On the wrong side of history: The World Bank and IMF mark 75th anniversary | The Background

Monday, November 29, 2021

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On the wrong side of history: The World Bank and IMF mark 75th anniversary

In a year of unprecedented public protests demanding change to tackle climate change, these institutions and their policies are looking decidedly outdated

 Soren Ambrose

 As ordinary citizens around the world are taking to the streets to disrupt the status quo and demand climate action, the World Bank and International Monetary Fund (IMF) are quietly marking their 75th anniversary at their annual meetings in Washington DC.

In a year of unprecedented public protests demanding transformative system change to tackle the climate emergency, these international financial institutions and their policies are looking decidedly outdated.

Between 2014 and 2018, the World Bank Group has advised on fossil fuel projects in 45 countries, and provided over $12 billion in direct finance. This came after a majority of governments signed up to the Paris Climate Agreement and undermines its goals to limit global warming to 1.5 degrees.

The IMF also has a role to play in the climate crisis. Its incessant calls for reductions in public spending have left many developing countries, where climate disasters are most likely to hit, seriously under-prepared for such shocks. Even clearer is the problem of debt.

Earlier this year, Mozambique was forced to take out more IMF loans to recover from Cyclone Idai instead of receiving debt relief and grants from the rich countries that have caused climate change. ActionAid is campaigning for climate justice – this means those that have done the most to cause climate change, providing finance to support those whose lives and livelihoods are being destroyed as a result.

We’re calling for a funding mechanism, under the UN Framework Convention on Climate Change, that would automatically provide relief funds and debt relief to countries recovering from climate disasters. Support from the IMF and World Bank for this proposal would help make it a reality.

Meanwhile a new debt crisis is looming. After a lengthy campaign for debt relief in 2005, the institutions finally agreed to substantial write-downs, which also came with substantial conditions. But now many of the countries that received relief are back in trouble, as they continue to try to raise money for development — everything from bridges and ports to schools and hospitals. Levels of debt are now increasing dramatically, with over 100 countries in, or close to, a designation of ‘debt distress’. In 2016, more than 40% of Ghana’s government spending was on repaying debts.

The World Bank lends money to governments for large infrastructure projects, and is often questioned about those projects’ impacts on the environment and on governments’ capacity to repay the loans, or instead just build up more debt. It also aggressively pushes for the privatisation of state-owned companies, the use of public-private partnerships that tend to assign the risks to governments and the profits to corporations.

Without enough public investment in health, social care and education, and increasing privatisation of essential services, the extra burden of caring for older relatives and children falls on women. A recent report by ActionAid Ghana investigates how IMF policies have squeezed financing of essential public services, such as health and water. In Accra, the privatisation of water provision is restricting access and forcing young women to spend lengthy periods queuing for water. Prices have doubled in the past year, leaving those who cannot afford to pay, travelling long distances to find streams.

An ActionAid Malawi project to open community based childcare centres is reaching over 92,000 children. These centres are enabling women to spend more time on farming and selling their produce, helping campaigners make the case for increased government funding for early childcare.

When I worked with the 50 Years Is Enough Network — founded on the 50th anniversary of the IMF and World Bank — we were highlighting the harm caused to developing countries in Africa, Asia, and Latin America in the name of efforts to help them develop. Twenty-five years on, the fundamental problems we identified remain.

What’s needed is transformational reform of these outdated institutions whose policies are putting them on the wrong side of history. It’s time that governments in the Global South take back control of their policy making and public spending.

The World Bank should fully support public projects, without insisting that governments take on the risk of the private sector while turning over the revenues made from providing services and infrastructure.

The IMF, meanwhile, should return policy-making to governments by making the only condition of their loans that they be repaid on time.

Soren Ambrose is fiscal justice policy adviser at ActionAid.



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