SUMMER 2021 obsBRETTONe WOODSrver A quarterly critical review of developments at the World Bank and IMF

FINANCE analysis In this issue

3 Economic stability Democratic deficit: the IMF, , and central with social instability: bank independence The IMF and austerity protests in Colombia by Mario Alejandro Valencia

4 World Bank must place economic transformation at heart of IDA20 replenishment by Kwasi Adu-Amankwah

5 Latest IMF gender research: Making the economy work for women, or women work for the economy?

8 World Bank’s new Climate Change Action Plan fails to deliver much- needed transformative agenda

a board which set the bank’s monetary A January statement from academics Ecuador approves law granting central policy and controlled its budget. The affiliated with Progressive International, bank independence following IMF law – the decrees of which are now being a global mobilisation campaign, called demands implemented – will ban the BCE from it an “economic absurdity” to limit the financing government spending, buying government’s ability “to use their full range independence has become a staple IMF policy and a major way in public sector debt, and investing in public or of policy tools”, adding that the law would which it shapes global private businesses. facilitate “the outflow of capital from Ecuadorian private financial institutions.” Civil society organisations and academics The IMF has emphasised the central bank Jameson Mencías, an Ecuadorian economist raise concerns over the policy in Ecuador reform, designating it as one of only two with the Latin American Network for and globally prior actions, a type of condition required Economic and Social Justice (Latindadd), for loan disbursement. The legislation commented that the reforms proposed in was prepared with IMF technical support this law, “point to the protection of private In April the Ecuadorian National Assembly claiming it will align the BCE “with banks and the liberalisation of financial approved a law greatly increasing the best practice in areas of governance, flows, clearly confusing the defence of independence of Ecuador’s central bank. independence, objectives, transparency, and the monetary system with defence of the The move, which had been a point of controls.” Central bank independence (CBI) banking system.” acute tension during Ecuador’s presidential had previously been part of the portfolio of election earlier this year, was required by reforms proposed by the IMF for Ecuador’s It is not just in Ecuador where the IMF has the IMF in order for Ecuador to access a $6.5 $4.2 billion loan in 2019, but was left been pushing aggressively for CBI. Over billion loan agreed in September 2020. unimplemented as the government was recent months, it has featured prominently met with widespread protest and political in IMF loan discussions with Ukraine, The “law for the defence of dollarisation” opposition (see Observer Winter 2019). the Democratic Republic of Congo, and establishes legal and operational autonomy Mauritius. Over the last two decades, CBI has for the Central Bank of Ecuador (BCE), International and national civil society become a staple IMF policy and a major way removing it from the direct authority of the organisations (CSOs) and academics have in which it shapes global monetary policy. finance minister, who previously headed responded with anger to the new law.

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The IMF and the rise of central bank authority over central banks does not make sky-high by the pandemic – but only in the independence them free of politics, only free of democratic advanced economies. In the developed accountability. world, they realise fully that monetary Central banks are the institutions responsible policy has to be closely aligned with fiscal for managing a nation’s currency and In a 2020 working paper, the Fund asked policy, and both have to be expansionary monetary policy – i.e. the supply of money if central banks should consider inequality to support the economic recovery and into an economy and the interest rates when taking decisions. Their inevitable protect citizens during this major crisis. But payable on borrowing. Contrary to popular ambiguity in answering such questions no such realisation is evident for developing opinion, their independence is a relatively points to the core fallacy of the argument countries, where the clearly wrong policies recent policy practice, first emerging in the that central banks can be ‘politics-free’. of fiscal austerity and so-called central 1970s. Over the last 25 years there has Even establishment voices such as Foreign bank independence are being thrust on to been a “global rise” in CBI: academics note Policy now acknowledge that the “illusion” populations already hugely battered by that in 2015, 81 per cent of countries had a that monetary policy is “technical, not the pandemic.” If countries like Ecuador CBI index score over 0.5 (on a scale of 0 to political” has been completely ended by the are to respond effectively to the crisis they 1, where 1 represents full independence), pandemic response, which has shown that need more, not fewer tools to support compared to 12 per cent in 1980. central banks “hold the reigns of the global development. economy”. As widely acknowledged, the IMF has Δbit.ly/CBindependence played a “vital role” in this global policy It has also been argued that CBI enhances transition. Initially not a major feature of the power of the Fund, at the expense of IMF conditionality or technical assistance, national parliaments. Economist Bernhard since the 1990s the Fund has increasingly Reinsberg observes that, by limiting policy Photo: IMF called for various policies to boost CBI. options, “strengthening CBI helps the The argument in favour of CBI is simple: IMF in nudging a government into painful it controls inflation by taking austerity and reform measures, ultimately management out of the hands of short- leading to greater program compliance.” sighted politicians. As IMF staff write, “if This reduced policy space makes countries politicians manipulate monetary policy to less developmental. According to Daniel bolster their pre-election popularity, their Munevar with Belgium-based civil society prioritization of short-term political gains network Eurodad, “In practice, CBI becomes could invite long-term pain for the economy, another binding constraint on the capacity in the form of higher inflation or even hyper- of countries to use available policy space inflation.” to pursue developmental policies.” Importantly, these curtailed tools – such This “political interference” – as the IMF as boosting employment via interest The rise of IMF technical assistance on central bank calls it – involves governments pushing rate adjustment or financing domestic independence. central banks to lower interest rates. This spending – were essential parts of the policy makes it cheaper for businesses to borrow programmes that today’s rich countries used and expand, thereby creating employment. as part of their development policies. This boosts governments’ popularity, but at the possible cost of inflation running out The wave of CBI of recent decades has of control. The ‘interference’ also involves also had broader impacts. It has been governments turning to central banks to shown that the rise of CBI directly leads fund their public spending, thereby raising to financial deregulation, as governments public debt to unsustainable levels. seek alternative policy tools to stimulate their economies. This has made them more But despite its presentation as best practice, open to financial shocks and increases the process of increased CBI is highly the influence of private financial actors contentious and can in fact be detrimental over government policy. Relatedly, a to development. January World Bank working paper argues Undemocratic, undevelopmental and that CBI increases inequality by reducing unequal fiscal policy space (making redistribution harder), increasing financialisation (which Critics have argued that taking monetary benefits asset holders), and weakening the policy out of the hands of elected politicians bargaining power of workers. is undemocratic. As economist and former Minister of Finance for Greece Yanis The IMF must critically reassess its central Varoufakis argues, “so-called independent bank policies if countries are to be given central banks are independent only of their the space to prioritise the wellbeing of For additional online content for parliaments and the people and, thus, their citizenry over the interests of global this issue of the Observer, see fully in the pockets of the financiers and finance. The pandemic has only exacerbated brettonwoodsproject.org/observer the broader oligarchy.” While IMF staff this tension. Economist Jayati Ghosh have commented that CBI is aimed at comments that, “All the myths of central Para la versión en español, visite: “politics-free monetary policy decisions”, as bank independence have been blown brettonwoodsproject.org/es/observador Varoufakis suggests, removing government

