The Spring Meetings are being held this week from April 15-20 in Washington, DC
Photo: Screengrab of video by IMF Media Centre The spring meetings of the World Bank and the International Monetary Fund (IMF) commenced this week in Washington, DC. These meetings will discuss the progress on issues of international development, debt, economic recovery and climate. The IMF’s mandate is maintaining global economic stability, while the World Bank’s evolved mission is to “create a world free from poverty on a liveable planet”.
In his opening address, World Bank President Ajay Banga highlighted the bank’s adherence to the G20 expert group recommendations to strengthen multilateral development banks (MDB). To increase the lending capacity while being able to take more risks, the bank has lowered its loan-to-equity ratio from 20 per cent to 19 per cent, freeing up around $4 billion annually, adding to lendable resources. It also introduced a portfolio guarantee platform and launched a hybrid capital instrument. Reforms are also underway to reduce project approval timelines.
The yet-to-be-operational Liveable Planet Fund, which according to Banga will be “funded by governments but also philanthropies”, is an extension of the Global Public Goods (GPG) Fund established in 2018. The GPG Fund provides concessional finance for global public goods in middle-income countries, receiving loans from the World Bank Group’s International Bank for Reconstruction and Development.
One of the focus areas of the meetings is the World Bank’s International Development Association replenishment campaign, which is a source of concessional financing for low-income countries. In 2021, the World Bank announced a $93 billion replenishment package for fiscal years 2022-25. Other themes up for discussion include unlocking the full potential of callable capital (money that shareholders governments will provide in case of an extreme emergency if many borrowers have defaulted and the multilateral development bank is unable to pay its lenders), mobilisation of private capital, climate finance, among others. The World Bank is revamping its corporate scorecard to track climate outcomes, as well as other indicators based on impacts. At COP28, the World Bank committed 45 per cent of its funds towards climate projects.
Banga has been vocal about multilateral and government money alone being insufficient to get the trillions required to close the climate funding gap, for which “mobilisation of private capital” is high on the agenda. Last year in June, the World Bank unveiled a Private Sector Investment Lab and recruited chief executives across asset management companies, banks and operators “to identify barriers and solutions” for investment in emerging markets. The bank now publishes proprietary statistics revealing the credit risk profile of private and public sector investments to attract more private sector capital into emerging and developing economies.
In an opening speech in the lead up to the Spring Meetings, IMF Managing Director Kristalina Georgieva shed light on the latest global economic trends. Among other aspects, she noted that global economic activity is weak compared to past standards, with fiscal buffers being depleted and increasing debt levels creating public finance challenges in several countries.
She also mentioned that the cost of servicing debt for countries across the globe has been rising in the last decade and the pandemic has exacerbated this. Interest payments on public debts will amount to, on average, about 5 per cent of government revenues in advanced economies (other than the United States), and for low-income countries, the interest payments will average about 14 per cent of government revenue.
As highlighted in a CSE report, high external debt burdens leave poor countries with lesser fiscal space to spend adequately on priority areas such as education, health and climate change. For countries attempting to get relief through debt treatment, such as through the G20’s Common Framework, a common roadblock on successfully completing the deals is the issue of ‘comparability of treatment’ among different creditor groups. The Global Sovereign Debt Roundtable will reconvene this week to throw light on this issue.
Georgieva also mentioned that 18 countries now use the IMF’s Resilience and Sustainability Trust, a fund set up to provide resources to countries affected by ‘shocks’ such as climate-induced natural disasters. Discussions on the rechannelling of IMF Special Drawing Rights (SDR) – a reserve currency meant to supplement the official reserves of its member countries – are to happen in the coming days of the spring meetings. The debate on whether SDRs should be rechannelled with a climate priority and how the same will play out has been ongoing for some time now.
At a side event, IMF presented a framework for estimating future economic losses from floods and tropical cyclones under different climate scenarios. Most countries studied are expected to face higher damages by mid-century, with cyclones impacts being concentrated in the Caribbean, South and East Asia, Eastern Africa and Oceania. This is a part of the IMF’s growing work on understanding the financial impacts of climate change.
The Spring Meetings also saw the release of the latest iterations of the IMF’s flagship publications, the Global Financial Stability Report and the World Economic Outlook.
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