UN steps up criticism of IMF and World Bank

UNITED NATIONS

From the ashes of World War II, three institutions were created as linchpins of a new global order. Now, in an unusual move, the top official in one — the secretary-general of the United Nations — is pressing for major changes in the other two.

Antonio Guterres says the International Monetary Fund has benefited rich countries instead of poor ones. And he describes the IMF and World Bank ’s response to the COVID-19 pandemic as a “glaring failure” that left dozens of countries deeply indebted.

Guterres’ criticism, in a recent paper, isn’t the first time he’s called for overhauling global financial institutions. But it is his most in-depth analysis of their problems, cast in light of their response to the pandemic, which he called a “stress test” for the organizations.

His comments were issued ahead of meetings called by French President Emmanuel Macron in Paris this week to address reforms of the multilateral development banks and other issues.

Guterres said it’s time for the boards of the IMF and the World Bank to right what he called the historic wrongs and “bias and injustice built into the current international financial architecture.”

Guterres also said the institutions haven’t kept pace with global growth.

He said the World Bank has $22 billion in paid capital, the money used for low-interest loans and grants for government development programs. As a percentage of global GDP, that’s less than one-fifth of the 1960 funding level.

Many developing countries are in a deep financial crisis, exacerbated by inflation, rising interest rates and a standstill in debt relief.

“Some governments are being forced to choose between making debt repayments or defaulting in order to pay public sector workers,” Guterres said, adding that “Africa now spends more on debt service costs than on health care.”

The IMF’s rules unfairly favor wealthy nations, he said.

During the pandemic, the wealthy Group of Seven nations, with a population of 772 million, received the equivalent of $280 billion from the IMF while the least developed countries, with a population of 1.1 billion, were allocated just over $8 billion.

“This was done according to the rules,” Guterres said. This is “morally wrong.”

He called for major reforms that would strengthen the representation of developing countries on the boards of the IMF and World Bank, help countries restructure debts, change IMF quotas, and revamp the use of IMF funds.

He also called for scaling up financing for economic development and tackling the impact of climate change.

Beyond the Paris meeting, the debate over IMF and World Bank reforms will continue in September at a summit of leaders of the Group of 20 in New Delhi, and at the annual gathering of world leaders at the United Nations.