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FINANCE analysis

Economic stability with social instability: The IMF and austerity protests in Colombia Guest analysis by Mario Alejandro Valencia, Latindadd

ministers, and allegations of human rights If there is no change in the productive Massive protests in Colombia following abuses by the state. structure, with an economy able to produce IMF proposed tax reform goods and services with medium- and high- The origins of the discontent technological transformation, as opposed Expected state spending cuts make to the extraction of natural resources, it possibility of a strong recovery from the The debt crisis in Latin America in the 1980s pandemic unlikely led to a wave of interventions from the IMF, will be impossible to correct Colombia’s which granted loans in exchange for fiscal fundamental economic problems. austerity measures (see Observer Summer The market, despite its supposed ability to Colombia, according to the World Bank, is one 2019). The relative macroeconomic stability efficiently channel investment, was unable of the five most unequal countries globally. and control of inflation has had a high to direct the necessary resources towards This is partly the result of its regressive tax social cost, including increased inequality the health, education, scientific research, structure, which, after 15 reforms in the (see Observer Summer 2021), leading to infrastructure, and access to credit needs past 30 years, has evolved to increase the massive social protests across Colombia of the economy, which in reality required a prevalence of indirect taxes such as the since 2019. Whilst the loans flowed and the large level of state intervention. The solution regressive value-added tax (VAT) and reduce fiscal adjustments advanced, the Colombian for Colombia is to access resources with low direct taxes, such as those on businesses. state did not take the political decision to interest rates or finance without debt, such Each reform has introduced new carve-outs correct the systematic deficits of the current as the IMF’s Special Drawing Rights (SDRs) which total more than 230 different tax account – deficits caused by unbalanced (see Observer Spring 2021). This would exemptions, accounting for an annual fiscal globalisation supported by IMF policies. loss of approximately $4.5 billion. allow it to invest in vital sectors such as Colombia exports raw materials and natural agriculture and manufacturing that are able The country has entered into an austerity resources and imports processed goods. to generate profits and employment that trap, following the demands made by the Unsurprisingly, the country does not earn reduce the country’s commercial deficit. IMF over multiple structural adjustment sufficient dollars on these exports to pay The country can also consider the programmes in exchange for loans to for its imports and, on top of that, with the restructuring of its debt or utilising its resolve its balance of payment problems. ambition of attracting foreign investment, foreign reserves to support government The latest loan instalment of $5.4 Colombia has eroded its tax base. As such, expenditure. In this way, it would not billion took place in December 2020, what has taken priority is the growing be necessary in the future to take up and was followed in February 2021 by informality of business and labour, which the non-concessional IMF loans or their recommendations from the IMF to further impedes the population from obtaining policy recommendations. It would also be increase VAT and broaden the base on sufficient income for a better quality of life. personal income tax. possible to strengthen Colombia’s revenue A failed model for recovery structure by stopping capital flight to global In April, the government of President financial centres. Only a fiscal, business, Iván Duque presented the IMF tax The pandemic worsened the situation and and productivity reform of this magnitude recommendation, which aimed to collect Duque’s government was unable to inject will lead to the return of social stability in some $7.5 billion in additional revenue per into the economy resources to allow for a the country and enable it to pursue a just annum, to Congress. This revenue would be better health response and income support recovery from the pandemic. collected principally from the middle class, during the national lockdown. On the which has already been heavily hit by recent contrary, the state returned to the classic Δbit.ly/Colombiaanalysis low economic growth, compounded by the and failed approach of loans in exchange pandemic. According to the government, the for austerity: The Minister of Finance José purpose of the tax reform is to finance social Manuel Restrepo has revealed that he programmes for the poorest in Colombia. But expects a reduction in state spending of 7 Photo: Remux a closer look at the reform reveals that 58 per per cent of GDP from 2021 to 2026. cent of the new resources will be dedicated to How could one expect an economic recovery paying off Colombia’s national debt. without the force of sufficient public In response to the proposed tax reform, spending to kick-start the machinery of the a national strike was called on 28 April by economy? The response is simple: There trade unions and social organisations. The will not be reactivation because there has strike has been ongoing for over sixty days, not been a single reform of the productive with large protests across the country’s apparatus or of business policy. The highest major cities. It has led to the withdrawal of aspiration can only be a return to the the tax reform bill, the resignation of various unacceptable status quo of 2019. Colombians protestors march against tax reform.

