World Bank
The annual fall meetings of the World Bank and IMF in Istanbul this week focused on the “road to recovery” from the global economic crisis. While we didn’t see major new initiatives emerge from the meetings, the Bank and the Fund reaffirmed important commitments to help emerging market and developing countries cope with the impacts of the financial crisis. These include commitments to ensure the Bank and the Fund have adequate resources to respond to the crisis and timetables for governance reforms that would give greater voice and representation to emerging market and developing countries.
They echoed calls to: protect core spending on health, education, infrastructure, agriculture and social safety nets; revive global trade and investment; and establish a multilateral trust fund at the World Bank for the food security initiative. The World Bank and African Development Bank also announced this week that they would invest $215 million to bring high-speed, low-cost internet access to central African countries.
While important progress is being made at the institutions, some say it’s not going fast enough or deep enough. Nancy Birdsall, at the Center for Global Development, says the newly inclusive G20 is more progressive than the modest changes in governance being proposed at the World Bank and IMF. Several African finance ministers also issued a statement during the annual World Bank and IMF meetings calling for their countries to have a voice in the G-20, and another self-styled “group of 30” financial figures called for much more dramatic reforms at the IMF including ending the U.S. veto power and cutting the number of European board chairs.
We’ll be watching to see how these financial mechanisms and new governance proposals will benefit sub-Saharan African countries. In the meantime, read more of ONE’s analysis of the meetings here.
The World Bank and International Monetary Fund (IMF) fall meetings will take place this weekend and early next week in Istanbul, Turkey. This year’s meetings will focus on the impact of the global financial crisis on developing countries and “the road to recovery.”
Among the main points on the agenda are:
- Progress and further solutions needed to help countries hit hard by the financial crisis, particularly related to downturns in capital flows, trade, remittances and tourism.
- Financial capacity of the World Bank and IMF to respond to the needs of developing countries hit hardest by the financial crisis. The World Bank and IMF have both recognized increase demand from developing countries that are trying to cope with the impacts of the financial crisis.
- Climate issues in the run up to the international negotiations in Copenhagen in December 2009.
- Review of progress of the current round of funding of the World Bank’s International Development Association (IDA) – that’s the branch that provides no-interest loans and grants to the world’s poorest countries.
- Changes in governance of the international financial institutions (the IMF, World Bank, etc.) to increase voice and participation of emerging and developing countries.
You can track the events in Istanbul on the World Bank blog and we’ll be posting more of our reactions here in the coming days.
Overall, the Pittsburgh G20 Summit appears to have made some progress towards reshaping global power structures to make them more representative, but it still has some way to go before it becomes a truly representative global decision making body.
I spent the summit with our US Government Relations Director Tom Hart, who said:
“Moving from the G8 to the G20 is a seismic shift: it brings many more of the world’s people to the table, but the new expanded world body must now start addressing the needs of the poorest countries, especially in Africa. For nearly a decade now, Africa has been squarely on the G8’s agenda, even if delivery on their commitments has been mixed. During this transition time, African development must not fall through the cracks. One way to show the world will not forget Africa would be to hold an upcoming G20 summit on the African continent.”
As I posted earlier here, we passed our petition, in which 75,000 ONE members worldwide call for a G20 Summit to be held in Africa, to the US delegation at the summit.
Below are some key points in the summit’s communique that are relevant to Africa:
- Agriculture – The G20 called on the World Bank to develop a new trust fund, as a way to implement the G8′s food security initiative announced at the L’Aquila Summit in Italy in July. This multilateral fund will support the set of principles championed by the White House to make aid for agriculture more effective, coordinated and geared towards the strategies developed by poor countries themselves.
- Climate change – The G20 failed to call for resources to help the poorest countries adapt to the harmful impacts of climate change, and tackle its causes. It was disappointing that there was no mention of the urgency of addressing these needs.
- African Development Bank – The G20 have reaffirmed the commitment to make sure the multilateral development banks have enough finance, especially the World soft loan arm, the International Development Association (IDA) and the African Development Bank (AfDB). The African bank has increased its lending to respond to the financial crisis by as much as US$4bn and now needs support to replenish its coffers. ONE welcomes Canada’s announcement of an extra US$2.8bn in loan guarantees for the Bank.
- World Bank and IMF- Both International Financial Institutions took steps towards increasing representation of developing countries.
In the IFC-World Bank Doing Business 2010 report released yesterday, for the first time a sub-Saharan African country—Rwanda—was named the world’s top reformer of business regulations, based on the number and impact of reforms implemented. Doing Business is an annual report that ranks economies based on 10 indicators of business regulation that record the time and cost to meet government requirements for starting and operating a business, trading across borders, paying taxes, and closing a business.
In Rwanda, it now takes an entrepreneur just two procedures and three days to start a business. Imports and exports are more efficient, and transferring property takes less time thanks to a reorganized registry and time limits. Investors have more protection, insolvency reorganization has been streamlined, and a wider range of assets can be used as collateral to access credit.
Mauritius, ranked 17 globally, is the top sub-Saharan economy for the second year in a row in terms of the overall regulatory ease of doing business.
However, despite these advances, more reforms are needed in Africa. The average rank for sub-Saharan African countries remain the lowest of any region.
