IMF and World Bank complicit in 'austerity as new normal', despite availability of alternatives
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WINTER 2019
observer
BRETTON WOODS
A quarterly critical review of developments at the World Bank and IMF
CONDITIONALITY analysis In this issue
IMF and World Bank complicit in ‘austerity as 3 IMF’s recognition of
unpaid care work
new normal’, despite availability of alternatives undermined by its own
harmful role
by Rachel Noble
4 Reviews of WBG’s
accountability
mechanisms too
important to be done
in secret
by Kris Genovese
6 Local communities
oppose planned dam
construction supported
by World Bank in
Manipur
by Jiten Yumnam
9 EIB rules out most fossil fuel
funding from 2021, setting new
benchmark for MDBs
This fiscal contraction phase is projected policies and the welfare state,” the report
Austerity projected to affect 5.8 billion to continue at least until 2024 and is concluded that this does not need to be the
people by 2021 “characterised by shocks [in total spending] case and that there are alternatives, even in
in which adjustment deepens, the first the poorest countries.
UN offers handbook on alternative
occurring in 2010-11, the second taking
financing options Austerity alternatives remain widely
hold during 2016-17, and a third expected
to initiate in 2020.” According to the report, underutilised
IMF and World Bank continue to cling to
unnecessary and harmful fiscal orthodoxy this “forthcoming adjustment shock is Multiple options for expanding fiscal
expected to impact 130 countries in 2021 in space are indeed available, according to
terms of GDP,” adding that “the developing a November report by the International
In October, a report by Matthew Cummins world will be the most severely affected,” Labour Organization (ILO) and the United
and Isabel Ortiz, entitled Austerity: The and that “projections indicate that austerity Nations Entity for Gender Equality and the
New Normal; A Renewed Washington will affect approximately 5.8 billion persons Empowerment of Women (UN Women),
Consensus 2010-24, established that most by 2021 – about 75 per cent of the global entitled Fiscal Space for Social Protection;
governments are on track to reduce public population.” A Handbook for Assessing Financing
spending, as a percentage of GDP and
Options (hereafter ‘the handbook’). The
nominally adjusted by inflation, at least until The projected austerity measures include
handbook detailed eight financing options
2024. The report concluded that the world is pension and social security reforms; cutting
governments should be aggressively
moving from “a decade of adjustment”, as or capping the public sector wage bill;
exploring to promote national socio-
the last report in this series documented in labour flexibilisation reforms; reducing or
economic development that remain
2015, to an institutionalisation of austerity eliminating subsidies; increasing regressive
underutilised: Expanding social security
as “the new norm.” consumption taxes; strengthening public-
coverage and contributory revenues;
private partnerships (PPPs); and privatising
The report detailed that an initial phase increasing tax revenues; eliminating
public assets, all of which exacerbate
of fiscal stimulus in response to the 2008 illicit financial flows; improving efficiency
inequalities. Arguing that, “public
financial crisis was followed by a distinct and reallocating public expenditures
expenditure adjustment is being used as
second phase starting in 2010, in which (emphasising this requires going beyond
a trojan horse to introduce Washington
governments started to reduce spending. a simple financial cost-benefit analysis);
Consensus policies to cut back on public
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B RE T TO N WO O D S O B S ERVER WI NTE R 2 0 1 9
tapping into fiscal and foreign exchange and 90s, the bulk of their macroeconomic abuses. Recent examples include the
reserves; managing debt (meaning policy advice continues to ignore this lesson, reported reduced specialised services to
borrowing or restructuring sovereign with “23 out of 26 [IMF loan] programmes combat violence against women as part
debt); adopting a more accommodative continuing to be conditional on fiscal of Brazil’s IMF-backed austerity measures;
macroeconomic framework; and increasing consolidation,” as reported by Eurodad (see the rising death rate in Greece following
aid and transfers. Observer Summer 2019). the IMF-imposed austerity measures;
the severely diminished living standards
For example, on managing debt, the Bank- and IMF-backed austerity continues in Ukraine as part of Bank and Fund
handbook prescribed that, in the absence to cause misery programmes; and IMF-sponsored austerity
of a sovereign debt workout mechanism, undermining the provision of essential,
The IMF’s November working paper,
countries should seek to restructure gender-responsive public services in Ghana
Doing more with less: How can Brazil
existing high levels of debt. This could take (see Observer Autumn 2018, Spring 2018,
foster development while pursuing fiscal
place through various means, such as re- Summer 2017; Briefing, The IMF, Gender and
consolidation?, is the latest example of the
negotiation, and including debt repudiation Expenditure Policy).
IMF seemingly taking the opposite approach
or default, “especially when the legitimacy
to the guidance laid-out in the handbook.
of the debt is questionable and/or the BWIs move further away from the UN
It argues that Brazil has “room for public
opportunity cost in terms of worsening social consensus
savings of about 3 per cent of GDP per year
outcomes is high.” In relation to assessing
in the health and education sectors,” which, While the handbook made clear that
optimal debt levels, the authors questioned
it estimated, is what would be “required… the eight alternative financing options
the IMF’s 40 per cent long-term debt-to-GDP
to reach satisfactory progress in the are endorsed by various individual
ratio as the ceiling for developing countries
Sustainable Development Goals [SDGs]… policy statements and research papers
and emerging economies. It called instead
given Brazil’s current fiscal consolidation of international finance institutions, it
for a focus on the quality of the spending
needs.” As pointed out on online news simultaneously underscored the continued
being financed with debt, echoing with
platform openDemocracy in April, data disparities between the bread-and-butter
the 10 civil society principles for sovereign
indicates that three years of deepening policies of the IMF and World Bank and
debt resolution published in September by
austerity policies in Brazil have already that of many other UN agencies. As the
Belgium-based civil society organisation
led to a further lowering of GDP and an handbook pointed out, it is merely the
Eurodad.
