In 2023, 93 million people around the world were adversely affected by natural hazards, many climate-linked, with 86,473 fatalities and economic losses amounting to $202.7 billion. According to the World Health Organization, heat stress is the leading cause of weather-related deaths. Considering this, it is important to invest in inclusive and climate-resilient infrastructure.

BIC has worked at the intersection of climate and disability and monitored various Multilateral Development Bank (MDB) financed projects, including in the transport and post-disaster reconstruction sectors. A trend we have identified in these projects is a lack of meaningful stakeholder engagement and robust data collection in project design and implementation, which has led to persons with disabilities being excluded from accessing project benefits. The design of all new infrastructure projects and those being updated should incorporate disability-inclusive climate resilience measures.  

What should the World Bank take into account when investing in infrastructure?

Heat Stress: Our partners in Ghana dealt with this issue as they engaged with a diverse set of stakeholders around the World Bank-proposed Kumasi Urban Mobility and Accessibility Project (KUMAP). Community members shared that the current transport system lacks a sufficient number of covered bus stops to protect people from bright sunlight. Any new bus stops constructed as part of the KUMAP project should be universally accessible and protect against bright sunlight and extreme heat. All infrastructure investments must consider how persons with different disabilities, health conditions, and mobility needs interact with the heat and design for it. 

Flooding: Communities in Kumasi have raised concerns around the climate resilience of the transport system, particularly around flooding. Currently, roads are inaccessible after flooding, and people are cut off from services, jobs, and schools, all of which may disproportionately impact persons with disabilities. The KUMAP project should incorporate climate resilience into the design and operation of the transport system to maintain service in the event of flooding or other climate-induced disasters. Any resilience measures should be disability inclusive. 

How to Make Infrastructure Resilient and Inclusive 

Plan for the Unexpected and Maintain Engagement with Stakeholders. In Central Sulawesi, the World Bank has been supporting the government of Indonesia to rebuild housing and public infrastructure following an earthquake and tsunami in September 2018. Camps were built with temporary housing meant to last around two to three years. However, it has taken over five years for the permanent housing to be built, with the construction due to be completed by the end of 2024. Those living in the camps found it difficult to manage the living conditions due to the deteriorating quality of the housing and the impact of the weather. These conditions led to residents moving to the permanent housing as soon as it was built, even before water and electricity connections were provided. 

The experience in Palu could not have been captured in assessments at the beginning of the project and delays that arose during implementation were not foreseen or planned for. However, it could have been better mitigated with continuous stakeholder engagement and flexibility throughout the project implementation period, with meaningful consultations, incorporating better data disaggregation (such as gender, age, and vulnerabilities to climate change), and better communication during the housing delays. The Bank should have engaged in more frequent dialogue with disaster-affected persons and updated the project design to reflect changes in the needs of communities and the environment. The World Bank should be prepared to adapt to the unexpected through rigorous data collection and regular stakeholder engagement throughout the project cycle. 
Be More Consistent in Addressing Marginalized Groups. The Bank’s infrastructure investments in recent years have heavily emphasized promoting resilient, green, healthy, and inclusively-built environments, particularly through partnerships such as the Global Facility for Disaster Reduction and Recovery (GFDRR). However, the Bank does not consistently or adequately address marginalized groups in its plans and policies, including research reports, publications, or toolkits. While some Bank publications include universal accessibility, other publications fail to evaluate differentiated impacts on marginalized populations - for example, the impact on women, persons with disabilities, or women with disabilities. It is important that all Bank research, publications, toolkits, and frameworks recognize the interconnected impacts of climate change and use this knowledge and understanding to design projects that are genuinely inclusive for all.

Why and how should MDBs invest in climate-resilient and inclusive infrastructure?

2025 admittedly presents a dubious landscape for achieving substantive global economic governance reforms. The scale of needs is large—achieving development and climate goals demands trillions more in annual financing and a reorientation of our economic system—while our political context is trending in the wrong direction, with countries cutting international investments and geopolitical tensions deterring international cooperation.

Still, making progress matters. On climate change, every fraction of a degree makes a difference, and the scale of development challenges are so large that even small increases in inclusive growth or public service provision can improve the lives of millions of people. Actions taken now can also set the stage for more ambitious reforms when circumstances become more favorable in the future.

So, what are five realistic goals for global economic governance in 2025?

