IMF, World Bank Spring Meetings: Trade, Development Financing Top Packed Agenda
Trade, investment, and development financing dominated the Spring Meetings of the International Monetary Fund (IMF) and World Bank Group (WBG) last week, as finance and development officials debated over how to ensure improving economic growth forecasts are not short-lived.
The 16-22 April gathering, held in Washington, featured meetings of the two steering bodies of these institutions: the International Monetary and Financial Committee (IMFC) and the Development Committee. The former is specific to the IMF, while the latter is a joint IMF-WBG committee. The meetings traditionally provide officials the opportunity to discuss the direction of both organisations’ work, as well as various topics of international relevance, such as global economic and development trends.
Heading into this year’s Spring Meetings, growth prospects have shown some promise. The IMF’s latest economic forecasts suggest that global growth will hit 3.9 percent both this year and next, a slight uptick from the 3.8 percent seen last year.
IMF report warns on trade tensions
The estimates, part of the Fund’s semi-annual World Economic Outlook (WEO), came with the qualifier that this pickup in pace would not be permanent, given certain risk factors such as burgeoning levels of public debt and a recent increase in trade restrictions by some major players.
The WEO also referred specifically to some of the geopolitical forces that have amplified public debate on the state of the global economy, along with what it means for people’s lives.
“Anxiety about technological change and globalisation is on the rise and, when combined with wider trade imbalances, could foster a shift toward inward-looking policies, disrupting trade and investment,” the IMF report warned.
“Recent import restrictions announced by the United States, announced retaliatory actions by China, and potential retaliation by other countries raise concerns in this regard and threaten to damage global and domestic activity and sentiment,” the report continued, adding that the US’ recent overhaul of the tax code could also “exacerbate income polarisation” in one of the world’s largest economies.
High on the meeting’s agenda were recent trade policy actions that economists and officials alike say could have implications for the medium-term future of both global and national-level economic growth.
“That major economies are flirting with a trade war at a time of widespread economic expansion may seem paradoxical – especially when the expansion is so reliant on investment and trade,” said Maurice Obstfeld, IMF Economic Counsellor and Director of Research, in a blog post about the latest WEO forecasts.
He added, however, that ongoing efforts to craft new regional trade deals could, depending on their approach and content, help shore up the multilateral trading system.
“There is room to strengthen the current system rather than risk bilateral fragmentation of international trade. Plurilateral arrangements, if consistent with multilateral rules, can also provide a useful springboard to more open trade,” Obstfeld added, referring specifically to the African Continental Free Trade Area (AfCFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in this respect.
IMFC: “window of opportunity” for policy reforms
The IMFC’s closing communiqué nodded to the current growth landscape, including the prospect of “downside” risks and growing tensions on trade. They also noted that upcoming “demographic headwinds” could complicate longer-term efforts at better levels of inclusive growth.
Officials also said that countries should use the current “window of opportunity” to take on key policy reforms, and pledged that they would “continue to use all policy tools to achieve strong, sustainable, balanced, inclusive, and job-rich growth.”
On trade, they made a specific reference to the leaders’ communiqué from last year’s G20 summit in Hamburg, Germany, with its pledges to maintain open markets, tackle protectionism and “unfair practices,” and keep in mind “reciprocal and mutually advantageous trade and investment frameworks.” (See Bridges Weekly, 13 July 2017)
They also referred to the value of continued “dialogue and actions” and noted that countries are “working to strengthen the contribution of trade to our economies,” using language that has become more common in ministerial statements on trade over the past year in different forums.
Financing for development
Another hot-button issue for last week’s Spring Meetings was development financing, which was an issue raised on multiple fronts.
Notably, the World Bank Group secured a US$13 billion paid-in capital increase, split between the WBG’s International Bank for Reconstruction and Development (IBRD), which works on projects geared towards poverty reduction and addressing other challenges to sustainable growth efforts, and its International Finance Corporation (IFC), which focuses on the private sector in developing economies.
“This is a transformative package, comprising fundamental institutional and financial reforms,” the Development Committee said in its closing communiqué. The financial package is included in the “Sustainable Financing for Sustainable Development Report.”
The Development Committee also noted the World Bank’s efforts at supporting the achievement of the Sustainable Development Goals (SDGs) and Agenda 2030 for Sustainable Development, along with the Bank’s own “twin goals” adopted in 2013. These aim to eradicate extreme poverty by 2030, as well as to improve incomes and living standards for the world’s poorest. The latter goal is often referred to simply as “shared prosperity.”
World Bank President Jim Yong Kim noted that this capital increase will be key for the institution to “mobilise additional finance for development to meet the aspirations of the people we serve.”
“Our shareholders have asked the Bank Group to step up our leadership role in addressing the multiple overlapping challenges of our time, and this capital package allows for greater responsiveness to risks to global stability and security, particularly in poorer countries and fragile states,” he added.
In other development financing news, a new initiative dedicated to supporting female entrepreneurs saw high-profile support from various donor governments last week. The Women Entrepreneurs Finance Initiative, or We-Fi, also dates back to last year’s G20 leaders’ summit, and is currently housed at the World Bank.
According to the World Bank, the initiative already has pledges of US$340 million from donor governments, and is now slated to mobilise US$1.6 billion to support projects that will make it easier for women leading small and medium-sized companies to get the necessary financial support to thrive and better engage in markets.
The IMFC and Development Committee will convene again during the IMF-WBG Annual Meetings, slated for October in Bali, Indonesia.