increase in public debt, while exacerbating latest iteration of a long line of UN and civil
In relation to tapping into fiscal and foreign social inequalities to detrimental effects, society research that supports expansionary
exchange reserves, the IMF’s continued undermining Brazil’s ability to achieve its macroeconomic policies and argues “against
reluctance towards governments using SDG targets. Criticism that the IMF’s 2018 mainstream macroeconomic policy advice,
capital controls, despite its recent more social spending framework continues to be as advised by the IMF [and others].”
accepting ‘institutional view’ on the matter “out of step with international standards”
(see Observer Summer 2019), even after This includes the 2019 Trade and
(see Observer Autumn 2019), contrasted
prolonged evidence-based advocacy to Development Report by the UN Conference
with other UN organisations favouring
the contrary (see Observer Summer 2018, on Trade and Development, which argued
them “as integral to the macroeconomic
Winter 2017-18), further reinforces the that, in an effort to establish a Global
policy toolkit.” The World Bank’s Country
notion that the view at the IMF is, in its Green New Deal, a serious discussion of
Policy and Institutional Assessments were
staff’s own words, “in terms of austerity… public financing options is first required
also criticised for reinforcing contractionary
you cannot defy gravity” (see Dispatch for governments to reclaim policy space
policies, while being so influential as to
Annuals 2017). and collectively act to boost demand,
cause harmful herd-like behaviour amongst
to enable the massive new wave of
other donors as part of the discussion on
Meanwhile, a September white paper investments required to tackle climate
increasing aid and transfers (see Inside the
by the World Bank on rethinking social change. Poignantly, the report frames this
Institutions, Country Policy and Institutional
protection systems was premised on the as an effort aligned with the original spirit
Assessments).
idea that governments can only finance a of the Bretton Woods conference of 1944,
More broadly, in arguing for a more minimum safety net of last resort if, “they to restore the faith in multilateralism lost by
accommodating macroeconomic scale back widescale public social insurance the scars of austerity, stagnant real wages,
framework, the handbook set-out that fiscal schemes, lower the size of social insurance sluggish productivity growth, rising debt
and monetary policies were consistently contributions and put greater emphasis levels and unprecedented levels of inequality
used counter-cyclically until the late 1960s, on privately-managed mandatory and (see BWP Briefing Bretton Woods at 75: A
making social protection measures fiscally voluntary individuals savings and insurance series of critical essays).
sustainable. This has changed markedly schemes,” according to an October blog,
Δbit.ly/Austeritypolicies
however since the early 1980s, “when the published by UK-based consultancy
agenda of privatisation, liberalisation and organisation Development Pathways. In
globalisation reforms…was advanced by the doing so, it argued, the World Bank proposed
IMF and World Bank,” shrinking policy and “a rollback of existing rights and protections
fiscal space via the establishment of a new for workers, both in terms of social security
For additional online content for
macroeconomic orthodoxy (see Inside the and labour market protections.”
this issue of the Observer, see
Institutions, Common Criticisms of the Bank brettonwoodsproject.org/observer
Meanwhile, civil society around the world
and Fund). While the Bank and Fund have
continues to push back and count the
tacitly begun to acknowledge the limitations Para la versión en español, visite:
human costs these policies entail, especially
of the approach of their structural brettonwoodsproject.org/es/observador
for those most vulnerable to human rights
adjustment programmes of the 1980s
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B RE T TO N WO O D S O B S ERVER WI NTE R 2 0 1 9
GENDER analysis
IMF’s recognition of unpaid care work undermined by its own
harmful policy advice
Guest analysis by Rachel Noble, ActionAid
the rights of women and girls in the Global Ghana’s most recent IMF loan programme,
IMF publishes first paper on unpaid care South – regardless of whether gender is public investment levels were expected to be
and domestic work deemed macro-critical by any particular cut again, from 5.4 per cent of GDP in 2014
government or not. to around 2.8 per cent of GDP by 2018. Nor
Fails to acknowledge how Fund policies
exacerbate unpaid care work burdens
is there any recognition of the possible need
As one would expect from the IMF, the for alternative policy mixes to be considered
argument for addressing women’s unequal to avoid harmful gendered impacts, as
In October, the IMF published its first share of unpaid care work is made from per the guidance on operationalising
working paper dedicated to unpaid care and an entirely instrumentalist perspective, gender in IMF country-level work (see
domestic work (UCDW). Globally, women meaning it is justified in order to increase BWP Briefing, The IMF and Gender Equality:
perform 76.2 per cent of the total hours women’s labour force participation and thus Operationalising Change).
of unpaid care work. While recognition of to contribute to economic growth, rather
UCDW by the IMF is welcome and can be than as an intrinsic human rights imperative. On labour market policies, while there is an
seen as a response to decades of wider Astonishingly, the paper also seems to implicit nod to aspects of the ILO’s Decent
advocacy by feminist activists, the working instrumentalise having children, asserting Work agenda, such as its social protection
paper is merely aimed at eliciting debate that, “no one can dispute the importance pillar, it is again unclear whether the IMF
and does not constitute or officially inform of raising and rearing a child for future is advocating that such social protection
IMF policy. economic growth.” be provided universally by the state, as
advocated for by many women’s rights
Disappointingly, the authors have chosen On public services, the authors recognise groups and wider civil society organisations,
not to adopt the internationally agreed UN that appropriate public services and including ActionAid. Nor does it mention
language of “unpaid care and domestic infrastructure play an important role in the importance of living wages or collective
work”, instead referring more broadly to redressing women’s UCDW, recommending bargaining rights as being critical to securing
“unpaid work”. However, the definition of that governments invest in these areas. decent pay and conditions. There is no
unpaid work the IMF gives in the paper However, health and education are only mention of the informal sector and of the
largely corresponds with what is commonly considered as important in relation to particular measures women need to balance
understood as UCDW. building women’s ‘human capital’ (see their unpaid care work and paid work that is
Observer Autumn 2018), rather than decent (see BWP Briefing, The IMF, Gender
The paper clearly asserts that, “Reducing recognising women’s agency in caring for Equality and Labour).