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FINANCE commentary

World Bank must place economic transformation at heart of IDA20 replenishment Guest comment by Kwasi Adu-Amankwah, General Secretary, ITUC-Africa

the list of policy themes for IDA20. Real and Deliberate efforts are needed to promote IDA20 must change policy framework to urgent action is needed, as described in the worker’s rights, which are essential not only support economic transformation ITUC’s detailed proposal for the World Bank for workers, but also for the economy. on job creation, social protection, debt relief, Social Protection Fund is required to meet and labour standards. IDA-eligible countries need assistance to current and future needs of IDA countries build or rebuild social protection systems that As the United Nations Conference on can offer tangible protection to workers and Labour movements demand substantive Trade and Development noted in its families in times of need. Covid-19 has shown consultations on all IDA20 and future IDA processes March 2021 report, before the pandemic, the importance of installing such systems the policy matrix of austerity (fiscal ahead of time. The World Bank is uniquely consolidation), inflation targeting, trade placed to help establish a Global Social The African Regional Organisation of the and investment liberalisation, innovative Protection Fund that supports and protects International Trade Union Confederation finance (financialisation) and labour all of humanity during crises. The situation (ITUC-Africa) welcomes the early market flexibility have only produced where rich countries bailed out and vaccinated replenishment of the World Bank’s stark inequalities, arrested development, their citizens and poor countries looked on International Development Association economic and financial fragility, and helplessly while their citizens suffered is a blot (IDA), the World Bank’s low-income country unsustainable exploitation of natural on the conscience of humanity and detracts arm. The Covid-19 pandemic has sapped the resources. More than ever, countries in significantly from notions of human progress. resources of countries around the world, with the Global South need a break from these Only through the establishment of such a fund the poorest countries worst affected. They counterproductive policies. Tackling the will low-income countries be able to avoid face economic devastation and staggering climate emergency, an important theme damaging lockdowns and prolonged crises debt which threatens to reverse what little for IDA20, requires a movement away from driven by the unequal access to vaccines and progress they have made over the last dependence on natural resources. Trade related medical equipment (see Observer decade. These countries urgently need help and investment liberalisation foisted on Spring 2021). in the form of concessional loans and grants. poor countries has limited precedent in the For most poor countries, current levels of history of countries that have successfully IDA processes must ensure adequate civil public debt do not allow them to go to the undergone economic transformation. It is society consultations commercial capital market for loans. We the reason African countries deindustrialised Only by benefiting from the experience therefore consider the early replenishment in the 1980s and 1990s and have remained and expertise of civil society can IDA truly of IDA20 concessional and grant-making in the throes of balance of payment meet its stated development objectives. We resources essential to support recovery from challenges ever since. therefore demand qualitative consultations the pandemic and to begin to address pre- on the IDA20 replenishment and all future Economic transformation fueled primarily by existing developmental challenges faced by IDA processes. After many years of organising the extraction and export of commodities low-income countries. workers in either public bureaucracies or that leads to deindustrialisation is a the private sector and in engaging in the ITUC-Africa agrees that the proposed perverse transformation. It creates harmful development policy processes, ITUC-Africa, IDA20 special themes of climate change, agricultural policies which impoverish and the union movement in Africa more fragility, conflict and violence, gender, jobs farmers and force them to flee from the broadly, retain potent knowledge needed and economic transformation, and human countryside. That transformation has only to strengthen development processes. The capital, are issues of special significance in created low productivity, indecent jobs and current lack of consultation with civil society Africa where the majority of IDA-eligible increased informality. Developing countries and union movements makes it highly unlikely countries are located. need real transformation. IDA20 must that the changes required to meet IDA’s support policies that enable countries to Economic transformation requires a new overall objectives will be made in the IDA20 improve agricultural capacity while building policy framework replenishment process. The system in which productive capacity in light manufacturing. limited civil society ‘consultations’ take place Whilst we agree on the broad policy This is the only sustainable way to create only after IDA’s policy packages have been themes underlying IDA20, several concerns more and better jobs. largely agreed must be immediately changed. remain. Principal among these is the policy Social protection: Essential for workers The IDA20 replenishment process must context in which IDA funding occurs. and the economy be a starting point for IDA to become truly In our view the policy mix proposed by responsive to the needs of the communities the World Bank to date does nothing to In the context of the Covid-19 and jobs crises, and countries it is mandated to support. tackle underdevelopment, and in fact IDA20 offers an opportunity for the Bank to institutionalises it. It is not enough for ‘jobs work with stakeholders to reverse past policies Δbit.ly/IDA20comment and economic transformation’ to appear on that dismantled worker protection schemes.

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GENDER analysis

Latest IMF gender research: Making the economy work for women, or women work for the economy?

