ambassadors talk about reforming the financial institutions, any changes are up to their boards. Security Council, which has been debated for more than 40 years. ambassadors think it might be “marginally easier” and more helpful to developing countries to overhaul the IMF and World Bank than to reform the U.N. Guterres’ push for reforming the IMF and World Bank comes as the United Nations also faces demands for an overhaul of its structure, which still reflects the post-World War II global order. The bank’s development committee said in a March report that the bank “must evolve in response to the unprecedented confluence of global crises that has upended development progress and threatens people and the planet.” The World Bank Group said in January that its shareholders have initiated a process “to better address the scale of development.” It also increased interest-free lending fourfold to $24 billion and provided around $964 million in grants to 31 of its most vulnerable nations between April 20 so they could service their debts. In a written response to a query from the AP, the IMF said it has mounted “an unprecedented” response to the largest-ever request from countries for help dealing with recent shocks.Īfter the pandemic hit, the IMF approved $306 billion in financing for 96 countries, including below-market rate loans to 57 low-income countries. She added that a review of IMF quotas is a priority and is expected to be completed by Dec. IMF spokesperson Julie Kozack, asked about Guterres’ proposals at a June 8 news conference, said “I’m not in a position to comment on any of the specifics.” He also called for scaling up financing for economic development and tackling the impact of climate change. He called for major reforms that would strengthen the representation of developing countries on the boards of the IMF and World Bank, help countries restructure debts, change IMF quotas, and revamp the use of IMF funds. “This was done according to the rules,” Guterres said. During the pandemic, the wealthy Group of Seven nations, with a population of 772 million, received the equivalent of $280 billion from the IMF while the least developed countries, with a population of 1.1 billion, were allocated just over $8 billion. The IMF’s rules unfairly favor wealthy nations, he said. “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.” As a percentage of global GDP, that’s less than one-fifth of the 1960 funding level.Īt the same time, many developing countries are in a deep financial crisis, exacerbated by inflation, rising interest rates and a standstill in debt relief. He said the World Bank has $22 billion in paid capital, the money used for low-interest loans and grants for government development programs. Guterres said the institutions haven’t kept pace with global growth. The World Bank would provide financial assistance for postwar reconstruction and for building the economies of less developed countries. The IMF was to monitor exchange rates and lend reserve currencies to countries with balance of payment deficits. The IMF and what is now known as the World Bank Group were created at a conference in Bretton Woods, New Hampshire, in July 1944 to be key institutions of a postwar international monetary system. That “architecture” was established when many developing countries were still under colonial rule. Guterres said it’s time for the boards of the IMF and the World Bank to right what he called the historic wrongs and “bias and injustice built into the current international financial architecture.” “In fairness, the bank has been trying to update its funding procedures to address these concerns, but it has not gone far enough to satisfy countries in the Global South,” Gowan said. and its European allies dominating decision-making, leaving African countries with only “a sliver of voting rights.” Developing countries also complain that the bank’s lending rules are weighted against them, he said. director, said there is a lot of frustration with the U.S. Richard Gowan, the International Crisis Group’s U.N. president and the IMF managing director is a European Union national appointed by the European Commission.” Maurice Kugler, a professor of public policy at George Mason University, told The Associated Press that the institutions’ failure to help the neediest countries “reflects the persistence of a top-down approach in which the World Bank president is a U.S.
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