NOTE: This guest post was written by Angelo Piro. Angelo is a student majoring in Diplomacy and International Relations and Economics at Seton Hall University. Angelo’s focus has been on the role of international organizations in development and good governance, recently studying the prevention of electoral violence from an international perspective. He is fluent in English and Spanish, and has a working knowledge of Russian. Angelo has interned with the office of Senator Kirsten Gillibrand (D-NY) and will be studying at Dubrovnik International University this coming semester. He writes for the Diplomatic Envoy.
Late last week, the ministers of finance, central bankers and economic advisors from 188 different nations met in Washington D.C. for an annual joint meeting of the World Bank and the International Monetary Fund under the umbrella of the Development Committee. While most of the attention was focused on the side meeting of the IMF, as they discussed the impending issues of Greek debt and potential further instability, many interesting things came out of the joint session of the two organizations beyond the original purpose of development discussions.
For most of the week, analyst had seen the meeting of the Development Committee as largely procedural, meant to be a lead-up to another meeting set to take place in June in Lima, Peru, and, in part, officials seemed to follow this. There was very little of substance said in the final communique of the group beyond the announcing of a new financing body for the Sustainable Development Goals, the Global Infrastructure Facility, reflecting the overall fluidity and unsubstantial structure of the SDGs just months before their mandate begins. One of the more concrete developments for the SDGs was the announcement of the initiative to achieve universal financial transaction accounts by 2020, which holds a unique potential for intersectional relationships between development organizations and the private sector. However, the body did produce a generally rosy outlook (WEO) on the future of development in the years to come, predicting growth in both developed and developing economies, born mostly of falling commodity prices. One spot of trouble did grow out of this report with predicted stagnation in Middle Income Countries, like China and Russia, both of which are sure to pursue monetary easing.
Of particular regional interest to the committee was the Middle East and North Africa region. In their final communique, the committee suggests investment and aid specifically targeting these regions to counterbalance rising insecurity and falling oil prices. In a surprising challenge to both the US and OPEC, the committee called for an end to oil subsidies to address this issue, an additional move towards the SDGs. This point will be especially interesting in light of rising European interest in stability in the region, both for security purposes and in the face of a rising refugee situation, which came to a head just days before with one of the largest trafficking accidents in the Mediterranean. In the weeks to come the world may well see greater involvement by the World Bank and IMF in order to engage in preventative strategies.
One of the main points of discussion for many meetings and workshops was the worldwide Ebola response. There was much criticism for the international aid and development community during the crisis, and this did not seem to go away in the proceedings in Washington, with many laying the blame at the feet of a lackluster response from the UN, with many pointing to how, within days, the issue shifted from being almost handled within some agencies to then required the military to be called in. The World Bank and IMF governors seemed to take the criticism well, suggesting in a final communique both the strengthening of local institutions, as well as the framework of a Pandemic Financing Facility to bring together rapid funding responses to future outbreaks. However, what was not addressed were certain underlying causes for the anemic response to the crisis, such as underfunded public institutions, which many blame on reform packages attached to structural readjustment loans given out by both the IMF and the World Bank.
Another major issue for the two organizations at this meeting was addressing the emergence of new development finance organizations, specifically the planned BRICS Development Bank and the Asian Infrastructure Investment Bank, which has gathered 56 member states. The tone of the committee seemed to echo the more diplomatic approach of IMF Director Christine Lagarde and World Bank Director Jim Yong Kim have taken in the past, addressing these two organizations as partners in cooperative projects rather than competitors for political real-estate. The members did draw a line in the sand for these organizations in terms of their standards, with US Treasury Secretary Jack Lew saying the AIIB can be complementary additions to existing architecture provided that they match existing standards. This challenge to the standards of these new development banks probably signals that neither the IMF nor the World Bank will undertake the reforms on voting and practice called for by some of the founders of these new banks, like China.
In all, what was seen at this meeting points to a very important year for both organizations. Facing a new mandate under the SDGs, the IMF and the World Bank will need to develop many new strategies, especially in the face of new international volatility, shrinking budgets and growing competition among development agencies.