Debuts and pressing economic challenges on tap at IMF/World Bank

Slowing global economic growth. Trade tensions. Rising inequality. A planet in peril. These challenges and some notable debuts will be on the agenda at this week’s joint gathering of the International Monetary Fund (IMF) and World Bank in Washington. 

The semiannual event attracts power brokers, finance ministers, big-money luminaries, central bankers and media from around the world.

But the institutions – which both mark their 75th anniversaries this year – are also attracting critics who question their capacity to redress the global economy’s most pressing problems.

The debuts

Tuesday, former Wall Street executive and newly installed World Bank Group President David Malpass will start his five-year term. The sole candidate for the job, he was nominated by President Donald Trump in February and unanimously selected by the bank’s executive board on Friday. 

Malpass’s nomination to lead the development lender initially raised eyebrows. He’s expressed doubts in the past over multilateral cooperation and criticised the World Bank for continuing to lend to China even as the country has grown wealthier.

President Trump’s climate scepticism also blatantly contradicts the bank’s position on climate change, which it characterises as “an acute threat” to global development and its efforts to end poverty.

Tuesday also will see newly installed IMF Chief Economist Gita Gopinath present the first World Economic Outlook (WEO) produced on her watch.

Appointed by IMF Managing Director Christine Lagarde last fall, Gopinath is the first woman to lead the fund’s research department in its seven-decade history.


”We expect continuity from previous WEOs,” Torsten Slok, chief economist with Deutsche Bank, told Al Jazeera. “The [analytical] chapters are always interesting because they are always very well done, and on top of that, they reveal what policymakers are thinking about.”

Last week, Lagarde indicated the IMF’s forecasts for global growth would likely be further revised downward, telling an audience at the US Chamber of Commerce in Washington that the global economy is in “a delicate moment”. 

Though Lagarde said growth could improve in the second half of this year and early 2020, she warned that there are “clear downside risks” including the United Kingdom’s proposed exit from the European Union, high levels of global debt, “jittery” financial markets and trade tensions.

The recent slowdown in global trade is already spreading pain to European and most Asian economies.

“The ongoing trade war is a very important topic not only because of its impact on the G7 countries but also because trade and trade policy is very important for emerging markets,” said Slok.

Last Wednesday, the IMF released research forecasting the possible consequences of an escalation in the ongoing US-China tit-for-tat trade dispute. The IMF warned that if the US and China were to increase tariffs by 25 percent on all goods flowing between the two countries, both economies would suffer “sizeable” losses in manufacturing.

Sustainability on the agenda

This week’s meetings in Washington will spotlight sustainability, development and the roles of both citizens and institutions in making progress towards the United Nations Sustainable Development Goals (SDGs) – a global blueprint to work towards a more secure, equitable and sustainable future. 

“Sustainability has come more to the forefront of conversations surrounding the IMF,” Rachel Ziemba, an adjunct senior fellow with the Center for a New American Security, told Al Jazeera.

“This year, one key question will be whether or not the risks surrounding sustainability have been taken into account for future planning – and for investors, if it’s being priced into any future forecasting,” she added.

But some believe the IMF and World Bank are taking the wrong approach to meet these challenges.

“The IMF in recent years has an exceptionally poor record, thanks in good part to its disastrous engagement with Greece,” said James Galbraith, a professor of economics at the University of Texas.

During the global financial crisis, the IMF and the eurozone required Greece to raise taxes and cut spending in exchange for a bailout package. The painful austerity measures devastated the livelihoods of millions of ordinary Greeks and hit young workers and pensioners especially hard. 

The World Bank has also come under fire for its “Maximizing Finance for Development” agenda, which helps private sector capital tap into developing markets. 

Last year, a group of 120 scholars signed an open letter criticising the World Bank’s approach, arguing that it promotes the privatisation of public services and could usher in “permanent austerity along the lines of ‘privatising gains, socialising losses'”.

“What the World Bank is encouraging countries to do is to transform their financial systems in a way that they can welcome global institutional investors,” said Daniela Gabor, a professor of economics and macrofinance  at UWE Bristol and the lead signatory on the letter.

Gabor argues that the World Bank should help countries create an institutional infrastructure that orients the entire economy towards greener, more sustainable development.

“The World Bank has not yet confronted the very serious question that you need structural change in the economies of the poorer countries that you’re supporting in theory in order to achieve the SDGs,” Gabor said.