spring meetings in a charged climate

There is no shortage of challenges: the need for reform, global warming, the risk of generalized debt and the fragmentation of international trade.

Par Africa Point

For the Bretton-Woods institutions, there is no shortage of challenges in these spring meetings: need for reforms, global warming, risks of generalization of debt and fragmentation of international trade.
© CELAL GUNES / ANADOLU AGENCY / Anadolu Agency via AFP

Published on 04/11/2023 at 08:34

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LLaunching this Thursday of the spring meetings of the International Monetary Fund (IMF) and the World Bank (WB), following the publication of growth hopes on Tuesday, in a busy climate. The update of global economic data will mark the official start of the meetings at the headquarters of the two institutions in Washington.

Modest growth

Already, the Managing Director of the IMF, Kristalina Georgieva, has given an idea of ​​the trend. It forecasts global growth below 3%. In itself, nothing exceptional: during the last update, in January, the IMF was already forecasting growth at 2.9%, the Bank revealing itself to be even more pessimistic, according to its president, David Malpass. “Global growth is expected to be weak this year, at 2%,” Mr. Malpass said during a telephone press conference on Monday, an estimate slightly higher for the WB, however, since it forecast 1.7% for 2023. in January.

But this is likely to last, as the Fund will not allow global growth to exceed 3% on average annually by 2028, which, as Ms Georgieva reminded us, is “our weakest medium-term outlook since 1990”. At the end of March, the WB was even more negative, expecting annual global growth of 2.2% on average by 2030, the weakest decade for more than forty years.

A significant slowdown, which comes as the world faces a series of unprecedented challenges, between the consequences of global warming, the risks of fragmentation of world trade or a generalized debt crisis. READ ALSOAfrica: a more resilient economy than expected

​​​​​​​​​​​​​​Reform of international financial institutions called for

In order to face up to all these challenges, a reform of the international financial institutions (IFIs) is increasingly demanded by a certain number of States, the United States in particular having declared itself in this direction. In an interview with AFP, Treasury Secretary Janet Yellen also recalled that she “wants a reform of the missions” in particular of the World Bank and its subsidiaries, in order to add “resilience in the face of climate change, pandemics and conflicts among the core missions”. “We will carry out other reforms during the rest of the year, this will be part of the discussions at the next meetings of the IMF as well as at the annual meetings of the IMF and the WB in Morocco”, next October,​​​​​​​READ ALSOGlobal growth will be better than expected in 2023, according to the IMF

The predictable pattern

This development should start with the regional investment banks and the WB, under the direction of its next president, a priori the American candidate, Ajay Banga, the only candidate. It must intervene quickly, however: the ecological transition of emerging and low-income countries will require at least 1,000 billion dollars per year over the next few years, recalled Kristalina Georgieva, a sum that the IFIs currently do not have the means to distribute. . This will require that “our wealthiest members contribute to filling the gaps” in terms of fundraising, she insisted, while Mr. Banga wants to succeed in onboarding the sector private, once at the head of the BM.​​​​​​​READ ALSOAfrica: “How to finance infrastructure in a sustainable way?”

A series of expected announcements

These subjects will be among the main topics discussed during these spring meetings, and a first series of announcements to be made on this occasion, in particular concerning the borrowing capacities of the BM and its subsidiaries, assured AFP Ms Yellen. . This will not prevent the IFIs from stressing several other points of concern, starting with the risks of destabilization of the financial sector, if the fight once morest inflation pushes the central banks to raise their rates further. David Malpass thus recalled the “long-term risks caused by the gap between the zero-interest assets of the last decade and those of the last few months, following the rate hike”​​​ which will take time to “digest.”

Reducing inflation remains the priority, insisted Thursday Kristalina Georgieva, for whom central banks “must do more to guarantee financial stability”.

The other consequence of this rise in rates is that more and more low-income countries are approaching the risk of a debt crisis. This is already the case for 15% of them, recalled the Director General and 40% of others are close to this situation, not to mention emerging countries such as Tunisia, Pakistan or Ghana. . To deal with it, the IFIs will need more means, which their respective leaderships will try to remind the representatives of the States over the next few days, if they want to avoid an even heavier economic climate.​​​​​​​​​​​​​​​​​​​READ ALSO​​​​​​​“For the IMF, development and macroeconomic stability go hand in hand”​​​​​​​