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World Bank Group President Ajay Banga listens during the G-20 Finance Ministers and Central Bank Governors' Meetings at the IMF and World Bank’s 2024 annual Spring Meetings in Washington, U.S., April 18, 2024.
The big challenges facing the IMF and World Bank
As the International Monetary Fund and World Bank spring meetings wrap up Friday in Washington, the two crucial global lenders face a few important challenges in the year ahead. GZERO has been on the ground to bring you the big takeaways.
A tale of two recoveries. The IMF’s global economic outlook is fairly rosy as a whole. Inflation is easing in the US and Europe, and 3.2% growth of global GDP is a respectable clip – especially given recent fears of a recession. The US and Chinese economies are both growing, even if Beijing is still struggling with persistent debt and property market woes.
But the recovery has yet to reach every corner of the globe. One-third of the lowest-income countries are poorer today than in 2019, before the pandemic. And because inflation has pushed up interest rates, the costs of servicing sovereign debt have skyrocketed, an especially heavy burden for lower-income countries. Bringing financial stability to these fragile situations is a key focus for the IMF and the World Bank.
Power up. The World Bank announced it is launching a massive $35 billion plan to connect 300 million people in Africa to electricity. It’s the kind of fundamental development work the World Bank excels at, and it will help put the continent on track to drive an increasing share of global growth in the coming decades.
But many of the African students who might benefit from lightbulbs to study by also lack access to basic medical care – in fact, more than half the population of the globe finds themselves shut out of formal healthcare, and another two billion struggle to afford it. The World Bank plans to bring quality care to some 1.5 billion people and bolster public health systems to create sustainable improvements.
A new approach. World Bank President Ajay Banga stepped into a delicate situation succeeding David Malpass, who courted controversy with his skepticism about climate change. Banga is the first president in over a decade coming in from the private sector and he's attempting to streamline processes and make the institution more agile and flexible, which may include merging the Bank’s keystone conferences into one.
We’ll keep you up to date on progress during the Annual Meetings this fall.
For more on the big takeaways from this year’s conference, watch Senior Writer Matthew Kendrick’s interview with Tony Maciulishere.
People gather as they watch from afar after an alleged gang member was killed and set on fire, amid an escalation in gang violence, in Port-au-Prince, Haiti March 20, 2024.
Want to stabilize the world’s worst crises? “Leave your textbook in your drawer.”
Matthew Kendrick spoke with Ghassan Salamé, the former head of the UN Support Mission in Libya, and former UN Deputy Secretary-General Lord Mark Malloch-Brown, as part of a panel at the IMF/World Bank Spring Meetings on Wednesday.
The international community is struggling to address half a dozen conflicts, spanning from the Middle East to Haiti, that often involve institutions poorly equipped to tackle modern problems. But that doesn’t mean they can afford to stop trying; it just means they need to get creative.
“The most urgent need is to bring back humanitarianism as a domain independent from war,” said Ghassan Salamé, the former head of the UN Support Mission in Libya, noting that the basic concerns of food, education, and healthcare must not be held hostage to military objectives. “And you cannot apply it in a selective way. You have to apply it in Ukraine with the same strength you do in Gaza.”
Bias in attention is especially stark for Sudan, where just 3.2% of humanitarian needs have been funded despite a brutal civil war that has killed over 15,000 and forced a staggering 8.2 million to flee.
“Indifference is much worse than hostility,” said Salamé. “Sudan needs concern.”
Part of the problem, according to former UN Deputy Secretary-General Lord Mark Malloch-Brown, is that “humanitarianism was based on the idea that conflict is temporary, and then you go back to development.” That means when the shooting starts, the IMF and World Bank tend to back away and wait for the dust to settle before starting to help stabilize the affected economy. That just won’t fly in the 21st century, and Malloch-Brown called for the institutions to develop new tools to provide help before, during, and after a country falls into violence to strengthen key unifying institutions, such as ministries of finance, education, and social welfare.
The key, said Salamé, is to “leave your textbook somewhere in your drawer and try to solve the situation as it is.”
Looking at crises in developing countries along longer trajectories can help highlight their hidden potential. When asked how these new approaches could apply to Haiti, where the formal government has all but collapsed, Malloch-Brown said the country “never had the degree of internal development, social reform, or inclusive economic policies that allow a stable polity to emerge.” If Haiti receives “a persistent period of tender love and care,” he added, its economic potential means “I’m optimistic enough to believe it can be fixed.”
Students read Koranic verses at a madrasa, or Koranic school, in Dhusamareeb, central Somalia, December 16, 2012.
IMF says economic picture is rosy, but how does it look from the bottom?
Inflation looks set to fall globally, and a global recession is unlikely in 2024, according to the IMF’s April update to the World Economic Outlook. That so-called “soft landing” is great news for those in New York or Paris, but what does the picture look like from the most vulnerable economies?
Money has been tight for developing countries in sub-Saharan Africa, in particular, with many over-indebted states are only just returning to capital markets after COVID-19’s economic knock-ons shut them out, and face dim medium-term growth prospects.
IMF Chief Economist Pierre-Olivier Gourinchas told the IMF/World Bank Spring Meetings in Washington, DC, that low-income countries should focus on structural reforms to make their economies and governments more efficient.
“This will help lower borrowing costs and reduce funding needs,” he said, adding that such countries should lean into their demographic advantages and “improve the human capital of their large, young populations, especially as the rest of the world is aging rapidly.”
That’s easier said than done, but the IMF can point to a massive success story: Somalia. In December last year, Mogadishu was able to discharge some 90% of its external debt after meeting the specifications of an IMF program called the Heavily Indebted Poor Countries Initiative. That achievement followed years of hard work by Mogadishu.
In 2012, decades of war had left Somalia’s federal government barely functional and without a proper budget. If salaries were paid, it was through unaccountable cash. But now, it has fully digitized payroll, invoice tracking systems, and cash management tools, all of which have helped Somalia massively increase social spending, from $8 per person per year a decade ago to $48 per person per year today.
Such success in a fragile country has raised hopes that the model can be exported. But Somali Finance Minister Bihi Iman Egeh cautions that his country’s program “was only successful because it reflected Somalia’s needs and priorities,” meaning other countries need to tailor the approach to suit their unique challenges.
Building broad consensus meant “the economic reform program was among the few common national priorities that was elevated above our lively national politics,” said Egeh. “It was a successful unifying national exercise.”