equality, these latest studies come after as “promoting” gender equality, failing to New IMF research moves away from the IMF opened the door to examining acknowledge a central feminist critique that macroeconomic drivers of gender the harmful gendered impacts of its own the bulk of the IMF’s conventional policy inequality macroeconomic policy advice in 2018, advice undermines gender equality and when it published guidance for staff on women’s rights, particularly in the Global Understanding human costs of fiscal consolidation more urgent than ever in operationalising gender issues at country- South (see BWP, Positioning women’s rights pandemic recovery level. That guidance recognised what has and gender equality in the macroeconomic long been established by the women’s rights policy environment). movement, that “some macroeconomic In March, the IMF published a summary policies recommended by IMF staff,” This approach is tone deaf to the long- of some of its most recent gender impact such as budget cuts on subsidies, social standing work of many women’s rights assessment work, which was part of a wider programmes and the public sector wage organisations and feminist economists. In a IMF bilateral UK-financed research project. bill, “could exacerbate gender inequality.” 2019 letter to IMF Managing Director Kristalina The summary paper signalled a potential The note went on to direct staff to consider Georgieva, 67 civil society organisations shift in the IMF’s attention away from the an alternative policy mix in these instances, outlined that the impact of the IMF on macroeconomic drivers of gender inequality laying out a potential path for IMF staff to gender equality lies first and foremost in its and towards further instrumentalising move away from some of the most harmful historic and continued adherence to “fiscal women for economic growth. As the IMF’s policy advice to women’s rights. consolidation, regressive taxation and labour new senior gender advisor, Ratna Sahay, flexibilisation, [which] have exacerbated the who was appointed to the newly created To help staff determine which policies feminisation of poverty [and pushed] women position in April, takes up her post, women’s might exacerbate gender inequality, the into informal, low-waged work, increased rights organisations will be watching to IMF developed a modelling framework their unpaid care burdens, and negatively see whether the IMF will confront head-on to analyse impacts of macroeconomic impacted on their access to education, health the ways in which its core policy advice reforms on gender inequality. The first and social protection…particularly in the continues to undermine women’s rights. iteration of this modelling work was Global South.” These groups have consistently conducted in Argentina in 2017, where the called for gender impact assessments of The paper described a number of IMF IMF examined the impacts of a tax cut on macroeconomic reforms to be systematically country studies conducted between 2018 female labour force participation and the conducted across the IMF’s work, in alignment and 2020 as part of its surveillance work gender pay gap. While the IMF’s approach with the UN Guiding Principles on human that aimed to measure the economic gains remained unsystematic and narrow, the rights impact assessments of economic of closing certain gender gaps. In Sierra understanding that conventional IMF reform programmes adopted by the UN Leone, for instance, the IMF found that macroeconomic policy advice can impact Human Rights Council in 2019 (see Observer closing gender gaps in education could men and women differently, and that Spring 2019). “boost GDP by an impressive…40 percent.” this difference should be measured and In Senegal, the IMF ran a simulation in which taken into account by macroeconomic Human costs of fiscal consolidation higher the enforcement of anti-discrimination policymakers, was a welcome development than ever policies increased GDP by 5 per cent. Similar (see BWP, The IMF and Gender Equality: Focusing on the human costs of fiscal exercises were conducted in Iran, Lao PDR Operationalising Change). This work was consolidation is particularly urgent in the and Nigeria. This research focus has also cited in the 2018 IMF gender note as an context of the extremely constrained fiscal been replicated at the World Bank, which example of how to consider differential environment of the Covid-19 recovery in the produced a 2019 study of Niger outlining gendered impacts of a conventional Global South. The IMF’s member countries the “economic costs” of gender inequality, macroeconomic policy reform. require robust analysis and all the policy including consideration of women’s fertility options on the table to carefully weigh The subsequent regression of the Fund’s rates, which, if reduced, the Bank found, what the IMF has described as “difficult gender impact assessment work away from would have “budget savings”. In concluding trade-offs”. In this context, the IMF must examining the implications of the IMF’s from this research that these gender prioritise understanding the implications of conventional macroeconomic policy advice gaps should – somehow – be closed, the its continued restrictive fiscal policy advice, towards closing gender gaps is therefore IMF and World Bank ignore the structural which is projected to be implemented in concerning. It negates the ability of this macroeconomic barriers to achieving gender 154 countries this year, affecting 6.6 billion impact assessment work to reveal how equality, which include their own continued people by next year, according to the latest proposed IMF policy reforms could exacerbate adherence to fiscally restrictive policy advice global austerity report by Ortiz and Cummins gender inequality and thereby fails to offer and loan conditions in the Global South. (see Observer Autumn 2020). an evidence-based avenue for IMF staff to New research direction negates move away from some of its most harmful While the IMF could, in theory, commit to opportunity for transformative change policy advice. Even when the IMF did consider examining both the gendered impacts of While the IMF’s gender work has, since its the gendered implications of fiscal policy in a macroeconomic policy reforms and the inception in 2013, consistently focused 2020 staff discussion note, it chose to focus economic impacts of enhancing gender on making the economic case for gender on fiscal interventions that are regarded equality, in practice, its resources to carry

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out dedicated gender impact assessment its limited gender resources to where they work are extremely limited. While the IMF are needed most, and, as the Fund prepares put forward a medium-term budget in May the staff guidance note on implementing Photo: IMF that proposes the first increase in the IMF’s the CSR, prioritises providing unambiguous, operational budget in a decade, it fails to detailed guidance to its staff on exactly how make provisions for scaled up, systematic to identify and address adverse gendered gender impact assessments across its impacts of IMF-backed macroeconomic operations, as was also reflected in the lack policy reforms in practice. Women for Growth, the slogan of the IMF’s gender of emphasis on assessing gender impacts Δbit.ly/IMFgenderresearch work, encapsulating its instrumental approach to in May’s Comprehensive Surveillance Review women’s work. (CSR, see Observer Summer 2021). In this context, it is imperative that the IMF directs