and redistributing unpaid work is a macro- the sick and for children who are not in
critical issue,” meaning, in the IMF’s school. Provision of child and elderly care is While the paper acknowledges that tax
terminology, that unpaid care is essential also recommended, although it is unclear policies can have gendered impacts in
to economic stability and growth. By whether the paper is calling for childcare relation to tax filing systems, it makes no
implication, as the paper is framed under to be provided universally by the state, mention of financing public services and
“stronger policies to support gender which would enable the countless women infrastructure through progressive taxation.
equality”, it could be understood to argue and men working in the informal sector to It also neglects clamping down on corporate
that gender inequality is also a macro- access such services. tax avoidance and illicit financial flows, as
critical issue, given that an overarching ways to finance gender equality measures,
impediment to achieving this is women’s By far the biggest problem with the paper as ActionAid has recently argued alongside
unfair share of UCDW. This is possibly a slight is that it provides zero acknowledgement many other feminist advocates.
advancement from the Fund’s 2018 paper of how IMF policy recommendations and
on How to Operationalize Gender Issues in loan conditionalities themselves compel Unpaid care and domestic work is vital to
Country Programme Work, which noted, countries to implement austerity measures the social reproduction of the human race.
“the macro-criticality of gender issues in a and cut and privatise the very same public That the IMF has produced a paper on this
broad set of circumstances,” but stopped services, thereby shifting the care burden is a notable step in advancing the feminist
short of affirming it is always the case, in back onto women (see BWP Briefing, The struggle for UCDW to be recognised and
every country. It instead recommended IMF, Gender Equality and Expenditure Policy). valued by policymakers and wider society.
that, “Staff should point to macroeconomic For example, in Ghana, following a loan However, any positive impact it may hope
significance where it exists.” ActionAid and agreement with the IMF which required to have will be severely compromised until it
other social justice organisations have been drastic cuts to the public sector wage recognises and addresses how the majority
calling for the IMF to take a systematic bill, the number of doctors halved and of its policy prescriptions often directly
approach to how it considers and addresses the number of nurses and midwifes fell undermine women’s rights, including by
gender in its work, not least by recognising by 26 per cent between 2004 and 2007. exacerbating their UCDW burden.
and addressing the impacts of its policies on ActionAid’s analysis found that, under
Δbit.ly/IMFunpaidcare
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B RE T TO N WO O D S O B S ERVER WI NTE R 2 0 1 9
IFI GOVERNANCE commentary
Reviews of World Bank Group’s accountability mechanisms too
important to be done in secret
Guest analysis by Kris Genovese, Centre for Research on Multinational Corporations (SOMO)
The team’s terms of reference, which complainants should have the same
Reviews of World Bank’s accountability presumably contain a timeline for the opportunity to review and comment on the
mechanisms lack proper civil society review, have not been disclosed, nor has draft compliance report as the IFC – which is
engagement and transparency the board committed to disclose the consistent with best practice at other IAMs.
Civil society calls for reviews to result in
team’s final recommendations. Moreover, The CAO should also be transparent about
establishment of remedy funds there will be no public consultation on the the eligibility criteria applied to financial
recommendations, departing from standard intermediary complaints.
practice for IAM reviews. Instead, the team
You would be forgiven if you didn’t know will seek input from a multi-stakeholder But the biggest priority is for the IFC to
that the International Finance Corporation group, whose composition has not been assume responsibility for the harms caused
(IFC), the World Bank’s private sector lending disclosed and who have not been given any to complainants. To its credit, the IFC has
arm, was reviewing its accountability information about the consultation process. taken some important steps recently to
framework, including the effectiveness of There is an email address though, in case enhance its focus on environmental and
its independent accountability mechanism you want to submit your comments, in the social risk, and has adopted structural
(IAM), the Compliance Advisor Ombudsman hope that they correspond to the issues that changes that – if implemented well – could
(CAO) (see Observer Winter 2018). Despite are actually on the table, which have also better prevent harm to communities (see
the importance of the process, in particular not been shared. Observer Summer 2019). But these changes
given the numerous documented cases in are not enough. The IFC’s homepage claims
which IFC financing has resulted in harms There is a lot at stake with this review. credit for outcomes that would not have
to communities (see Observer Spring 2015), One priority is to maintain the CAO’s occurred without IFC involvement. Yet, when
the only publicly available information about independence and structure. The head of something goes wrong in an IFC-financed
the review is a brief announcement made the CAO is currently selected by an external project, it points the finger at its client and
in October by the IFC and the Multilateral committee of representatives from the cries “not our fault”. We will see if the courts
Investment Guarantee Agency board of private sector, civil society, and academia, buy that argument (see Observer Spring
directors. Within the scope of the review, who make a recommendation to the 2019). In the meantime, the IFC must
the board should be commended for going president of the World Bank Group. This, and engage in dispute resolution processes,
beyond the CAO and its role and examining provisions that prevent a revolving door with when invited by the parties, and ensure that
how the IFC responds to CAO processes. Yet, IFC, give affected communities confidence its response to compliance investigations
the limited information about the process, that the CAO will handle their complaints in result in meaningful changes for
combined with the precedent set by the a way that does not favour the institution complainants. It can do both by establishing
protracted and similarly clandestine review that they believe caused them harm. a remedy fund that could be used to
of the Inspection Panel, the independent supplement what the client has offered
Broadening accountability and remedy (see Observer Winter 2019). One small
accountability mechanism for the World
Bank’s public-lending side, raises doubts The structure of the CAO, which houses but important step the IFC could take is to
about its outcome (see Observer Autumn compliance, dispute resolution and require its clients to disclose the availability
2019). This view was detailed in an October advisory functions under one roof, ensures of the CAO. The CAO and the Inspection
letter to the IFC’s board of directors signed a streamlined process for complainants Panel are too important to communities and
by 75 civil society organisations. Excluding and helps them decide whether dispute the credibility of the World Bank Group to be
the Bank’s stakeholders and the people who resolution or compliance review (i.e. the reviewed in secret.
helped to create and are the beneficiaries extent to which the IFC complied with its
Δbit.ly/CAOReview19
of these accountability systems from these own regulations) best suits their needs.
discussions is not only ironic, but deeply This reflects the notion that regardless of
Photo: ota_photos
problematic. the function, the outcome of a complaint
process should be: To prevent harms,
The announcement reveals that the provide effective remedy to project-affected
review will be led by a team of external people and the environment, and to
experts, who will “seek input from a multi- ensure institutional accountability as well
stakeholder group.” The composition of as continuous improvement in preventing
the review team, chaired by Peter Woicke, and addressing social and environmental
former Executive Vice President of the risks and impacts of development finance
IFC and member of the CAO’s Strategic institution-supported projects.
