The International Monetary Fund (IMF) and the World Bank have agreed to step up efforts to tackle global economic challenges around high debt levels, climate change and digital transition amid rising geopolitical tensions.
The chief executive officers (CEOs) of the International Monetary Fund (IMF), Kristalina Georgieva, and the World Bank, Ajay Banga, in a joint statement, maintained that “The Bretton Woods institutions have a critical role to play to help member countries address the challenges and leverage the opportunities, working closely together and with partners.”
They reiterated that “The world can, and must, come together to address global challenges. The IMF and World Bank are committed to help advance this common effort.”
According to them, “The world confronts major transformational challenges and more frequent shocks at a time of rising economic and geopolitical tensions. Growth in the world economy has slowed, with the medium-term outlook at its weakest in over three decades. Progress in poverty reduction has come to a halt.
“Conflict and fragility are on the rise. The world is facing geoeconomic fragmentation, extreme natural disasters exacerbated by climate change, and increasing levels of public debt. Rapid digitalization and technological transformations create new challenges, but also opportunities.”
They added that “With well-designed and appropriately sequenced reforms, the digital and green transitions can bring tremendous economic, social and environmental gains, and add to welfare and prosperity.”
The duo listed forward-looking initiatives to closely coordinate global, regional, and country level engagements to ensure that resources are deployed efficiently and effectively.
Noting that climate change is a threat to global peace, security, economic stability, and development, the institutions promised to promote complementarity and synergies in their climate-related works.
“Building on its Climate Change Action Plan, the Country Climate and Development Reports (CCDRs), and extensive country-level policy work, the World Bank provides policy advice on climate issues to member countries, supports policy reforms through Development Policy Financing and provides financing for specific investments at the sectoral level through investment and program for results loans.
“The Fund has adopted a new climate strategy that includes coverage of macro-critical climate issues as part of Article IV consultations and expanded technical assistance in areas where it has specialized expertise.
It has also established the Resilience and Sustainability Trust (RST) to provide affordable long-term finance to vulnerable countries implementing macro-critical climate reforms.
The two institutions are successfully co-hosting the Secretariat of the Coalition of Finance Ministers for Climate Action.
“The two institutions will further strengthen coordination and focus on results. We will formalize the regular meetings of the new Bank-Fund Climate Advisory Group, tasked with ensuring coordination of our climate related work streams.
“The group will meet every two months to discuss global and country level engagements, including the results of CCDRs, country level climate analytical work, and the pipeline of key projects and policy-based lending (World Bank’s DPLs and Fund’s RST engagements).
“We will also incorporate climate considerations in our ongoing work on debt sustainability, including through the revised joint Low Income Country Debt Sustainability Framework.”
Progress in poverty reduction has come to a halt. Conflict and fragility are on the rise. The world is facing geoeconomic fragmentation, extreme natural disasters exacerbated by climate change, and increasing levels of public debt.
The Bank and the Fund expressed worries over “The current context of elevated debt vulnerabilities gives renewed urgency to intensified collaboration, building and leveraging on our respective areas of expertise.”
Accordingly, they resolved to “enhance our joint work to help prevent further build-up of debt vulnerabilities, assisting countries to strengthen debt management and transparency and public finances, while improving the joint Low Income Country Debt Sustainability Framework to better account for current challenges.”
They also pledged to “deepen our support to creditors and debtors engaged in a debt restructuring and will work further with our partners to improve restructuring processes, including under the Common Framework, building on the work we launched at the Global Sovereign Debt Roundtable.”
The Bretton Woods institutions also admitted that the ongoing digital transition is at the forefront of development and provides a unique opportunity for countries to accelerate economic growth and connect citizens to services and jobs.
Despite this, they noted that in 2022, nearly 3 billion people remained offline, the vast majority of whom live in developing countries, and the wide gaps in usage of digital products between and within countries remain a challenge.
While the Bank works with governments in emerging and developing countries to address regulatory and infrastructure constraints to digital inclusion and transformation, and to promote financial inclusion and low-cost payments systems, expand digitalization of government services and operations.
The Fund focuses on supporting digital transformation in the financial sector to promote wider use of new financial technologies while maintaining the integrity and stability of the financial system.
“We will step up our joint work to help countries increase the effectiveness of revenue collection and expenditure systems in governments and reap the benefit of new digital technologies while mitigating the risks.”
This will include ways to improve cross-border payments, support implementation of the G20 Roadmap to enhance cross-border payments, and ensure that payment innovations spur growth, poverty reduction and job creation.
“The Bank and the Fund will work with shareholders and partners to mobilize the substantial resources needed to meet the complex challenges the world faces today. This requires both domestic and external resources.
“To this end, we will increase our support to help countries build strong tax policy and administration and fiscal institutions that deliver efficient public spending and sound debt and public financial management, along with our ongoing work to support development of strong domestic financial markets,” they said.