Last week’s turmoil in the global bond markets will be playing on the minds of finance ministers and central bank governors when they gather in Marrakech this week for the annual meetings of the International Monetary Fund and the World Bank.
After the triple shocks of the Covid pandemic, the war in Ukraine and the surge in inflation, the mood may be less febrile than it was a year ago, but few if any of those travelling to Morocco – which suffered a devastating earthquake last month – would dare say that the crisis era is over. Most will be wondering what might go wrong next.
The list of possible flashpoints is long: a recession as the sharp increase in interest rates over the past two years bites; a financial crash as investor confidence is punctured; a developing-country debt crisis; a catastrophic climate event; an escalation of the war.
It will be a big meeting for the leaders of the IMF and World Bank – the two multilateral institutions that emerged from the 1944 Bretton Woods conference. Kristalina Georgieva, the managing director of the IMF, wants to see inflation tamed without triggering a recession, an acceleration of the green transition, a replenishment of her institution’s coffers, an agreement for rich countries to provide cash for zero-interest loans to low-income nations, and faster progress in debt relief.
It is quite a wishlist, particularly given the damage the pandemic and its aftermath have caused to the public finances in the developed west, and the tension – if not outright hostility – that exists between many of the world’s biggest economies. As Georgieva told the Guardian last week, Russia’s invasion of Ukraine has added to the sense of fragmentation. The days when globalisation was seen as an unstoppable force have come to an end, but the need for multilateral cooperation is as acute as it has ever been.
The World Bank has had a lower profile than the IMF in recent years, but will also come under the spotlight this week when its new president, Ajay Banga, delivers his mission statement for the organisation together with plans to increase its lending capacity.
Banga says the dual goal of the bank should be the eradication of poverty on a livable planet, but there is plenty to do before either objective is met. As the bank itself said last week, Africa faces a lost decade of weak growth and rising instability, while the United Nations has estimated that developing countries will need $2tn a year until 2030 to cope with climate breakdown. That will require a stepping-up of developed-country assistance, substantially more concessional lending from the World Bank, and a massive increase in private investment.
David Malpass, Banga’s immediate predecessor, was pushed out for his lack of ambition when it came to sweating the bank’s balance sheet to provide more climate finance, and the new president is already coming under pressure to deliver.
Romilly Greenhill, UK director for lobbying organisation The One Campaign, said: “We are starting to see a welcome increase in available finance for vulnerable countries from global institutions like the World Bank and other multilateral development banks. But this still isn’t happening at anything like the speed or scale needed to tackle the generational challenges staring us in the face.”
From a parochial British perspective, this year’s meeting will be hard pressed to match last year’s gathering in Washington for drama. Nothing is ever certain, but it is a reasonable bet that Rishi Sunak will not do to Jeremy Hunt what Liz Truss did to Kwasi Kwarteng and summon him home from the IMF meeting to be sacked. But while some of the UK’s problems have eased over the past 12 months, the challenges for the IMF, the World Bank and the global economy remain both numerous and pressing.