Advisors Group, inspires some confidence,
but it might be the only thing that does. That does not mean the CAO’s processes
could not be strengthened. For example,
“Opportunity Street”.
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B RE T TO N WO O D S O B S ERVER WI NTE R 2 0 1 9
ACCOUNTABILITY news
Civil society urges US Congress to hold IFC accountable before approving
capital increase
In November, civil society organisations increase could exacerbate existing problems the committee to “use its congressional
(CSOs) participated in hearings held by the within the institution (see Dispatch Spring oversight role to hold the IFC accountable
US House Committee on Financial Services in 2018). to those [the IFC’s] standards and promote
Washington DC, which included scrutinising a clear path towards required disclosure in
the International Finance Corporation’s Jolie Schwarz, of US-based CSO Bank IFC’s financial intermediary portfolio” (see
(IFC), the World Bank’s private sector arm, Information Center, highlighted the need Observer Summer 2016), in addition to
$5.5 billion proposed capital increase (see for Congress to push for specific structural calling for an end to IFC’s support for for-
Observer Summer 2018). reforms, such as the creation of a remedy profit education providers.
fund at the IFC. Nadia Daar, of Oxfam
The US Congress has yet to authorise the International’s Washington DC office, urged Δbit.ly/IFCcapitalincrease
US contribution to the IFC’s capital increase,
approved by the Bank’s Governors in 2018.
Committee chair, Maxine Waters, previously
Photo: Center for International Environmental Law
expressed concerns about accountability
and transparency of IFC activities, including
the International Development Association’s
(IDA), the Bank’s low-income arm, Private
Sector Window (PSW) (see Observer
Summer 2019). Waters made her position
clear again at November’s hearing, stating
that, unless structural reforms are made,
including regarding the PSW and financial
intermediaries investments, she “is just not
interested” in supporting the IFC’s capital
increase.
CSOs reiterated concerns raised during
discussions around the World Bank’s general
capital increase last year about the need for
substantial reforms to address longstanding
accountability, environmental and human
rights concerns, without which a capital
Jolie Schwarz, Bank Information Center (right), at US Congress hearings, November 2019.
ACCOUNTABILITY news
IFC accountability mechanism investigates World Bank-funded for-profit
schools
The Compliance Advisor Ombudsman The report comes after a complaint was step forward in the long-running fight
(CAO), the independent accountability submitted to the CAO in April 2018 by against the commercialisation of education
mechanism for the International Finance Kenyan civil society organisation (CSO) in low-income countries, following recent
Corporation (IFC), the World Bank’s private East African Centre for Human Rights triumphs such as the recognition of the
sector lending arm, published a report in (EACHRights), outlining alleged BIA Abidjan Principles in a UN Human Rights
October raising “substantial concerns” about violations of IFC’s social and environmental Council resolution (see Observer Summer
IFC’s $13.5m investment in controversial performance standards and breaches of 2019) and the Global Partnership for
for-profit multinational school chain Bridge human rights law. The CAO raised alarm Education’s decision in June to prohibit its
International Academies (BIA), announcing about BIA’s “adherence to relevant health funds from supporting for-profit education.
that it will conduct a compliance and safety requirements” and the potential
investigation (see Observer Spring 2018). “adverse impacts to teachers, parents and In a press release, Dr Judith Oloo of
The decision takes place in the context of students raised in the complaints.” The CAO EACHRights commented: “…We look forward
ongoing campaigns to end World Bank also identified concerns about the IFC’s to a rigorous and thorough investigation,
support for private education and instead monitoring of its own client performance. and call on all investors to start taking action
ensure it contributes to the expansion of to avoid further harm.”
public education. CSOs welcomed the investigation as another
Δbit.ly/BIAinvestigations
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B RE T TO N WO O D S O B S ERVER WI NTE R 2 0 1 9
INFRASTRUCTURE analysis
Local communities oppose planned dam construction supported
by World Bank in Manipur
by Jiten Yumnam, Center for Research and Advocacy, Manipur (India)
initiative through power sector reform. Dam impacts & peoples’ resistance
IFIs support hydropower building spree in Additionally, the International Financial
Manipur The NHPC’s 105 MW Loktak hydroelectric
Corporation (IFC), the World Bank’s private
project caused displacement and loss of
sector investment arm, has provided
Projects threaten local communities’ livelihoods of indigenous communities,
rights and livelihoods
finance to a number of Indian financial
submerging more than 50,000 acres of
intermediaries (FIs), which have in turn
agricultural land in the Loktak wetlands.
Bank finances transmission line linked to provided $3.19 billion to the National
NHPC’s proposed 1,500 MW Tipaimukh dam
hydropower expansion in region Hydroelectric Power Corporation Limited
has been opposed by local communities,
(NHPC), the largest public dam-building
as it will submerge 27,000 hectares of
company in India. Between 2005 and
Manipur, a region in India’s North East forest and agricultural land along the
2014, IFC invested $520 million in Indian
(NE), announced plans in 2012 to generate Barak River basin. In the case of the high
infrastructure bank IDFC, as well as other
more than 2,000 MW of power under its voltage transmission and distribution lines
banks, including ICICI, HDFC, Axis Bank,
hydropower Policy, prompting concerns in Manipur, the World Bank’s environmental
according to a 2016 report by US-based civil
among indigenous communities. Previous assessment failed to consider the physical
society organisation Inclusive Development
large hydropower projects in the region, and health impacts for the local populations.