1. Establish principles for MDB resource needs reviews and initiate them at each MDB

Right now, decisions on multilateral development banks’ (MDBs) financing capacity are largely driven by inertia and political whims, rather than a regular, evidence-based assessment of how their ability to provide finance matches up with the financing needed to meet goals and the international community. Resource needs reviews would change that, and they are one of the key recommendations of the Group of 20 (G20) Roadmap on Better, Bigger, and More Effective MDBs, which G20 leaders endorsed in November.

That Roadmap sets a near-term goal of establishing principles for resource needs reviews, and South Africa can push for these principles to be decided under its G20 presidency next year. The G20 can simultaneously push MDBs to each initiate their own resource needs review—in the World Bank’s case, the 2025 shareholding review provides a moment to launch an assessment of its capital needs. Carrying out these reviews will generate an analysis of what mix of capital adequacy reforms, hybrid capital and capital increases would add up to financing needs, putting MDBs on a strong footing to increase the supply of finance..

2. Lay the groundwork for increasing developing countries’ voice and representation 

There are three key moments for governance reforms of international financial institutions in 2025. First, the International Monetary Fund (IMF) set a June 2025 deadline for making progress on approaches to quota realignment after the last quota review ended without changes in voting power. Second, voice and representation will be one of the topics at the Fourth International Conference on Financing for Development (FfD4), taking place from June 30-July 3. Third, the World Bank’s International Bank for Reconstruction and Development and International Finance Corporation are undergoing a shareholding review in 2025.

None of these processes would immediately lead to changes in voting power—IMF and World Bank reviews require subsequent changes to quotas or capital, while FfD4 doesn’t have direct jurisdiction over the Bretton Woods Institutions as a UN conference—but they need to lay a path to addressing developing countries’ underrepresentation in the IMF and World Bank. Failing to propose concrete reforms, such as the vague promises that have filled communiqués for over a decade without leading to action, would give the impression that the institutions are incapable of evolving to reflect today’s world. While geopolitical tensions between the US and China make any outcome difficult, there are measures that would increase small economies’ representation while having relatively even effects on major shareholders, such as increasing the weight of the compression factor, certain ad hoc increases or increasing basic votes—the latter of which made it into the FfD4 elements paper.

3. Map out the path to $1.3 trillion in the Baku to Belém Roadmap 

COP29, the most recent UN climate conference, came to a new climate finance agreement, but that agreement left a number of ambiguities. Its inner layer is a commitment for developed countries to generate $300 billion per year for developing countries by 2035, while there is a broader commitment of $1.3 trillion per year in climate investment in developing countries from all sources. To flesh out this vague $1.3 trillion goal, the agreement set up the “Baku to Belém Roadmap to 1.3T.”

Developed countries have implied private finance would power the $1.3 trillion sum, but even the International High Level Expert Group on Climate Finance—whose work was influential in shaping the $1.3 trillion figure—only projected that external private flows would amount to $500 billion. The Baku to Belém Roadmap is the moment to outline a realistic path to the $1.3 trillion climate investments developing countries need. The agreement should set a pathway to debt relief, new international taxes and IMF reform that could scale up climate investments. Committing to a $1.3 trillion goal without the ambition to match not only risks further eroding trust between developing and developed countries, but it also leaves the door open to dangerous levels of warming. A substantive Baku to Belém Roadmap is a must.

4. Roll back investor-state dispute settlement

In recent years, actors across the political spectrum have investor-state dispute settlement (ISDS), a mechanism written into many international investment agreements that give foreign investors a special right to bring claims against governments in arbitration tribunals. Recognizing the threat ISDS poses to climate action, the European Union withdrew from the Energy Charter Treaty (ECT), one of the largest investment treaties covering the energy sector. Motivated more by national sovereignty concerns, the Trump administration scaled back ISDS when it negotiated the US-Mexico-Canada Agreement (USMCA) in 2018 to succeed the North American Free Trade Agreement. Last year, Honduras withdrew from the World Bank’s arbitration tribunal, with a recent case against Honduras highlighting how ISDS can harm developing countries’ fiscal space and policy space.

There is ample space for further rolling back of ISDS in 2025. Countries can take bilateral and regional action: Colombia and the UK’s bilateral investment treaty could be renegotiated, Nigeria is reviewing its bilateral investment treaties, and countries that withdrew from the ECT remain party to a number of active treaties posing a similar threat to climate action. There are also opportunities for multilateral action through the United Nations Commission on International Trade Law’s working group on ISDS reform, the FfD4 conference and South Africa’s G20 presidency—and South Africa is a natural ISDS leader, having withdrawn from over a dozen treaties with ISDS provisions over a decade ago and not having experienced a decrease in foreign investment since.

