EU (Common Wealth) _Three institutions emerged from the ruins of World War II to serve as the pillars of a new global order: the United Nations, the International Monetary Fund, and the World Bank. In an uncommon move, the top official, UN Secretary-General Antonio Guterres, is now very critical of big changes in the other two.
According to Guterres, the International Monetary Fund has favored rich countries rather than impoverished ones. He also calls the IMF and World Bank’s response to the COVID-19 pandemic a “glaring failure” that has left dozens of countries severely in debt.
Guterres’ critique in a recent article isn’t the first time he’s advocated for global financial institutions to be overhauled. But it is his most in-depth examination of their difficulties, as seen through the lens of their response to the pandemic that he refers to as a “stress test” for the organizations.
His remarks came ahead of discussions held by French President Emmanuel Macron in Paris to discuss multilateral development bank reforms and other problems.
The IMF and World Bank both declined to comment directly on the secretary-general’s comments and proposals. However, Guterres’ remarks match those of outside opponents who regard the IMF and World Bank’s leadership as constrained by the rich states that govern them – a position comparable to the United States, which has faced its own calls for reform.
The failure of the institutions to assist the poorest countries, according to Maurice Kugler, a professor of public policy at George Mason University, “reflects the persistence of a top-down approach in which the World Bank president is a U.S. national appointed by the U.S. president and the IMF managing director is a European Union national appointed by the European Commission.”
According to Guterres, the institutions have not kept up with global expansion. He stated that the World Bank has $22 billion in paid capital, which is used for low-interest loans and grants to governments for development. That is less than one-fifth of the financing level in 1960 as a percentage of world GDP.
Simultaneously, many emerging countries are in grave financial trouble, exacerbated by inflation, rising interest rates, and a halt in debt reduction.
“Some governments are being forced to choose between making debt repayments or defaulting in order to pay public sector workers — possibly ruining their credit rating for years to come,” Guterres said, adding that “Africa now spends more on debt service costs than on health care.”
According to him, the IMF’s regulations disproportionately favor wealthier nations. The wealthiest Group of Seven nations, with a population of 772 million, received the equivalent of $280 billion from the IMF during the pandemic, while the least developed countries, with a population of 1.1 billion, received little over $8 billion.
“This was done according to the rules,” Guterres stated. This is considered “morally wrong.”
He urged for fundamental reforms to increase developing-country representation on the boards of the IMF and World Bank, assist countries in debt restructuring, modify IMF quotas, and rethink the use of IMF funding. He also advocated for increased funding for economic growth and addressing the effects of climate change.
Guterres’ push for IMF and World Bank reform comes as the United Nations confronts calls to change its structure, which still reflects the post-World War II global order.
Western governments are well aware that China is becoming a more powerful lender in many developing countries. As a result, they are interested in changing the IMF and World Bank in ways that will prevent poorer countries from relying on Beijing for loans.”
Beyond the Paris meeting, the debate over IMF and World Bank changes will continue in September at a Group of 20 leaders’ summit in New Delhi, as well as at the United Nations’ annual gathering of world leaders.
In an Associated Press interview Wednesday, US climate head John Kerry said he will attend the Paris summit alongside IMF and World Bank officials.