International. The NHPC was involved in
including the 105 MW Loktak hydroelectric The planned dams and related infrastructure
building the 105 MW Loktak hydroelectric
project, the Mapithel dam and the Khuga projects will also destroy the floral and
project, commissioned in 1983, and more
dam, came with adverse impacts for local faunal diversity of Manipur.
recently signed an agreement with the
populations. Government of Manipur to build the 1,500 The deployment of Indian security forces at
As part of its policy, in August the MW Tipaimukh Hydroelectric Project in April several dam sites, under the 1958 Armed
Government of Manipur identified 32 2010. It is preparing to build the 66 MW Forces Special Powers Act, has also led to
potential hydropower development sites Loktak Downstream Hydroelectric Project human rights violations: Three villagers were
on rivers in Manipur, which is flanked by the over the Leimatak River in Manipur, in killed by border security forces guarding the
Eastern Himalayas and the Indo-Burma addition to other proposed projects. Khuga dam in December 2005, for instance,
biodiversity hot spot. Hydropower projects for demanding just rehabilitation and for
The Singapore-based Asian Genco Private
are classified as ‘renewable energy’ by the resisting the dam (see Observer Summer
Limited company invested $1.4 billion in the
Government of India – a measure designed 2019). Indigenous communities of Manipur
1,200 MW Teesta-III project in Sikkim near
to help achieve India’s goal of 40 per cent called for decommissioning of 105 MW Loktak
Manipur; the IFC also held investments in
of total power generation from non-fossil dam and a halt to construction of new dams
private equity funds that financed Teesta
fuel sources by 2030, as part of its Nationally in Manipur like the 1,500 MW Tipaimukh
III dam, which had adverse impacts on
Determined Contribution to the Paris dam and the 190 MW Pabram dam. Villagers
the rights of the indigenous Lepcha People
Agreement (NDC). affected by Mapithel dam protested its
in Sikkim. However, it is difficult to trace
planned commissioning in 2016.
However, hydropower is no longer the least- financing involving the IFC in hydropower
cost energy option in India, as the unit price projects, as sub-projects supported by its IFIs like the World Bank should stop
from hydroelectric projects stood at around investments in FIs are not typically disclosed, financing financial intermediaries that
4 India Rupees (Rs.) in June 2019, while depriving impacted communities of access support NHPC, and providing other support
the solar tariffs decreased in India from to IFC’s Compliance Advisor Ombudsman, its for hydropower projects in NE India, which
Rs. 18 per unit in 2010 to Rs. 2.44 in May independent accountability mechanism (see are not sustainable nor cost effective.
2019. Despite this, national authorities and Observer Winter 2018). An accountability standard to hold
international finance institutions (IFIs) are financial intermediaries, equity funds and
Additionally, in June 2016, the World Bank
pushing ahead with Manipur’s hydropower financial institutions accountable needs
approved a $470m loan for high voltage
boom and risking local communities’ to be established for Manipur’s potential
transmission and distribution lines in Manipur
livelihoods. hydroelectric projects. Protecting Indigenous
and five other states in India’s NE. The World
Peoples’ rights, supporting their call for
IFIs financing dams in Manipur Bank-financed transmission lines criss-cross
sustainable development, and ensuring their
the Barak, Irang and other rivers of Manipur,
IFIs are increasingly financing dam projects informed consent should be paramount in
and will be one of several key infrastructure
and related infrastructure in Manipur. For all energy projects in Manipur – including
projects, along with road construction
instance, the Asian Development Bank those supported by the World Bank.
financed by ADB, to facilitate the construction
(ADB) supported the North East Power of over 200 dams across India’s NE over the Δbit.ly/ManipurHydro
Development Project, which complemented Brahmaputra–Barak River system, including
the Government of India’s Power for All the 32 dams proposed in Manipur.
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B RE T TO N WO O D S O B S ERVER WI NTE R 2 0 1 9
IFI GOVERNANCE news
New IMF head applauds Trumps tax reforms
harmful tax competition, including the over the interests of developing countries
IMF managing director Kristalina risk of a race to the bottom.” While civil (see Observer Winter 2017-18, Autumn
Georgieva backs Trump’s tax reforms society organisations (CSOs) generally 2016). Moreover, in October 2019, doubts
welcomed this acknowledgment, the were once again cast around the OECD’s
Campaigners call for reform of
international corporate tax rules
paper fell short of including broader civil willingness to meaningfully reform
society recommendations set out in their international tax rules, as an October
consultation responses. One example is the analysis commissioned by the Independent
In an October interview with US-based establishment of a UN intergovernmental Commission for the Reform of International
media channel HBO, Kristalina Georgieva, tax body, which has been repeatedly Corporate Taxation demonstrated that its
the newly appointed IMF managing director, rejected by the Organisation for Economic latest proposal for corporate tax reform will
made comments that could signal a Co-operation and Development (OECD), likely “further intensify global inequalities
different approach from the Fund on tax. a group of mostly rich nations, who, as and fail to curb rampant tax abuse.”
Belgium-based CSO Eurodad noted, insist on
When asked by the interviewer about the Meanwhile, civil society research continues
keeping standard-setting for taxation reform
US president’s approach to decision-making, to show that in practice, the bulk of the
under the auspices of the OECD and G20.
