it into a better and bigger bank. To achieve the latter, the Spring Meeting have been used as a moment of pledging. The World Bank Group´s (WBG) communications department was finally able to announce that member states committed a total of USD 11 billion for the three new financial instruments it is setting up: the Portfolio Guarantee Platform, the Hybrid Capital Mechanism, and the new Livable Planet Fund (see table below). These resources should enable the WBG to leverage additional lending worth more than USD 63 billion. 

Pledges to World Bank financial instruments at the 2024 Spring Meetings

  Source: World Bank

Source: World Bank

However, these figures should be treated with caution. At USD 9 billion, by far the largest contribution comes from the US administration, and still needs to be approved by the US Congress. This has not worked so well for other recent US pledges, such as the rechannelling of Special Drawing Rights (SDRs). Other member states, such as Germany, have simply reiterated pledges they already made at last year´s Annual Meetings. 

The creation of three new financial instruments also implies a further fragmentation and proliferation of WBG instruments, which is suboptimal from an aid effectiveness perspective. The WBG already has 360 Trust Funds with narrow mandates and sometimes cumbersome procedures. Money earmarked by member states for such instruments is missing when it comes to core contributions, such as those to the International Development Association (IDA). The second meeting on the replenishment of IDA, a major source of external finance especially for low-income countries, also took place at the Spring Meetings. At a Summit in Nairobi, African Heads of States said they expected a major increases in IDA resources.

With regards to the better Bank, the WBG reported mainly on some progress on organisational issues, in particular the introduction of a new scorecard, i.e. results framework. Civil society organisations participating inside the building, or protesting outside of it, had expected more. Some questioned the effectiveness of WBG operations overall, given that few borrowing countries have escaped poverty despite decades of Word Bank support. Others criticized the WBG´s contributions to climate change through its involvement in the fossil fuel sector, calling for reparations, and the cancellation of fossil fuel debt. Overall, there are growing calls for the WBG to support developing countries through debt relief rather than additional lending, as multilateral loans, particularly from the World Bank, account for a significant share of the debt burden borne by poorer countries. 

The Development Committee, the World Bank’s main governing body, failed to adopt a joint Communiqué due to ongoing geopolitical challenges. The meeting ended with a Chair´s Statement. 

IMF reform: High ambitions - slow progress

The IMF has also come under increasing criticism for its role in exacerbating debt crises, to the detriment of its mandate. CSOs led a major campaign to abolish IMF surcharges, penalty interest rates that countries in crisis have to pay when they take out larger amounts of IMF loans for a longer periods. As they represent additional costs for countries severely affected by crises, they hinder not helps their exit from crises. In an impressive mobilisation, more than 540 organisations called for an end to IMF surcharges in the run-up to the Spring Meetings. 

IMF Managing Director (MD) Kristalina Georgieva was elected for a second term just before the start of the Spring Meetings. This in an unopposed election, as the ‘gentlemen´s agreement’ between the Bretton Woods Institution´s major shareholders (according to which the Europeans get to appoint the IMF MD and the US get to appoint the World Bank President) remains intact. Some have been motivated to call for further governance reforms. 

The G24 – the group of emerging and developing countries used the Spring Meetings as a forum to advocate for a major overhaul of the IMF, which remains the key institutional pillar of the international financial architecture (IFA) and in particular the global financial safety net (GFSN).  

However, there was little progress on IFA reform to report from the Spring Meetings. Like the Development Committee, the IMF’s International Monetary and Financial Committee (IMFC) failed to adopt a communiqué by consensus, a chair´s statement was released instead. Remarkably, while the G20 failed to issue a communiqué, apparently due to disputes over a wealth tax proposal strongly advocated by Brazilian Finance Minister Fernando Haddad for at the Spring Meetings, the G7 issued a joint statement.

The IMFC chair´s statement falls short of the EMDE member states’ ambitions, promising only a review of the surcharge policy with an uncertain outcome. On governance reform, it merely acknowledges the need for quota realignment and welcomes the creation of a third chair for African member states on the IMF Executive Board. 

Despite the existence of a high-level “Global Sovereign Debt Roundtable” at the IMF, no major work is being done at the IMF on an effective multilateral debt workout mechanism, raising the expectation that such institution-building will be put on the agenda of other processes, in particular the one leading to the Fourth International Conference on Financing for Development, that just started.