RIGHTS news

IFC faces critical questions over investments in gig economy

the UK-based International Transport Sally Roever from UK-based civil society IFC increases investments in gig economy Workers’ Federation said, “We have serious organisation Women in Informal platform companies concerns with the rise of investments in ‘gig Employment: Globalizing and Organizing economy’ companies. Global development said, “We are concerned that the focus on Labour unions raise workers’ rights institutions like the IFC must carefully vet the gig economy risks skewing the analysis concerns their investments to ensure vulnerable of the informal economy. The rise of working workers are not being exploited and trapped through platforms in some sectors and The International Finance Corporation in poverty.” some countries should not obscure the fact (IFC), the World Bank’s private sector arm, that the majority of the world’s jobs are has invested in several transport platform Driving a race to the bottom neither formal, nor part of the gig economy. companies in recent years that have been Though IFC has recognised gig economy Effective policies for poverty reduction criticised by labour rights advocates for their workers as being particularly vulnerable must address the reality of two billion of workers’ rights records. during the Covid-19 pandemic, its the world’s workers whose livelihoods are investment in Bolt follows a growing trend of marginal and unprotected because they Most recently, in March, IFC invested €20 the IFC financing platform companies in the work in the low-tech informal economy.” million in Bolt, an Estonian transport platform, transport and logistics sectors. Last June, for it to expand services in emerging markets, The World Bank has a long history of delivery workers in Brazil organised a strike including South Africa, Nigeria, and Ukraine. promoting labour flexibilisation, not least over low pay and poor working conditions The service, which has been compared with through its controversial Doing Business against Loggi, a motorcycle courier platform, Uber, enables users to hire taxis via an app. Report and the 2019 World Development which received a $5 million IFC investment Report (see Observer Winter 2019, Winter Bolt faced legal action in the UK in March 2020 in 2016. Over the last three years, IFC has 2018). In a 2019 White Paper on Social over claims that it failed to pay the minimum also invested in FCS Moove, Uber’s fleet Protection, the Bank maintained that wage to its drivers. Earlier this year, the manager in Sub-Saharan Africa, in India- governments should increase labour Independent Workers’ Union of Great Britain based food logistics platform Shadowfax, flexibilisation by limiting minimum wage held protests over drivers’ safety following the and in Kobo360, a truck delivery platform increases and making it easier for employers murder of Bolt driver Gabriel Bringye. Research based in Lagos. to hire and fire workers. published by Oxford University in March found IFC has touted ride-hailing platforms as that Bolt, alongside Amazon, maintained the Δbit.ly/IFCgigeconomy an opportunity for women’s economic worst working conditions for gig economy empowerment, citing the additional barriers workers in the UK. that women face in accessing the formal In April, Bolt drivers in Lagos, Nigeria, under economy. Prominent feminist economists an umbrella body of drivers, the Professional have argued that the reverse is true: that the Photo: Luiginter E-hailing Drivers and Private Owners gig economy promotes deregulation of the Association, went on strike to protest poor labour market, which places women in more working conditions and pay. They called on precarious positions and increases poverty. Bolt, alongside other transport platforms, In a 2016 paper, researchers Radhika to raise fares in line with inflation, and Balakrishnan, Lisa McGowan and Cassandra provide an adequate welfare package and Waters wrote that the gig economy, compensation for the families of drivers “automatically assigns women a higher killed and kidnapped on the job. Last month, burden of unpaid care work, and assumes Bolt was forced to increase its fares in Kenya that the preferential way to address this after drivers in Nairobi threatened to strike issue is flexible schedules, not better pay, over high fuel prices. better access to child care and other support services, or rethinking social stereotypes.” General Secretary Stephen Cotton from Gig economy workers in Milan. 6 BRETTON WOODS OBSERVER SUMMER 2021

ENVIRONMENT news

World Bank’s oil revenue outlook for Guyana at odds with climate action

published in October 2020. In contrast to the targeted public investment to build Bank’s Systematic Country Diagnostic Bank, IEEFA found, “that oil revenues won’t resilience. Coastal flooding is an especially predicts huge revenue from offshore oil cover Guyana’s annual budget deficit over serious risk, as much of Guyana’s population development for Guyana the next three years and meet its pledge to and economic activity—especially build a Sovereign Wealth Fund. This will lead agriculture—is concentrated in low-lying Concerns Bank’s oil-based growth estimates are overly optimistic and at to a shortfall of $482 million in the first three areas along the Atlantic coast.” odds with climate goals years.” Even with a predicted improvement in the following two years, IEEFA notes, Melinda Janki, a Guyanese lawyer, noted, “the aggregate five-year annual cash deficit “Joseph Stiglitz and Lord Stern, two former Guyanese civil society has reacted with still is likely to be $160 million,” with the World Bank economists, say renewable incredulity to the World Bank’s first following period looking highly uncertain: energy offers better economic returns. The Systematic Country Diagnostic (SCD) for “the outlook for the oil and gas industry International Energy Agency says no new Guyana, which has suggested that – despite is largely negative. New, long-term global fossil fuel projects. Yet country director the urgent need to transition to a low- market and political forces have created a Tahseen Sayed and the World Bank team are carbon global economy – the country will permanent oversupply of oil and gas, low pushing Guyana to transition to oil and to go experience a substantial windfall from its prices and new competitors that will keep from a carbon sink to a 3.87gigaton carbon new offshore oil development. According to markets unstable.” bomb disaster. The Executive Directors must the document, the development could see stop this lunacy before the country team Guyana’s per capita GDP rise to $16,900 by Ignoring climate risks in favour of business destroy Guyana and the entire planet.” 2030, more than 2.5 times its current size. as usual Indeed, in response to the threats posed This comes after research published in The World Bank’s strong support for by climate change, Guyanese citizens sued September showed that the World Bank and oil-based growth in Guyana is also their government in a ground-breaking case IMF have routinely over-estimated future counterproductive in light of the country’s filed in May, claiming its pursuit of offshore revenues from new oil and gas discoveries severe vulnerability to the physical risks oil development is unconstitutional, “on the over the past two decades, resulting in posed by climate change, even as the grounds that it exacerbates global warming a ‘presource curse’ in many countries development pathway it endorses means and threatens human rights.” The case, characterised by a severe mismatch these impacts will be more severe. Ironically, the first of its kind in the Caribbean, was between policies and actual revenues. the SCD fully acknowledges these risks, filed in Guyana’s Constitutional Court and is noting, “fiscal risks emanating from climate ongoing. The Bank’s projection – which will frame and natural disasters could derail…growth its engagement with Guyana over the and development efforts; necessitating Δbit.ly/Guyanaoilrevenue next five years – flies in the face of global climate goals, which the Bank is ostensibly supporting all countries to achieve through its newly released Climate Change Action Plan for 2021-25 (see Observer Summer Photo: David Stanley Photo: David 2021). The Bank previously backed Guyana’s offshore oil development through a combination of development policy finance (see Background, What is World Bank Development Policy Finance) and technical assistance – with both national and international civil society being highly critical of this support (see Observer Autumn 2020).