Georgieva replied, “To give credit to the IMF’s tax policy advice remains focused
leadership here, the United States is one While the supposed programmatic focus on pushing regressive consumption taxes,
of the better performing economies and it on sustainable development and tax of rather than a meaningful shift towards
is because it had the bravery to use a tax the Platform for Collaboration on Tax – a ending the-race-to-the-bottom on corporate
reform to spur more growth.” When pressed partnership between the IMF, World Bank, taxes and eliminating illicit financial flows
directly as to whether she is in favour of OECD and UN aiming to intensify their tax (see Dispatch Annuals 2019, Springs 2018;
President Trump’s 2017 tax reforms, which work – has been cautiously welcomed by Briefing The IMF, Gender and VAT).
include a $1.5 trillion tax cut that slashes some, it has also been accused thus far of
Δbit.ly/IMFTaxReforms
corporate tax rates, Georgieva responded, continuing to promote the OECD’s agenda
“I’m in favour of countries using their policy
space to make the economy more vibrant
Photo: IMF
and to make the lives of people better.”
The managing director’s inference that
reforms have improved people’s lives sits at
odds with the 2017 report by the UN Special
Rapporteur on extreme poverty and human
rights, which described the tax changes as
“a bid to make the US the world champion
of extreme inequality.” Doubts have also
been cast as to whether the reforms
made the economy more vibrant, as the
Congressional Budget Office estimates that
the total cost of the Tax Cuts and Jobs Act is
$1.9 trillion.
Notably, Georgieva’s comments also run in
contrast to those expressed by the previous
managing director Christine Lagarde,
who, at the 2018 World Economic Forum,
identified Trump’s tax reforms as a hazard
that “could destabilise the current economic
recovery,” and “lead to serious risks” around
financial vulnerability. In fact, the Fund’s
2017 Article IV on the US specifically noted
that the tax reforms are “likely to generate
a fall in the revenue-GDP ratio over the
medium-term and that tax relief is likely to
disproportionately benefit the wealthy.”
The IMF and corporation tax – Where does
it stand?
In January, the IMF released a flagship
policy paper on corporation tax, which
emphasised the “damage from continued
AM19 – Press Briefing.
7
B RE T TO N WO O D S O B S ERVER WI NTE R 2 0 1 9
CONDITIONALITY news
Uprising and discontent: Global protests erupt against IMF-backed policies
IV called for austerity measures such as Strikes in Tunisia overturned an IMF-backed
Protests against Fund loan programmes “restraining public wages.” Its 2019 Article wage bill in February, which was followed
continue in Argentina and Ecuador IV, released on the first day of the uprisings by Tunisia’s Truth and Dignity Commission
on 17 October, called for, “front-loaded and seeking reparations from the IMF and World
MENA region shaken by uprisings in
response to IMF policy recommendations
sustained fiscal consolidation,” with news- Bank for human rights violations linked
agency Reuters reporting in the same month to the legacy of structural adjustment
that the Fund insists on, “tough austerity programmes (see Observer Autumn 2019,
Recent months have proven particularly measures,” that politicians have, “publicly Spring 2019). Further, in Jordan, Prime
tumultuous for the IMF, with thousands vowed not to take.” This ‘business as usual’ Minister Hani al-Mulki resigned in June 2018,
taking to the streets around the globe approach to economic crises management amid the biggest protests in Jordan since
to demand change. Against a turbulent is unlikely to appease protesters. CSO Arab the 2011 Arab Spring, after pushing through
backdrop in Latin America, IMF-backed NGO Network on Development noted in unpopular IMF-supported reforms (see
policies have triggered civil unrest across its October/November bulletin that the Observer Summer 2018).
the region, resulting in civil society Lebanon protests arose from, “a structurally
organisation (CSO) Latindadd spearheading flawed economic system,” and that today’s A report on IMF programmes in Egypt,
a joint statement to the IMF in October situation can be attributed to, “the direct Jordan and Tunisia by CSO Oxfam
condemning the “familiar austerity policies” consequences of the rentier economy and International, presented to the Fund in
that have led to “devastating economic liberal macroeconomic policies the country October, found that, “The austerity policies
and social impacts.” In Ecuador, nation- has openly adopted since the 1990s, supported by the IMF contributed to a
wide protests, led by indigenous leaders, and will definitely constitute the fuel to decrease in social spending and an increase
broke out against IMF-backed austerity as the revolution that shall not stop before in poverty, leaving women the most
part of a $4.2 billion loan, resulting in fuel changing the entire economic and political affected” (see Observer Winter 2019).
subsidy cuts being reversed in October 2019 systems.” Δbit.ly/IMFGlobalProtests
(see Dispatch October 2019). In Argentina,
the Fund’s largest-ever loan was met with
Photo: ITUC
extensive protests in 2018 and 2019 and, in
October, Mauricio Macri lost the presidential
vote to IMF-critic Alberto Fernández
(see Observer Autumn 2019, Summer 2018).
While developments in Latin America have
dominated headlines, protests linked to IMF
policy recommendations have also erupted
once again across the Middle East and North
Africa (MENA) region (see Observer Summer
2018).
Egypt, which received a $12 billion IMF loan
in 2016, has seen a wave of protests in
response to Fund policy recommendations,
despite threats of force by Egyptian
authorities. In October, authorities were
forced to lower fuel prices following
demonstrations, despite the Fund’s deputy
managing director in July backing the
“elimination of most fuel subsidies.” While
the loan was hailed a success, with the
country’s fast-growing economy being
favoured by international investors, the
poverty ratio jumped from 27.8 per cent in
2015 – prior to the IMF loan – to almost one-
third today.
In Lebanon, widespread protests, strikes
and roadblocks took place in October,
culminating in Prime Minister Saad
Hariri’s resignation on 29 October, with
demonstrators demanding changes
such as poverty reduction and an end to
corruption. While the IMF does not have a
loan programme in Lebanon, its 2018 Article
General strike in Tunisia.