South-South cooperation has expanded rapidly in the last decade, and with Global North countries turning inwards and potentially stalling progress in multilateral institutions, Southern countries may have to turn to other venues. Developing countries have little access to the Global Financial Safety Net other than the IMF, an institution in which they also have little representation. Regional financial arrangements (RFAs) provide an alternative—countries could strengthen existing RFAs like the Chiang Mai Initiative Multilateralization (CMIM) or the Latin American Reserve Fund (FLAR), or they could build new RFAs for African countries. Another set of Southern institutions that could be strengthened are national development banks, and the Finance in Common Summit—taking place in February 2025 in South Africa—provides an opportunity.

Also, with the US likely raising tariffs and the EU seeking to protect its market, China will be seeking new buyers for its mass buildout of renewable energy technology. For many Global South countries, this could mean lower prices and an opportunity to accelerate the green transition. And while Northern countries are disregarding World Trade Organization (WTO) rules and its Appellate Body remains dysfunctional for the time being, Southern countries might also take the opportunity to lean into green industrial policies of their own.

The last few years have seen green and development-centered international financial architecture reform move up the global agenda. Even if political circumstances will be challenging in the coming year, meaningful progress is still possible—and these five areas would be a good place to start.

Five Realistic Goals for Global Economic Governance in 2025

This paper presents an overview of significant policy, financial, and operational challenges encountered by multilateral development banks (MDBs) in fragile and conflict-affected situations (FCS). The data indicates that MDBs have increased their involvement in financing FCS compared to bilateral and other multilateral donors, with the World Bank playing the most significant role. This is explained by financial and operational comparative advantages inherent in the MDB business model, despite their implicit biases and constraints. The paper reviews the strategies and framework documents adopted by MDBs to address FCS as a distinct development challenge, highlighting the complexity of translating knowledge advancements and lessons learned into operational categories and clear priorities. It also examines how MDBs are placed regarding the recommendations of the "peace-humanitarian-development nexus," which is central to the international consensus for addressing FCS. The evolution of the financial capacities of MDBs and the criteria for resource allocation in response to the needs of FCS are analyzed. The paper concludes by posing a set of questions that MDBs and their shareholders should consider as they develop reforms to meet FCS-specific requirements and strengthen performance and outcomes.

Multilateral Development Banks in Fragile and Conflict-Affected Situations: Overview of Key Policy, Financial, and Operational Issues

by Clemence Landers, Nancy Lee, Karen Mathiasen, Charles Kenny, Mary Borrowman and Thomas Ginn

ast week, the World Bank released a draft of the IDA21 replenishment report for comment by external stakeholders. Entitled “Ending Poverty on a Livable Planet: Delivering Impact with Urgency and Ambition,” the report includes the proposed policy package, financing terms, and allocations for the next replenishment. Negotiations for the 21st replenishment of the World Bank’s concessional lending arm conclude with a pledging session next month and will take effect in July 2025. The World Bank is aiming for a record $100-billion-plus replenishment.

A key focus of this replenishment is to simplify IDA’s structure by cutting the number of country-level actions by more than half, from 1,011 in IDA20 to under 500 in IDA21, and better aligning IDA results with the World Bank Group corporate scorecard.

Six of CGD's senior researchers dissected the draft report and the most recent iteration of the policy package on the issues we follow most closely, from financing terms and the private sector window to gender equality and refugees. CGD doesn't take institutional positions, and you'll see that while we agree on many things, there are points of disagreement as well. Here are our reactions:

Earlier this fall, Charles Kenny and I cautioned that achieving a $100-billion-plus IDA should not come on the back of IDA countries, by making loans more expensive. The tradeoff at the heart of IDA’s hybrid financial model is between terms and volumes. Today, amidst deteriorating debt dynamics across many low-income countries, almost a quarter of IDA funding goes out as grants. The grant approach is an integral part of IDA's model and one way that the institution sets an important standard as a responsible lender. But it also has significant downside implications for IDA’s financing outlook, since the institution relies on reflows as its largest single financing source. Last cycle, the IDA Deputies, the officials from shareholding countries responsible for negotiating replenishments, took measures to reduce grant funding for countries at moderate risk of debt distress, which helped temporarily curb the growth in grants. The ongoing challenge is to strike the right balance between keeping IDA’s terms generous and providing countries with the financial volumes that they require.

