WB, IMF kick off spring meetings

The spring meetings of the World Bank and International Monetary Fund (IMF) will focus on ambitious reform and fundraising agendas, but they will be overshadowed by concerns over high inflation, rising geopolitical tension, and financial stability. IMF managing director Kristalina Georgieva predicted that global growth would remain below 3% in 2023, making it the lowest medium-term prediction since the 1990s. Nearly 90% of advanced economies worldwide are expected to experience slowing growth this year, with India and China predicted to account for half of all growth. Low-income countries are expected to suffer a double shock from higher borrowing costs and a decline in demand for their exports, which could fuel poverty and hunger.

The IMF called for central banks to tackle high inflation through interest-rate hikes, although concerns have been raised that it could further inflame the banking sector. Wealthier countries have been asked to help plug a $1.6 billion hole in a concessional lending facility for low-income countries that was heavily used during the COVID-19 pandemic. Many low-income countries now face mounting debt burdens, partly due to the higher interest-rate environment, leading to capital outflows from the countries most in need of investment.

The World Bank is slightly raising its prediction for global growth in 2023 from 1.7 to 2% due to China’s economic reopening. Meanwhile, the IMF and World Bank have called for progress on stalled debt restructuring reforms. The World Bank estimates that war-torn Ukraine faces an additional $11 billion funding shortfall this year. The spring meetings will also provide an opportunity to make progress on an ambitious U.S.-backed agenda to reform the World Bank so that it is better prepared to tackle long-term issues such as climate change.

U.S. Treasury Secretary Janet Yellen expects member states to agree to update the World Bank’s mission statement to include building resilience against climate change, pandemics, and conflict and fragility. Yellen also anticipates an agreement to significantly stretch the World Bank’s financial capacity, which could result in an additional $50 billion in extra lending capacity over the next decade. The changes will likely fall to the bank’s next president to implement, with David Malpass due to step down early from a tenure marked by concerns over his position on climate change. He is widely expected to be replaced by the U.S.-backed former Mastercard CEO, Ajay Banga, who was the only person nominated for the position.