8
B RE T TO N WO O D S O B S ERVER WI NTE R 2 0 1 9
ENVIRONMENT news
EIB rules out most fossil fuel funding from 2021, setting benchmark for MDBs
for fossil fuel projects,” and a civil society online media outlet Euractiv, replacing the
European Investment Bank ends support protest outside October’s World Bank Annual previous threshold of 550g kw/hr. This will
for unabated coal, oil and gas from 2021 Meetings, calling for a ‘Fossil Free WBG’ (see exclude unabated fossil fuels but means
Dispatch Annuals 2019). the EIB could potentially still invest in so-
Policy surpasses ambition of World Bank’s
attempts to align with Paris Agreement
called “low-carbon gases such as biogas
Key supporter of fossil fuels takes leap and hydrogen,” according to Euractiv.
towards becoming EU’s ‘climate bank’ but Additionally, the Guardian noted, “The EIB
In November, the European Investment Bank loopholes remain will continue to support any project added
(EIB) board of directors approved a revamped As noted by coverage in UK newspaper the to the EU’s ‘projects of common interest’ list
energy policy that will see it cease finance for Guardian, estimates compiled by European before 2022. At present, more than 50 gas
unabated coal, oil and gas from 2021. CSO network Bankwatch suggest, “the projects could be eligible.”
EIB handed out €6.2m every day to fossil
The policy provides a new benchmark, as the Alex Doukas, from US-based CSO Oil Change
fuel companies between 2013 and 2018.”
EIB, the World Bank Group (WBG) and other International responded to the EIB’s new
This includes $2.8 billion in support for
multilateral development banks (MDBs) work policy by stating, “Gas lobbyists were able to
the controversial Southern Gas Corridor,
to define their joint approach to aligning convince many parties — most significantly
according to Bankwatch, a project designed
with the Paris Climate Agreement. Germany and the European Commission —
to bring natural gas from Azerbaijan to
to override public support for a fossil free
The approval of EIB’s energy policy followed European markets, which has also been
EIB, and write significant concessions into
a compromise, which saw its start date supported by the World Bank and other
this policy. However, with people-powered
pushed back a year from 2020, after initial MDBs (see Observer Summer 2018).
movements for climate action stronger than
opposition from the European Commission,
Under EIB’s new policy, energy projects ever, the gas industry will face an uphill
Germany and select Eastern European EU
applying for EIB funding will have to show battle in using these EIB loopholes to get
member states to a draft policy proposed by
they can produce one kilowatt hour (kw/ new projects funded by 2021.”
EIB management in August (see Observer
hr) of energy while emitting less than 250
Autumn 2019). Δbit.ly/EIBclimatepolicy
grammes of carbon dioxide, according to
Despite this, the EIB’s policy sets a new
standard among MDBs in terms of their
alignment with the Paris Agreement: Under
the policy, the EIB will seek to unlock €1
trillion of “climate action and sustainable
investment” by 2030 and will “align all
financing activities with the goals of the
Paris Agreement for the end of 2020.” It will
also end the vast majority of EIB’s finance
for fossil fuels.
The EIB, the World Bank, and seven other
MDBs announced in December 2018 that
they would work to develop a joint MDBs’
approach to Paris Agreement alignment (see
Observer Spring 2019), with MDBs providing
a progress update on this process at COP25
in Madrid this December, and continuing
to work on the process through COP26 in
Glasgow in December 2020.
“Today’s landmark decision should… prompt
other international financial institutions –
multilateral development banks in particular
– to immediately halt all support to the fossil
fuels industry,” said Belgium-based civil
society organisation (CSO) Counter Balance,
in its reaction to EIB’s announcement.
The approval of the EIB’s new energy policy
follows a letter signed by over 110 CSOs in
October calling for the World Bank to, “Phase
out lending for all fossil fuels after 2020,
including lending for ‘associated facilities’
Civil society groups call for the World Bank to stop financing fossil fuels outside its 2019 Annual Meetings in October.
9B RE T TO N WO O D S O B S ERVER WI NTE R 2 0 1 9
ENVIRONMENT news
IMF joins discussion on greening financial sector, as climate risks threaten
macro-stability
arguing that this is the most ‘efficient’ way withdrawal from the Paris Agreement under
Fund and central banks ponder for countries to implement the Paris Climate the Trump Administration notwithstanding,
macroeconomic policy responses to Agreement, despite skepticism from climate US Federal Reserve governor Lael Brainard
climate risks justice advocates about whether focusing on noted in November that, “To fulfil our core
Report commissioned by UK Labour Party
this particular policy is politically viable (see responsibilities, it will be important… to
highlights importance of public green Observer Summer 2019). study the implications of climate change for
taxonomy the economy and the financial system and
Commenting at a Civil Society Policy Forum to adapt our work accordingly.”
event during the 2019 Annual Meetings that
Shortly after being appointed as the IMF’s explored the IMF’s role in helping countries A recent paper commissioned by the
new managing director in late September, tackle climate risks, Signe Krogstrup of UK’s Labour Party, entitled Finance and
Kristalina Georgieva made clear that tackling Denmark’s central bank remarked, “I think Climate Change: A progressive green finance
climate risk would be a key part of the Fund’s that there is still a discussion about what approach for the UK, and published in
mandate during her tenure (see Dispatch should the IMF be doing on climate change. November, highlighted the need for the
Annuals 2019; Observer Autumn 2019). … Macro-stability is the clear focus of IMF. creation of robust macroeconomic policies,
So, the question is: Is climate macro-critical rather than relying on private finance-
At a 2019 IMF Annual Meetings panel in for the Fund, and should it be doing more? led approaches. It noted, “an ambitious
October on how central banks can combat Climate is potentially macro-critical in transition to low-carbon [sic] will not take
climate change, Georgieva said, according to at least two ways: disaster risks, where place via the market because of a series of
US-based news outlet Bloomberg, that the countries’ macroeconomic prospects are market failures that include incompatible
Fund, “is gearing up very rapidly to integrate negatively affected by climate impacts; and time horizons between private finance and
climate risks in our surveillance work.” transition risks, where the shift to a low- climate crisis, incomplete capital markets,
Georgieva, however, was more tentative carbon economy may cause a change in corporate market power, and subjective
about exactly what the Fund’s role will be: asset valuations.” private classifications of green assets.”