The Bank’s support ignores increased calls to abandon new oil and gas extraction projects. In its Net Zero Report released in May, even the historically conservative International Energy Agency noted that limiting average global temperature increase to 1.5°C compared to the pre-industrial period would necessitate “no new oil and gas being approved for development.”

The Bank’s projection is also at odds with analysis of Guyana’s oil prospects produced by the US-based Institute for Energy Economics and Financial Analysis (IEEFA) A seawall in Georgetown, Guyana. The low-lying country is highly vulnerable to flooding from sea-level rise caused by climate change.

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ENVIRONMENT analysis

World Bank’s new Climate Change Action Plan fails to deliver much-needed transformative agenda

Bank provided 12 per cent of all G20 and the Paris alignment of IFC and MIGA’s financial Plan lacks detail in key areas, including multilateral development bank-related intermediary (FI) portfolios, despite the IFC’s concrete commitments to end fossil fuels public finance for gas projects in developing FI clients frequently being linked to new coal support countries between 2017-19. In March, over investments (see Observer Winter 2020). 150 CSOs and academics called on the Bank Efforts to crowd in private investors to phase out its support for fossil fuels and CCAP deepens Bank’s devotion to ‘Wall potentially at cross-purposes with just Street Climate Consensus’ energy transition increase support for a just energy transition. The CCAP emphasises engaging the “The Climate Change Action Plan allows private sector in the Bank’s climate work, the WBG to continue to expose the The (WBG) published its in line with its wider Maximizing Finance countries and communities it’s mandated updated Climate Change Action Plan (CCAP) for Development (MfD) agenda, which to support to the risks and harms of fossil for 2021-25 on 22 June, with the plan privileges the private sector and exposes fuel development, including increasingly serving as its corporate strategy on climate states to long-term fiscal liabilities (see expensive and volatile energy prices, lock-in change. Despite the CCAP noting that, “Our Observer Summer 2017). It notes that, of obsolete infrastructure, stranded assets, collective responses to climate change, “public sector interventions can be focused illness, displacement, and a delayed and poverty, and inequality are defining choices on helping countries implement policy and unjust transition,” said Luísa Galvão, of of our age,” civil society organisations (CSOs) regulatory reforms needed to create the Friends of the Earth US. expressed disappointment at the plan’s lack right incentives to crowd-in private sector of detail in key areas. The CCAP includes a target of 35 per participants—including through upstream On paper, the CCAP seeks to help countries cent of the Bank’s investments between reforms—and to catalyze private sector and private sector clients transform key 2021-25 being “climate-related” on investment, using our menu of advisory and sectors in alignment with global climate average – a commitment blunted by a financial instruments.” lack of transparency about how the Bank goals, including through Country Climate There is a tension between these efforts and accounts for climate finance in its projects and Development Reports (CCDRs), which achieving a people-focused climate agenda (see Observer Spring 2021). It affirms that “will be used to inform, prioritize, and that is based on a consultative approach the Bank will align most of its finance with sequence climate action through the to transforming key systems, in line with the Paris Agreement by 1 July 2023 – with country engagement process and thus a just transition to a low-carbon future. As further details forthcoming at COP26 in implement the Action Plan.” The Bank aims noted by economist Daniela Gabor in a June Glasgow in November – putting a deadline to conduct 25 CCDRs in the coming year, op-ed in UK-based newspaper the Guardian, on a process initially announced in 2018 at but it is unclear how they will influence its private sector-led climate efforts, “often COP24 in Katowice, Poland (see Observer investment decisions. place the burden of decarbonisation on the Spring 2019). However, the International poor,” adding that under MfD, “Government Furthermore, the plan notes that, “All Finance Corporation (IFC), the Bank’s private spending is…directed to ‘derisking’ private investment in new gas infrastructure will be sector investment arm, and the Multilateral infrastructure, to cover the gap between the assessed for consistency” with countries’ Investment Guarantee Agency (MIGA), the fees paid by users of essential public services national climate plans, but provides no Bank’s political risk insurance arm, are working and the commercial rates of return expected explanation of this screening process. This on a delayed timeline, with 100 per cent of by private investors.” lack of disclosure is concerning, as a June their “real sector operations” to be aligned by report from the International Institute for 1 July 2025. The CCAP offers no deadline for Δbit.ly/CCAPlaunch Sustainable Development (IISD) found the Photo: World Bank Photo: World

World Bank President David Malpass, far left, speaks at an event on the economic recovery at the World Bank and IMF Spring Meetings in April, where he highlighted that the World Bank’s new Climate Change Action Plan was in development. 8 BRETTON WOODS OBSERVER SUMMER 2021

