Last week´s Annual Meeting of the World Bank Group and the International Monetary Fund (IMF) that took place in Washington, D.C. were the first major gathering of policymakers after the UN Summit of the Future (SotF), and one of the few remaining milestones before the international community gathers for the Fourth International Conference on Financing for Development (FfD4) in Sevilla in summer 2025. However, neither the outcome of the SotF has been reflected in the international financial institutions‘ (IFIs) own outcome documents, nor have the Annual Meetings been used as a strategic step to prepare for FfD4. The need for better coordination of UN and IFI agendas is more visible than ever.

The IMF set the tone for the meetings by stating that the key challenge to be addressed, according to Managing Director Kristalina Georgieva, is the high debt, low growth environment. However, the IMF’s prescriptions may simply repeat old mistakes: The Chairs‘ Statement of the International Monetary and Financial Committee (again, the IMFC failed to adopt a Communiqué by consensus, due to the ongoing geopolitical tensions) states that „fiscal policy should pivot toward consolidation“ and „monetary policy must ensure inflation returns durably to target“. In other words, it proposes a global austerity programme. It remains the IMFC´s secret how a combination of fiscal cuts and monetary tightening will help to overcome the current low-growth trap. Where is growth supposed to come from? Certainly, this policy mix does not reflect the UN´s desire for a massive SDG stimulus to catch up with the Sustainable Development Goals. 

News on surcharges, no news on SDRs 

The UN’s Pact for the Future included a commitment for rich countries to rechannel at least half of the 2021 Special Drawing Rights (SDRs) allocation to countries in need, one of the few measurable and tangible targets in the Pact, and the only one on finance to have a numerical target. While the reaffirmation of this target in the IMFC outcome document could have put some flesh to the otherwise bare bones, this did not happen. The finance ministers meeting in Washington, D.C. could only agree to „continue to invite countries to explore voluntary channeling of SDRs, including through MDBs, where legally possible, while preserving their reserve asset status.“ Moreover, while the UN Pact mandates a comprehensive review of the debt architecture – led by the IMF, against the wishes of developing countries and independent experts who wanted to see the UN in the driver’s seat – there is no reference to this in the IMFC paper. By putting the IMF in the driver’s seat, the UN may have killed the review and any sound and fundamental reform of the debt architecture reform, for the time being. 

The most tangible outcome of the IMF‘s Annual Meetings is therefore the decision on surcharges, taken after a long review. The IMF's current practice is to impose penalty interest rates on countries that find themselves in high debt distress, and need larger loans from the IMF for longer periods of time. This has come under criticism recently, it adds injury to injury, as countries in fiscal distress have to find extra money to pay the surcharges. This policy would be unacceptable from an institution that is supposed to heal in times of crises. The IMF has now decided to reduce the surcharges. According to Georgieva, „the approved measures will lower IMF borrowing costs for members by 36 percent, or about US$1.2 billion annually. The expected number of countries subject to surcharges in fiscal year 2026 will fall from 20 to 13.” Affected countries and economic justice campaigners had called for a complete end to the IMF’s counter-cyclical and counter-productive policy of imposing surcharges. In this respect, the IMF decision is a step forward but only a partial victory. The Pact for the Future had welcomed the surcharges review, which was already underway during the negotiation of the Pact. 

When it comes to governance reform, the IMFC continues to kick the can down the road. The outcome document, „welcome[s] the Executive Board’s ongoing work to develop by June 2025 possible approaches as a guide for further quota realignment“ which implies that certainly nothing will happen before June 2025 and, as the weak wording suggests, it is not certain that anything will happen after June 2025 either. The third chair for African countries on the Executive Board was again welcomed, but it does not come with additional voting rights for African countries. As things stand, African countries collectively hold only 5 per cent of voting rights in the IMF, compared to 28 per cent in the UN General Assembly. Such differences in governance structures may help to explain the very different outcomes produced by the UN and the IFIs. 

World Bank fundraising versus IMF austerity

On the World Bank´s side of the meetings, there are less substantial results to report. For the World Bank Group, these Annual Meetings seem to have been primarily a fundraising event, with the aim of attracting pledges for the upcoming International Development Association (IDA) replenishment round, as well as for new instruments such as the Portfolio Guarantee and the Hybrid Capital Instrument. Some countries did indeed pledge to IDA, such as Spain (EUR 400 million), Denmark (DKK 3300 million) and Lithuania (EUR 9.48 million). In all three cases, this is a significant increase as compared to the last round. However, they have been relatively small contributors, their new pledges together account for just 1 percent of the World Bank’s USD 100 billion fundraising target for the new IDA round. 

Countries that have traditionally been major contributors to IDA – such as Germany, France and Sweden – have recently announced severe cuts to their development budgets, fully in line with the IMF´s recommendation to consolidate fiscal policies. As it is these development budgets that would have to feed IDA, it is unlikely that any top-ups will come from this side. If they came, they would lead to disproportionate budget cuts for UN agencies, bilateral aid programmes, or direct budget support to developing countries. What the USA will do in the area of development finance after the national elections in November remains a big question mark at this point. 

More coherence and better coordination needed

Both the failure to reflect key UN agreements and the lack of consistent and coherent approach to development finance even at the IMF and World Bank point to the need for new governance formats. The FfD4 conference in 2025 could be one such format. However, it remains to be seen to what extent it will attract finance ministry representation from major economies and whether the FfD4 outcome will be taken more seriously by the IFIs than the SotF outcome.  Moreover, the current frequency of FfD conferences, which has been about once in a decade since the process began in 2002, is not sufficient to provide continuous policy guidance to the different pillars of the global economic governance system.  A rapid operationalisation of Action 48 of the new UN Pact for the Future, the “biennial summit at the level of Heads of State and Government to strengthen existing and establish more systematic links and coordination between the United Nations and the international financial institutions”, could help to promote coherence and greater effectiveness in development finance.