She noted that while conducting climate In addition to the creation of a robust
‘stress tests’ to try to gauge risks in countries As the IMF and central banks test waters green public taxonomy – which identifies
or sectors is a less contentious step the on greening finance, creating monetary assets well-aligned with a low-carbon
Fund could take, other measures, such policy in the public interest is vital transition – the paper called for mandatory
as developing a taxonomy of sustainable The IMF’s shift to analysis of climate risks disclosure of climate risks, and the greening
financial assets, could be seen as more comes as central banks are increasingly of the Bank of England’s macroeconomic
divisive. Earlier this year, efforts by the seeking to tackle the issue. In 2018, Bank of policies, including how this applies to its
European Union to create a taxonomy of England governor Mark Carney warned that commitment to quantitative easing through
‘green’ financial products were side-tracked an unmanaged transition to a low-carbon investing in corporate debt.
after some EU member states objected that economy could result in the sudden collapse
these changes would damage their national Civil society will be watching closely to
of assets linked to the fossil fuels, which he
industries, and the completion of the see whether the Fund recommends that
dubbed “a climate Minsky moment” (see
taxonomy has now been delayed until 2022. countries develop such robust policies,
Observer Summer 2019). The Network for
or whether it continues to support more
The Fund has also made several calls in Greening the Financial System now includes
‘market-driven’ approaches to tackling
the past year for countries to adopt more over 51 members, the majority of whom are
climate risks.
ambitious carbon taxes, most recently central banks, which are working on joint
in its Fiscal Monitor published in October, analysis of climate risks. The US’s imminent Δbit.ly/IMFgreening
Photo: IMF
The IMF’s managing director Kristalina Georgieva, centre, at a seminar entitled, ‘Can Central Banks Fight Climate Change’ during the 2019 IMF Annual Meetings.
10B RE T TO N WO O D S O B S ERVER WI NTE R 2 0 1 9
IFI GOVERNANCE news
Accountability Counsel
launches key tool
US blocks IMF voting rights redistribution for accountability
Efforts to use the IMF’s 15th Review of package of IMF resources and governance community
Quotas to redistribute voting rights on its reforms” (see Dispatch Annuals 2019;
board have been unilaterally thwarted by Observer Winter 2018, Winter 2016). In November, US-based civil society
the US, despite being supported by the organisation Accountability Counsel
majority of IMF member states. Confronted In response to an April 2019 statement launched the Accountability Console,
with US opposition, shareholders agreed by US Treasury Secretary, Steven Mnuchin, a new tool to provide communities,
instead with the US proposal to extend New who noted, “…we do not see a need for a investors, policy-makers and
Borrowing Arrangements (NAB) – designed quota increase at this time,” Mark Sobel researchers with comprehensive data
as a “backstop to the Fund’s quota-based of UK-based think-tank OMFIF, speculated on all Independent Accountability
financing mechanism” – as a way to ensure, that Washington was blocking the reform Mechanism (IAM) complaints to date.
at least in the short-term, that the Fund because it did not want to increase China’s The tool includes cases from 24 IAMs of
maintains its lending capacity (see Inside voting power at the IMF. The US move not multilateral and regional development
the Institutions, IMF resources: quota, NAB only leaves the voting shares unchanged, banks and other international finance
and GAB; Observer Summer 2019). but also potentially undermines the notion institutions. Resulting from community-
of the IMF being a quota-based institution driven demand, the Accountability
The 15th review was scheduled for (see Observer Summer 2019). Following Console provides a body of rare
completion no later than the 2019 World the decision to uphold the ‘gentleman’s community-level feedback about human
Bank and IMF Annual Meetings – after the agreement’ with the appointment of rights and environmental grievances
US Congress failed to authorise the 14th European-backed candidate Kristalina tied to internationally financed projects,
quota review, concluded in 2010, until 2016. Georgieva as IMF managing director, the including deep levels of information
The International Monetary and Finance blocking of the quota review also raises and comparative views about policies
Committee’s October 2019 communiqué broader questions around the IMF’s governing every aspect of the complaint
called “on the executive board to complete undemocratic governance structures. process at each IAM.
its work on the 15th Review and on a
Δbit.ly/IMFvotes
The tool comes at a particularly crucial
time as civil society organisations and
human rights defenders are increasingly
LAND news being threatened in development
contexts (see Observer Summer 2019),
amidst fears of a race to the bottom of
World Bank, IMF and EBRD push for controversial environmental and social safeguards
land reform in Ukraine between competing public finance
institutions (see Observer Winter 2018).
A November article on news site Common Bank approved a US$200 million loan for the The potential that the current reviews of
Dreams analysed a bill that became a draft restructuring of the agricultural market and the Inspection Panel and the Compliance
land reform law in Ukraine’s parliament. the auctioning of state lands.” The Bank’s Advisor Ombudsman, the World Bank
The draft law, which lacks measures to privatisation agenda for Ukraine was outlined and International Finance Corporation
ensure that land is not concentrated in by its president David Malpass in a Financial IAMs respectively, may result in the
the hands of wealthy landowners, or to Times article during his visit to the country erosion of their mandates and capacities
prevent land purchases being backed by in August. The reforms were also supported (see Observer Winter 2019), highlights
foreign corporations, passed its first reading by a 2018 IMF loan to Ukraine, which the the importance of efforts like the
in November despite protests outside UN independent expert on foreign debt and Accountability Console, which strengthen
parliament and the opposition of 73 per cent human rights criticised for its privatisation community campaigns for justice (see
of the population. agenda (see Observer Autumn 2018). Observer Winter 2018).
The article highlighted that Ukraine has come The Bank’s role in Ukraine clearly Δbit.ly/AccountabiltyConsole
under sustained pressure, including from demonstrates that much remains to be
the World Bank and the European Bank for done to ensure it supports democratic and
Reconstruction and Development (EBRD), to equitable land structures on the ground.
end its 18-year moratorium on land sales,
Δbit.ly/UkraineLandReform
noting that, “In August 2019, the World
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