Guest Columnist By Professor Maurice Okoli
The African Development Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, the Council of Europe Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, the Islamic Development Bank, and the New Development Bank joined the World Bank in the collaboration agreement.
Amid heightened criticisms and intense debates over several significant global issues including new financial architecture, economic diversification, growing debts and reforms, the International Monetary Fund (IMF) and the World Bank, on October 15 wrapped up their week-long annual meetings held under the theme Global Action, Global Impact in Marrakesh, Morocco in North Africa.
With the rapid geopolitical changes, it featured prominently finance ministers and central bank governors from 190 countries in desperate search of comprehensive mechanisms and suitable approaches to address the prevailing economic crisis across the globe. The coordinated annual meetings also reviewed its scope of geographical operations with particular emphasis on Africa.
Fundamentally Africa’s key drawbacks mostly mentioned in all the discussions are related to the system of governance, official policies and strategies, and persistent conflicts. Due to the severity of threatening conflicts combined with worsening insecurity and ineffective policies, speakers at the annual meetings reviewed with circumspection the economic performance in Africa.
The importance of this annual meeting particularly for Africa need not be over-emphasized. Of course, the popular paradox is that Africa has huge untapped resources including rich deposits of strategic minerals, the population is growing and now stands at 1.4 billion providing the human capital and yet that region is engulfed with abject poverty, lack of industrial infrastructure and technology, while agriculture largely remains at the rudimentary stage. It is impossible not to notice on the political map of the world — it is located roughly in the centre of the globe just on the equator and its huge expanse of territory.
The global financial system is now outdated, dysfunctional and unjust, said a New York Times opinion column jointly written by Kenyan President William Ruto, African Development Bank President Akinwumi Adesina, African Union Commission chairman Moussa Faki and Patrick Verkooijen, chief executive of the Global Commission on Adaptation.
It’s outdated because international financial institutions “are too small and limited to fulfil their mandate. Dysfunctional because the system as a whole is too slow to respond to new challenges, such as climate change. And unjust because it discriminates against poor countries, the leaders wrote.
Often lenders of last resort, the IMF and the World Bank use billions in loans and assistance to buoy struggling economies and encourage countries operating in deficit to implement reforms they say promote stability and economic growth.
During a panel session in Marrakech second week of October 2023, African Ministers of Finance, Planning and Economic Development called for key reforms during a meeting of the Africa High-Level Working Group on the Global Financial Architecture, coordinated by the Economic Commission for Africa (ECA). The ECA has the mandate to promote the economic and social development of its member states, foster intra-regional integration, and promote international cooperation for Africa’s development.
Their position, among others, was to strengthen the African voice on the global stage. This resounding call emphasized the need for a quota formula to increase the number share for Africa. The meeting expressed support for the establishment of an additional chair to represent African countries at the IMF Executive Board to amplify the region’s voice and representation.
The meeting further underscored the importance of scaling up both concessional and non-concessional financing priorities of African countries, including regional integration, infrastructure development and structural transformation. Also, there was the proposal for temporal suspension of debt service and to pause debt service payments in the event of climate-related disasters.
At the opening ceremony, IMF Chief Kristalina Georgieva in a speech stated that since 2020, successive economic shocks have led to the loss of US$3.6 trillion of the global output, and that have pushed the IMF and the World Bank in hollowing for an enduring role in addressing the socio-economic challenges.
Fifty-seven per cent of the world’s poorest countries, home to about 30 per cent of the world’s population, will have to cut their public spending by US$229 billion by 2029. Low and lower-middle-income countries will be forced to pay almost US$500 million every day in interest and debt repayments from now until that year, according to her suggestion.
The African Development Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, the Council of Europe Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, the Islamic Development Bank, and the New Development Bank joined the World Bank in the collaboration agreement.
World Bank together with other nine multilateral development banks jointly seek to boost lending power to developing countries. These banks pledged to bolster collaboration in accelerating an appreciable, liveable world free of poverty. Under consideration is estimated US$300 billion to US$400 billion of additional lending capacity to help developing countries confront “a perfect storm of intertwined crises — from climate shocks and conflicts to pandemics and surging debt.”
They would also work to catalyze private-sector engagement. In addition, and as incorporated in the official document after the summit, the World Bank will be strengthening efforts to partner with the private sector, civil society, other multilateral institutions, and charitable organizations.
Some experts are of the view that the banks should also release emerging market data so private investors can better understand the actual risks and opportunities of investing in such markets. According to economic experts, exploring ways to directly increase the voice of emerging markets and developing countries in the IMF by adding another deputy managing director to represent emerging markets and low-income countries, and a third executive board chair representing sub-Saharan Africa.
“Working together for a common cause, we can bring more experience, expertise, knowledge, and, especially, more funding to the massive challenges facing the world today,” World Bank President Ajay Banga said. “Together, we are greater than the sum of our parts.”
In addition to improved analytical and diagnostic tools, including country climate and development reports, the multilateral banks have to work on principles for using concessional finance to target support for projects that address the challenges. Concessional finance involves loans at more generous terms than the market provides. The socio-cultural conditions should also form part of the decision-making process for extending these loans to accelerate private sector mobilization.
International Monetary Fund chief Kristalina Georgieva called for wealthy nations to provide more support to debt-saddled developing countries, and to better help vulnerable nations deal with poverty and climate change, as she opened the first IMF-World Bank meetings on African soil in 50 years. The global lenders traditionally hold their annual gathering of finance ministers and central bank governors outside their Washington headquarters every three years.
The IMF and World Bank last held their meetings in Africa in 1973, when Kenya hosted the event and some nations were still under colonial rule. Half a century later, the continent faces various challenges ranging from conflict to a series of military coups to unrelenting poverty to natural disasters.
“Bringing the meetings to Africa, again, is symbolically and substantively very important,” Georgieva said at a meeting with members of civil society organizations. She noted that the continent is wrestling with “remarkably similar” problems as 50 years ago, including high inflation and “political upheaval in many places”.
“Many countries are under a burden of debt that can crush them and we very, very much hope that the meetings would be a place to build more trust among nations. We all need each other,” she said and added that the IMF and World Bank need “more capacity” to support African countries that need help, including providing zero-interest loans on a larger scale.
In the final analysis, China has to be considered for an increase in a quota within the institutions and given more representation if it played an active role in debt relief for low-income countries. China has already considered some African countries for addressing issues of debt restructuring deals, for instance, Angola, Egypt, Nigeria, Zambia and a few others.
Professor Maurice Okoli is a fellow at the Institute for African Studies and the Institute of World Economy and International Relations, Russian Academy of Sciences.
