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Nueva Arquitectura Financiera Pronunciamientos

LATINDADD’s reaction to 2024 IMF and World Bank Spring Meetings

Nearing the 80th anniversary, and still far from responsive to today’s world

LEER ES ESPAÑOL

Looking ahead to the upcoming 80th anniversary of the Bretton Woods Institutions (BWI), the spring meetings of the International Monetary Fund (IMF) and the World Bank were held on 15-20 April 2024 in Washington, DC. Consistent with the almost eight decades of existence of these institutions, the results point to the absence of substantial and decisive responses to the world’s poly-crisis, particularly for the nations of the South.

In a highly changing and – as the IMF Managing Director has pointed out – crisis-prone world, the policy orientation of boosting GDP and economic growth, reinforcing «credible fiscal frameworks» by deepening austerity policies, and tackling the debt crisis from a short-sighted, partial and insufficient approach, as reflected in the G7 statement, IMFC chair’s statement, G20 press conference, among others, persist.

Along the same line, the IMF’s flagship reports, such as the World Economic Outlook, focus on GDP growth as a goal itself; while the Fiscal Monitor highlights “the great election year» and continues the usual promotion of fiscal consolidation to ensure the sustainability of public finances and «rebuild buffers». It does not address debt reduction and restructuring policies as an alternative to generating fiscal space, nor does it increase access to concessional financing. The above approaches are also highlighted in the priorities of the IMF managing director’s Global Policy Agenda, entitled «Rebuild, Revive, Renew», which also includes as a priority ensuring that the IMF’s policies, lending toolkit and governance are fit for purpose.

Debt, governance of the BWIs and climate finance have been among the main issues during the meetings; however, a short-term approach prevails, no structural changes are envisaged and it is clear that these institutions are unlikely to be able to respond to today’s world.

Concerning vulnerabilities and debt crises, the only alternatives are the G20 Common Framework and the Global Sovereign Debt Roundtable, which do not respond to the current needs of the countries of the South, because they continue to be creditor-led, flawed in their design and have not resulted in any benefits for the four countries that have applied it so far. Its promoters continue to insist on improving its functioning when greater breadth and understanding are required to promote transformative changes, to think outside the Common Framework and to promote a multilateral debt resolution framework under the auspices of the United Nations, which is independent and democratic, as has been demanded by civil society organisations.

In addition, in a situation of public debt crisis and growing needs to finance a still uneven and slow recovery, get back on track towards the SDGs, and address the pressing needs of the climate emergency, reluctance to expand and provide access to concessional finance for low- and middle-income countries prevails, especially about a new issuance of Special Drawing Rights (SDRs). The focus has been on the rechannelling of SDRs through the IMF’s Resilience and Sustainability Fund (RST), which was announced to be used by 18 countries. Despite losing the spirit in which SDRs were issued, converting these resources into more debt, there has also been no progress on models of rechanneling outside the IMF, such as through regional development banks. This call has also been included in the official communiqués of the Group of Twenty-Four G24, and the V20 (the group of countries vulnerable to climate change).

Among other measures related to indebtedness, a formal review of the IMF’s surcharges policy is expected, which, lacking transparency, is challenged to take forward the suspension and elimination of this unnecessary and harmful policy. However, the risk of a review that only fuels superficial changes is latent.

Regarding the region, the «resilience» of Latin America and the Caribbean (LAC) in the face of crises has been highlighted, but once again, mainly considering GDP. Moreover, boosting potential growth would be part of the response to high levels of poverty and inequality. The region is facing a new lost decade and it is necessary to include vulnerabilities from a multidimensional approach and address structural problems such as labour market informality, gaps and inequalities including gender, poverty, food security, high exposure and low preparedness for extreme weather events, among others. The situation does not seem to have many ways out: reduced fiscal spaces and access to financing on concessional terms is practically null due to the middle or high-income classification for all LAC countries, which adds to the risks and problems of public indebtedness in a context of more costly loans that have an increasing the burdens on public budgets, not only for external debt but also for domestic debt. Debt servicing is at historic levels and is crowding out public social spending. Although the BWI works with all member countries, again middle-income countries are not mentioned with the urgency needed on this occasion. 

Furthermore, LAC countries, as well as other emerging countries, are not adequately represented in the governance of the BWI, which has been circumvented in the IMF’s 16th quota review, resulting in a 50 per cent equi-proportional increase for member countries, delaying the issue of fair redistribution and a necessary reconfiguration of its structure. A change in the calculation formula was not addressed. On the other hand, during the meetings, it was announced that Sub-Saharan Africa will have a seat on the IMF’s executive board in November to give it greater representation and voice, a marginal change in relation to what is needed. Finally, in the run-up to the meetings, the current IMF managing director was reappointed, further reaffirming the existing «gentleman’s agreement» in a non-transparent election process. Thus, governance at the IMF remains unchanged.

Undoubtedly, issues related to climate emergency, energy transition and financing for mitigation and adaptation have been among the most relevant issues of the meetings. Despite the advocacy and mobilisation actions of climate and economic justice movements, both inside and outside official events, they do not seem to resonate with the decision-makers who are the main drivers of this crisis.

In general, gender considerations are not substantially addressed by IMF and World Bank policies. For instance, the IMF’s gender strategy and guidance note on gender mainstreaming do not mention debt once. The conditionalities of their loan programmes, including fiscal consolidation and austerity measures aimed at ensuring fiscal sustainability, invisibilise their impacts as they are not part of the analyses and evaluations carried out. LATINDADD explains the effects of austerity on women and unpaid work, highlighting that life sustainability should be prioritised over debt sustainability.

During the spring meetings, LATINDADD was part of different CSPF sessions, as well as side events and workshops on issues related to international financial architecture and the need for reform. Highlights included the side event with G20 representatives on financial and economic priorities and challenges for Brazil’s presidency, panels on how to address debt from a feminist vision, the future of SDRs as a development finance tool, on a transformation of the financial architecture 80 years after the creation of the BWI, as well as other sessions on possible solutions that address debt and climate crises simultaneously, and the debt crisis beyond the current narrative of liquidity squeeze solely. The robustness of civil society debates and proposals contrasts with the reduced ambition of the IMF and World Bank in the face of a changing and increasingly challenging world. Both institutions are approaching their 80th anniversary, with governance structures that only reinforce power asymmetries, and with a lack of capacity to respond to current needs and address multiple crises. Efforts should be geared all the more towards the 4th International Conference on Financing for Development in 2025.