ACCOUNTABILITY news

IMF faces wave of calls to suspend loan disbursements in Africa

During the World Bank and IMF Spring suspensions of IMF loan disbursements. In with Cameroon. Sarah Saadoun, based Meetings in April, the IMF was confronted Cameroon, 20 women leaders sent a letter in New York with Human Rights Watch, with a social media storm in Kenya criticising to the IMF asking for a pending loan to be who investigated the implementation of the institution for approving a $2.34 billion halted until two IMF loans totaling $382 these measures and found that the IMF’s loan to the East African country amidst million disbursed to Cameroon have been efforts were insufficient, commented that, allegations of widespread corruption fully accounted for. The new loan comes “The Covid-19 corruption scandal rocking and concerns about its high debt levels. at a time when Cameroon has already Cameroon shows the high cost of the IMF Official virtual events of the meetings requested emergency debt relief which is treating anti-corruption and transparency as were disrupted and a petition to suspend likely to be conditioned on its commitment tick-the-box exercises rather than a means disbursement of the loan until a new, “to return to the fiscal consolidation path” in toward ensuring public oversight over public more accountable Kenyan administration the recovery. In June, IMF Communications spending.” is in office was signed by over 230,000 Director Gerry Rice noted that the Fund had Δbit.ly/IMFaccountability “weary Kenyan taxpayers”. The petition agreed anti-corruption measures lamented that “Kenyans have nothing to show for previous IMF loans while prices of basic commodities such as fuel are skyrocketing.” Wangari Kinoti, a Kenyan

feminist activist and international policy Photo: Phil Pasquini advisor with ActionAid tweeted at the time, “All the Kenyan anti-IMF activity over the last few days is encouraging, but I wish that it included a wider critique of what comes with IMF loans.” In the three-year financing package in question, IMF staff call for further reductions in the public wage bill and the removal of consumption tax exemptions, including on fuel.

In June, similar citizen initiatives were launched in Nigeria and Uganda calling for Illustration of the Kenyan social media storm targeting the IMF during its Spring Meetings in April.

ENVIRONMENT news

Dutch government sued at World Bank tribunal for fossil fuel phase out plan

In February, online news site Clean Energy on Multinational Corporations (SOMO), RWE than 1,000 registered ISDS cases relate to Wire reported that German energy company “seeks €1.4 billion in compensation for fossil fuel investments”, including oil and RWE has sued the Dutch government “for damages resulting from a new law, adopted gas extraction and transportation, gas compensation payments in relation to the in December 2019, that prohibits the use supply and combustion, oil refining, and country’s coal phase-out plans” at the World of coal for the production of energy as of coal extraction. These reports add further Bank’s International Centre for Settlement 2030.” evidence of the power of the regulatory of Investment Disputes (ICSID, see Inside chill produced by the threat of action in the Institutions, ICSID). The article notes In a separate report, which focused on international arbitration tribunals such as that, “in contrast to Germany’s planned Anglo-Dutch oil and gas company Royal ICSID, which threatens climate action and coal exit, the Dutch phase-out law for Dutch Shell’s use of investor-to-state undermines state responses to the Covid-19 the fossil power source does not stipulate dispute settlement (ISDS) mechanisms pandemic (see Observer Summer 2020; an ‘adequate compensation’ for plant to thwart state efforts to work toward a Winter 2020). operators.” According to a March report by green and just energy transition, SOMO Δbit.ly/ICSIDNLcoal the Netherlands-based Centre for Research stressed that “almost a fifth of the more

9 BRETTON WOODS OBSERVER SUMMER 2021

FINANCE news

Former UN Independent Expert calls for end to IMF surcharges

income for fiscal year 2020. He warned that, The April communiqué of the Group of 24 Open letter calls for IMF to end use of “these surcharges can often lead to debt major developing countries also called on surcharges costs as much as tripling”, a grave concern the IMF to “correct the regressive and pro- as countries struggle to respond to the cyclical character” of the policy (see Dispatch Letter claims that surcharges may violate Covid-19 pandemic amid high debt levels Spring 2021). In May, Bloomberg quoted international human rights law (see Dispatch Spring 2021). Argentina’s President Alberto Fernandez as stating, “I expect its [surcharges] suspension In May, former UN Independent Expert (IE) Echoing Professor Gallagher’s concerns, during the pandemic. I hope the Fund’s on foreign debt and human rights, Juan the open letter, co-signed by the current board discuss this in its October meeting, Pablo Bohoslavsky, wrote an open letter UN IE on debt and human rights and the and once and for all, eliminates them.” IMF calling for an end to the use of surcharges International Trade Union Confederation, Managing Director, Kristalina Georgieva by the IMF, as these extra charges constrain stressed that, “the same countries most responded in May that she, “took note of the ability of countries in the Global South in need of financial assistance will have to President Fernández’s request and…will to respond to the Covid-19 pandemic and pay more than USD$4 billion in additional consult with the membership on this issue.” meet their international human rights surcharges on top of interest payments and Further commenting in May, IMF Director obligations during a worsening debt crisis other fees from the beginning of the crisis of Communications, Gerry Rice, underlined (see Dispatch Spring 2021). Since the 1997 to the end of 2022.” The letter noted that that “any review is the prerogative of the Asian financial crisis, the IMF has sought the surcharges are procyclical, discriminate executive board”, adding that “surcharges to “generate income to allow the Fund to among countries based on their economic are an important part of what we call our accumulate precautionary balances” and strength and may therefore contradict risk management framework.” to disincentivise countries from an over- international law. Δbit.ly/IEsurcharges reliance on IMF financing. It does this by The letter argued that surcharges may penalising them for borrowing beyond also contravene another core principle of their allotted IMF quota (see Observer international human rights law, because Winter 2019) and for maintaining loans for they prevent States from generating, prolonged periods by charging a premium adequately allocating, and making use Photo: Phil Pasquini on borrowing costs. These quota and of their maximum available resources time-based surcharges have become an to move as quickly as possible towards important source of income for the IMF. the achievement of the full realisation of As Professor Kevin Gallagher noted in a human rights. It consequently calls on, March article in UK newspaper, the Financial “countries in the Global North to ensure, Times, “the IMF estimates the surcharges through their own contributions, that the have become the Fund’s largest source IMF is adequately and equitably funded to of revenue, accounting for almost half of undertake its mandated function.” revenues” and contributing over $1 billion in Protest at the 2021 IMF Spring Meetings in Washington DC calling for debt relief.

