Key takeaways from the World Bank-IMF Spring Meetings 2024 (2024)

Photo: Screengrab of video by IMF Media Centre

Curtains fell rather quickly on the spring meetings of the World Bank and International Monetary Fund (IMF) held last week, but not without sparking key debates. Amid the world’s “polycrisis”of increased poverty, food shortages, energy shocks, debt crises, climate change, inflation, and war, the discussions revolved around reforming the global financial architecture. Climate finance discussions were also prominent, setting the stage for deliberations later this year on the New Collective Quantified Goal on Climate Finance at the 29th Conference of Parties to the United Nations Framework Convention on Climate Change (COP29) to be held in Azerbaijan.

Development Committee Chair Mohamed bin Hadi Al Hussaini issued a statement acknowledging the heavy debt burdens and constrained fiscal space of many developing countries, leaving limited resources to build climate resilience. The Development Committee is a ministerial-level forum of the World Bank Group and IMF for intergovernmental consensus-building on development issues.

Eleven wealthy countries pledged $11 billionfor funding World Bank’s three new financing tools: The Liveable Planet Fund, portfolio guarantee platform and a hybrid capital instrument, aimed towards de-risking its programmes, attracting private-sector investments and boosting lending capacity.

Japan committed to make the first contribution to the Liveable Planet Fund. Further, a coalition of ten multilateral development banks (MDB) launched a co-financing platform to pull in concessional resources.

Ahead of the spring meetings, World Bank President Ajay Banga stressed that private capital mobilisation will be instrumental in reaching the trillions required for climate action. However,according to a report released last year by the G20 Independent Expert Group, currently MDBs are mobilising only 0.6 dollars in private capital for each dollar they lend.The report also stated that additional spending of $3 trillion per year is needed by 2030, of which $1.8 trillion represents additional investments in climate action.

Lawrence Summers and NK Singh, who served as the co-convenors of the IEG, found thatescalating interest rates and repayment of bonds and loans led to an outflow of nearly $200 billion from developing countries to private creditors in 2023, eclipsing the increased financing from international financial institutions.“Billions to trillions, the catchphrase for the World Bank’s plan to mobilise private sector money for development, has become millions in, billions out,” Summers and Singh wrote in the article.

One of the ways in which private capital mobilisation is achieved, is through blended finance – an umbrella term for using public money to subsidise private investment.

Civil society groups also raised issues such as IMF’s austerity policies. These place loan conditions on countries regarding fiscal consolidation or fiscal tightening to reduce government budget deficits, and have been criticised for impeding the economic growthof debt-distressed countries.

Fossil fuel financing by MDBs was also in focus. In 2018,nine MDBs announced a joint framework for aligning their activities with the goals of the Paris Agreement. In its ‘Paris Alignment Methodology’, the World Bank committed to aligning 100 per cent of its operationsand 85 per cent of the operations of its private sector arms – International Finance Corporation and Multilateral Investment Guarantee Agency – with the Paris Agreement, beginning July 1, 2023.

In spite of this, the World Bank continues to finance fossil fuels;an analysis by clean energy advocacy group Oil Change International showed that the World Bank provided $1.2 billion a year on average in fossil fuel finance between 2020 and 2022. Natural gas is also being promoted as a transition fuel by the World Bank, although mounting evidence suggests that it may not be as clean as it seems.

Regarding governance, last year, IMF under Managing Director Kristalina Georgieva approved an increase of IMF members quotasby 50 per cent but did not address the problem of distribution of quotas. Emerging markets and developing countries, represented by the G24, have been pushing for reforms in how IMF calculates member countries’ quotas, which determine their voting power, access to fund resources and share in general allocation of Special Drawing Rights (SDR). SDRs are not a currency but a reserve asset allocated by IMF to various countries that they can exchange for currency when needed.

The World Bank’s International Development Association (IDA) replenishment is coming up at the end of this year, which is a source of concessional financing for low-income countries. Banga has called for raising $30 billion in contributions to IDA. A substantial portion of this money would be directed towards climate finance, since the World Bank has committed 45 per cent of its funds towards climate projects. During2020-2024, the average per capita incomes in half of IDA countries have been growing at a sluggish pace than those of wealthy economies, thereby widening the economic gap between these two groups of countries, according to a new report by the World Bank titled The Great Reversal: Prospects, Risks, and Policies in International Development Association Countries.

Latest data by the ONE campaignshowed that net finance flows to developing countries turned negative in 2023, which means that more money flowed out from Global South countries than the money flowing in, making it crucial to triple IDA’s size and increase donor contributions.

The G20 Finance Ministerial took place on the sidelines of the Spring meetings. This year’s G20 Financial Track discussions revolve around taxation of the super-richand coordinating international tax initiatives, including the international tax taskforce launched at COP28 and the United Nations Tax Convention. Climate challenges are also a top priority of the Brazilian G20 presidency, which created the ‘Taskforce CLIMA’, a global mobilisation against climate change.