Globally, the report shows that despite the financial and economic crisis, a record 131 economies reformed business regulations between June 2008 and April 2009. Singapore is the top-ranked economy on the ease of doing business for the fourth year in a row, but most of the action occurred in developing economies. Two-thirds of the reforms recorded in the report were in low- and lower-middle-income economies.
-Mikiko Imai
Last week, the World Bank’s Shanta Devarajan, the Chief Economist of the Africa Region, posted a piece on “why aid to Africa must increase” on his blog. He makes the important point that while people in rich countries regain jobs when the economy regains, the effects of the global recession on Africa will be permanent – it is much more difficult for people in poor countries to regain what they have lost.
In poor African countries, children get pulled out of school—and miss out on becoming productive adults. In some cases, children die before they have a chance to go to school. If the current growth collapse is typical of the ones Africa has experienced in the past, an additional 700,000 African children may die before their first birthday.
He concludes that “by increasing aid to Africa, the international community has a chance to reverse this trend and prevent a temporary shock from having permanent consequences.
In addition to this post, his blog “Africa can… end poverty,” is a great online source where he shares his ideas about the issues of sustainable growth and development in Africa. Check it out!.
-Mikiko Imai
Last week I attended the launch of the World Bank’s Global Monitoring Report 2009 in Brussels. The report’s subtitle is ‘A Development Emergency’. A couple of key facts coming out of the report which, although not necessarily new statistics, serve to highlight the ‘development emergency’ as the World Bank calls it:
- In 2009, growth in developing countries will be 1.7%, just a quarter of pre-crisis levels; in sub-Saharan Africa it will be 1.6%
- The number of poor people will rise in over half of developing countries and in three quarters of countries in sub-Saharan Africa
- At the global level, access to sanitation is the most off-track Millennium Development Goal (MDG) after MDG1 on hunger
The report picks out 6 priorities for action: 1) adequate fiscal response 2) improve climate for private investment 3) redouble efforts on human development goals 4) scale up aid 5) open trade system 6) ensure multilateral system has the mandate, resources, and instruments to respond adequately.
Within the report’s main findings, infrastructure investment is presented as a win-win-win, in the sense that it has the highest multiplier effect, it removes bottlenecks to future growth, and contributes to a green recovery.
However, the report states that the infrastructure financing gap for sub-Saharan Africa (SSA) is $40bn annually. The World Bank contends that this amount could be reduced by 45% through improved management, efficiency and cost.
In March of this year, ONE undertook some research with ODI and NIESR to show the positive impact that investing $50bn in SSA could have on the world economy- invested in the right way, that development aid could ‘pay for itself’ within 16 years given the positive impact it would have on the global economy.
There was time for some discussion after the presentation of the report during which someone from the UN made a very interesting point. He said that just like with global warming, we need a kind of ‘polluter pays’ principle for this economic crisis. I don’t think we’ve had anything like this kind of ‘speculating countries pay’ idea muted before. The general debate that followed the report underlined the urgency of the whole situation much more. It was suggested that the civil society push is too weak, especially considering we know that there will be 200m more people pushed into poverty (that’s equivalent to around half the population of Europe) and that at least 200,000 children will die per year up to 2015 (that’s 1.2million lives in total). The figures are almost too much to comprehend, statistics which struggle to convey the human suffering they mask. It’s averting those crises that spurs us all on as campaigners.
You can check out the full report here.
-Eloise Todd
On Sunday, we headed to the final portion of the IMF and World Bank Spring meetings. Unlike the International Monetary and Financial Committee (IMFC) on Saturday, where little was discussed on what the IMF can do for the poor, yesterday, the World Bank and the International Monetary Fund Joint Development Committee gathered to discuss how the global economic crisis is impacting developing countries specifically.
The Development Committee and the IMFC released communiqués laying out their recommendations for action. Generally, a few positive recommendations were made, but we have yet to see a comprehensive, grand plan to protect the world’s poorest people from the fallout of the financial crisis.
The good news first: ONE, along with others in the development community, requested that the Bank “frontload” funding to low income countries. Yesterday’s Development Committee communiqué indicates that this may happen. Frontloading International Development Association (IDA) funding commitments means that the World Bank will have the resources to provide funding to low income countries now in larger bundles over smaller periods of time, rather than spanning it out until 2011. This is critical in order to ensure that development projects already underway can be completed and new projects that help the poor can be implemented.
The not-so-good news: The IMFC Communique recommended that the IMF increase its lending capacity for poor countries, and agreed to explore the idea of giving better terms for low income countries on their lending, but did not specify how far the IMF will go with this. IMF loans also frequently come with burdening economic conditions and has the potential to lead to a new debt crisis.
Also, little progress has been made to reform the IMF and World Bank governance. We are asking that African countries be given strong representation because, after all, institutions like the World Bank and IMF have a very large impact on their development and it’s only right that these nations have a say.
The weekend was productive, but we still have a lot of work to do. Even with the petitions of ONE members, the IMF did not budge on the gold sale issue. We’ll now need to take that up with participating countries to ask them to help us move on this issue. We also continue to ask that funds be made available to poor countries through grants and debt relief, rather than in loans. Additionally, the IMF and World Bank must move forward quickly on reform.
Stay tuned for ways you can help.
-Chandler Smith