IFI GOVERNANCE news

Civil society calls for IFC and MIGA to build upon CAO reform

On 1 July, the board of directors of the process must be transforming the IFC’s ineligible complaints not published at all. International Finance Corporation (IFC), the commitment to providing remedy into a World Bank’s private sector lending arm, reality for communities who have been The new policy was developed after and the Multilateral Investment Guarantee harmed by IFC-financed development an external review of IFC and MIGA’s Agency (MIGA), the World Bank’s political projects.” Margaux Day, of US-based CSO environmental and social accountability risk insurance arm, announced that they had Accountability Counsel concurred: “The framework. The review, published in August finalised the development of a new policy CAO facilitates access to remedy, but the 2020, included an assessment of the role and for the Compliance Advisor Ombudsman IFC and MIGA ultimately need to provide effectiveness of the CAO (see Observer Winter (CAO), the independent accountability it.” Despite the policy’s overall strength, civil 2019). In May, 24 civil society organisations mechanism of IFC and MIGA. society organisations were concerned that CSOs who have worked with communities it nonetheless dilutes portions of the CAO’s seeking remedy for harm caused by IFC and Reacting to the new policy, Carla García mandate, including through a restriction MIGA, submitted comments to a draft CAO Zendejas of US-based civil society on the CAO director general’s decision to policy published in April. The submission raised organisation (CSO) Center for International investigate; projects pending board approval concerns about the above-mentioned dilution Environmental Law stressed that, “while no longer being eligible for CAO review; and of the CAO’s mandate adopted in the final the changes in operations at the CAO are eligible complaints will not be published until policy. well received, a core objective of this reform the conclusion of the assessment phase, with Δbit.ly/NewCAOpolicy

10 BRETTON WOODS OBSERVER SUMMER 2021

GENDER news

World Bank gender-based violence mechanism raises “serious concerns”

In November, the World Bank updated Bank’s GBV Taskforce, launched in October with the policy, stating, “The fact that its procurement policy to include a 2016 in response to the allegations raised communities are not able to connect with disqualification mechanism to ban in the road project (see Observer Autumn the Independent Board or take part in contractors for two years if they are found 2017). investigations means that this mechanism is to violate its rules on gender-based violence not accountable to those most affected by (GBV). The mechanism, which applies to However, there are concerns that the its decisions.” large works contracts approved after 1 mechanism could deter communities from January 2021, aims to tackle GBV and sexual reporting GBV. Elana Berger with US-based It is also feared that because the policy exploitation and abuse (SEA) taking place in Bank Information Center said, “There are only applies to projects that are deemed World Bank-funded projects, after a Bank- serious concerns with this mechanism. high risk, the Bank could be disincentivised financed Uganda road project was cancelled Communities were critical to raising original from categorising projects as such. Project due to allegations of abuse by project issues of sexual exploitation around projects contractors and borrowers are also closely construction workers against women and and they should be involved in all reforms.” involved in the selection of the board, girls in 2017 (see Observer Spring 2017). raising further concerns about the board’s She highlighted concerns with access to independence. The mechanism was recommended by the the board which oversees compliance Δbit.ly/GBVprocurement

SOCIAL SERVICES news

Malpass makes World Bank a pariah with opposition to TRIPS waiver

On 8 June, World Bank President David In May, US President Joe Biden voiced US Malpass said that the World Bank opposes support for the waiver of some aspects of the proposal made by India and South Africa the Trade-Related Aspects of Intellectual at the World Trade Organisation (WTO) to Property Rights (TRIPS) Agreement, which temporarily waive intellectual property rights 100 developing countries have demanded, in for Covid-19 vaccines in order to combat the order to increase access to Covid-19 vaccines, pandemic. Responding to a question about drugs, and other medical technologies. the Bank’s stance on the waiver during a Payne Bank / Brandon Photo: World call with reporters, Malpass stated, “We The World Bank has come under fire for its don’t support that, for the reason that it lack of action on vaccine access, particularly would run the risk of reducing the innovation through its reliance on the COVAX initiative, and the R&D [research and development] which has only delivered 81 million vaccine in that sector.” However, research shows doses, falling far behind its target of making that most R&D costs for Covid-19 vaccines two billion doses of vaccine available have been financed by public funds, not worldwide in 2021 (see Observer Spring 2021; pharmaceutical companies. Background). In a June video, Malaysia’s vaccine minister Khairy Jamaluddin said that His comments came after he issued a joint COVAX has been an “abysmal failure”, and statement with IMF Managing Director that the “World Bank owes it to developing Kristalina Georgieva to the G7 ahead of its countries to be a strong voice for vaccine June summit calling for action on Covid-19 equity on the global stage.” vaccine access through a $50 billion plan Δbit.ly/MalpassIP proposed by the IMF, which also did not World Bank President David Malpass speaks at the endorse the waiver. virtual Spring Meetings in 2021.

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