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Sitharaman Urges IMF, World Bank to stick to core competencies, warns against long-term donor dependency

Aseem — Wed, 23 Oct 2024 16:49:25 +0000

New Delhi: The International Monetary Fund (IMF) and the World Bank (WB) should not drift away from their core competencies, as their decisions impact the global monetary systems, finance minister Nirmala Sitharaman warned on Wednesday.

Speaking at a discussion on “Bretton Woods Institutions at 80: Priorities for the Next Decade,” held on the sidelines of the 2024 World Bank and IMF annual meeting in Washington, Sitharaman emphasized that multilateral institutions like the IMF should avoid venturing into areas beyond their core expertise.

“Your core business is what you have to focus on. I would think that is the most important thing because if you don’t address it, the global monetary systems are going to be adversely impacted,” she said.

Sitharaman stressed the need for careful evaluation of financial assistance, noting that resources are finite and long-term, cautioning that concessional finance and donor support should not become indefinite, as it could undermine the intended short-term objectives.

“The evaluation exercise, which is being carried on in the World Bank, (and the IMF) should be more transparent, I would think, and consultative, and it should reflect the interests of all countries who the Bretton Woods institutions are helping,” Sitharaman added.

Sitharaman called for a shift in thinking in the Bretton Woods institutions to meet the needs of the next decade.

“I think we need to have a road map for concrete reform-based steps that have to be initiated because we’ve started doing that during India’s presidency of (G20), after a lot of introspection, inclusion, and so on,” she added.

A key focus of the 2023 Indian G20 presidency was on reforming multilateral development banks (MDBs) to improve their contribution to global development financing.

An International Expert Group (IEG) headed by N.K. Singh, an economist and former bureaucrat, along with Lawrence Summers, former US treasury secretary, released a two-part report on strengthening MDBs which suggested various reforms

Among other things, the first part of the Singh-Summers report suggested an increase in MDBs’ annual spending by $3 trillion by 2030, including $1.8 trillion for additional climate action and $1.2 trillion for achieving other sustainable development goals (SDGs).

The second part of the report stated the need for MDBs to mobilize $240 billion in private capital by shifting from risk avoidance to informed risk-taking, apart from introducing new lending instruments like pooled portfolio guarantees and hybrid capital.

Following the release of the report in 2023, in a joint statement MDBs, including the World Bank, agreed on the need for transformative changes in the operating models and financing capabilities as suggested by the expert committee headed by Singh and Summers.

“We talked about tripling the size of the lending of the institutions by 2030. We talked about dramatic changes in the speed with which they came to conclusions and delivered resources. We spoke about different levels of cooperation with and engagement with the private sector that were qualitatively and not merely quantitatively different,” Summers, also part of the discussions, said.

“The (Bretton Woods) institutions have to say things and do things that capture the imagination of the world. There have been moments when they did that when they sketched visions and put many, many billions of dollars behind the transition,” he added.

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World Bank says 26 poorest nations in worst financial shape since 2006

suimt — Mon, 14 Oct 2024 04:44:55 +0000

The World Bank building is pictured in Washington, April 5, 2021.

WASHINGTON: The world’s 26 poorest countries, home to 40% of the most poverty-stricken people, are more in debt than at any time since 2006 and increasingly vulnerable to natural disasters and other shocks, a new World Bank report showed on Sunday.
The report finds that these economies are poorer today on average than they were on the eve of the Covid-19 pandemic, even as the rest of the world has largely recovered from Covid and resumed its growth trajectory.
Released a week before World Bank and International Monetary Fund annual meetings get underway in Washington, the report confirms a major setback to efforts to eradicate extreme poverty and underscores the World Bank’s efforts this year to raise $100 billion to replenish its financing fund for the world’s poorest countries, the International Development Association (IDA).
The 26 poorest economies studied, which have annual per-capita incomes of less than $1,145, are increasingly reliant on IDA grants and near-zero interest rate loans as market financing has largely dried up, the World Bank said. Their average debt-to-GDP ratio of 72% is at an 18-year high and half of the group are either in debt distress or at high risk of it.
Most of the countries in the study are in sub-Saharan Africa, from Ethiopia to Chad and Congo, but the list also includes Afghanistan and Yemen.
Two thirds of the 26 poorest countries are either in armed conflicts or have difficulty maintaining order because of institutional and social fragility, which inhibit foreign investment, and nearly all export commodities, exposing them to frequent boom-and-bust cycles, the report said.
“At a time when much of the world simply backed away from the poorest countries, IDA has been their lifeline,” World Bank chief economist Indermit Gill said in a statement. “Over the past five years, it has poured most of its financial resources into the 26 low-income economies, keeping them afloat through the historic setbacks they suffered.”
IDA normally is replenished every three years with contributions from World Bank shareholding countries. It raised a record $93 billion in 2021 and World Bank President Ajay Banga is aiming to exceed that with more than $100 billion in pledges by Dec. 6.
Natural disasters have also taken a greater toll on these countries over the past decade. Between 2011 and 2023, natural disasters were associated with average annual losses of 2% of GDP, five times the average among lower-middle-income countries, pointing to the need for much higher investment, the World Bank said.
The report also recommended that these economies, which have large informal sectors operating outside their tax systems, do more to help themselves. This includes improving tax collections by simplifying taxpayer registration and tax administration and improving the efficiency of public spending.

World Bank Expects 5.1% Growth For Nepal

suimt — Wed, 02 Oct 2024 15:14:00 +0000

New Delhi: The World Bank on Wednesday projected a growth of 5.1 per cent for Nepal in the current 2024-25 fiscal year starting in mid-July, below the Nepali government’s 6 per cent target. Growing tourist arrivals, more hydropower generation and expected growth in paddy production shall contribute more to Nepal’s gross domestic product, the bank said in its Nepal Development Update report.

The South Asian country achieved a growth of 3.9 per cent in 2023-24, noted the international financial institution. The bank is expecting Nepal’s private sector to contribute more to its growth by taking advantage of the central bank’s loosening of monetary policies and easing of regulatory requirements, Xinhua news agency reported.

It has projected Nepal’s economy to grow by 5.5 per cent in the next fiscal year. In its report released last week, the Asian Development Bank forecast a 4.9-percent growth for Nepal in 2024-25. “Maintaining growth momentum is key to Nepal’s development,” said David Sislen, the World Bank’s Country Director for the Maldives, Nepal and Sri Lanka.

“This requires continued reform in critical areas such as infrastructure, governance, human capital development and developing an environment which encourages and supports the private sector,” Sislen was quoted as saying in a statement.