In IDA21, the Deputies have landed on a fair approach that puts recipient governments in the driver’s seat to decide if they want bigger volumes or cheaper terms. Countries at high risk of debt distress can choose between receiving most of their funding in grants with a 10-percent haircut (e.g., reduction in their allocation envelope) or 60-year zero-interest loans without the volume discount. Similarly, IDA countries at the higher end of the income spectrum (countries in the “blend” and “gap” categories) can choose between borrowing at fixed rates with a 15 percent volume discount or floating rates with their full IDA allocation. If IDA 21 manages to expand its overall envelope by 10-15 percent from $93 to $100-$105, countries opting for cheaper terms would likely not face a reduction in volumes compared to what they were getting in IDA20. Instead, it would serve more as a volume incentive for countries opting for slightly harder terms.

IDA is also attempting to keep pace on the financial innovation side by introducing a donor guarantee platform and hybrid capital. The guarantee option is promising, especially if it can help the institution do more market borrowing at lower funding costs. I’m more skeptical of the relevance of the hybrid capital instrument for IDA, since it’s proven to be an expensive mechanism when what IDA needs is cheaper finance.

Nancy Lee and Karen Mathiasen on the private sector window

In June, we published an evaluation of the private sector window (PSW) which included a number of recommendations to strengthen its impact, and we are pleased that several of them have been incorporated into the draft report.

First, we commend the decision to have the IFC contribute $500 million of its own resources to the PSW. We note that a final figure for IDA’s contribution to the PSW has not been announced. This should depend partly on how much the PSW will be able to leverage under the new provisioning of 60 percent (versus 100). We suggest setting a target for PSW support in this replenishment of around $3 billion under the new provisioning guidelines, which could be achieved through a $500 million contribution from the IFC and an additional contribution from donors of $1.4 billion. But these new donor resources should be conditioned on strong execution of reforms.

Second, we welcome the commitment to adopt a World-Bank-Group-approach to the PSW, including through better diagnostics and efforts to deploy the full suite of World Bank Group instruments. The ability to address policy-based risks and commercial risks should entail the development of more transformational projects, and we look forward to seeing evidence of how this works in practice.

Third, we view the proposal to increase the transparency of the PSW as a significant improvement over current practice, including four new disclosure indicators: IFC/MIGA own account commitments, commercial co-financing, development finance institution co-financing, and an ex-ante narrative on project outcomes. In addition, we would urge that mobilization data include project-level private finance mobilization—with direct and indirect mobilization reported separately—and project-level ex ante and ex post impact scores. This is a much-needed reform because currently the IFC simply reports that the PSW has mobilized $26 billion, without any disaggregation of that figure.

Fourth, we view the commitment to support 20 countries in the development of domestic capital markets as a good complement to PSW resources. To the extent that the PSW is used, the IFC should offer evidence that the subsidies played a demonstrable role.

Finally, we welcome the decision to support “mainly long-term finance investments,” but believe a strict limit on any subsidies for short-term trade finance needs to be established.

Charles Kenny on the private sector window

As Clemence notes, she and I wrote a blog cautioning that a bigger IDA should not come on the back of more expensive loans or less effective windows. It appears both approaches are being used. Capping country grants at $650 million (from $1 billion) is a way to make IDA bigger overall but smaller in the countries that need it most. I’m skeptical that counts as a good thing.

It is good news that the IFC will start supporting subsidies to IFC projects through the PSW rather than relying solely on IDA funding for that cause, but the IFC should play a larger role and IDA a considerably smaller one. In that regard, the lower provisioning ratio is helpful and can be used to further reduce the burden the PSW places on IDA, preferably to below $1 billion. There is no reason to expand the scale of a window that has demonstrated such limited impact to date, or ability to find transformative projects.

The commitment to greater PSW transparency is welcome, but it is notable that information that the IFC committed to its largest shareholder that it would release is not in this disclosure: not least, subsidy costs and name, location by city, and sector for financial intermediary subprojects that are the most environmentally or socially concerning.

Furthermore, the document is silent on principles around the PSW that the IFC committed to: increasing the share of public concessions supported by the PSW that are tendered on a competitive basis, and ensuring that at least 35 percent of IFC IDA-PSW supported projects use competitive or open access approaches. Both reporting and further progress (including targets) should be included.

Again, regarding subsidies, the IFC committed to ensure that any PSW subsidy for projects is less than 10 percent of project costs and seeking IDA Board approval prior to providing any subsidy above that amount. This commitment should be reported on and updated.

The draft report claims that this is “the most ambitious IDA cycle to date in advancing gender equality.” Unfortunately, I believe that the criteria for the new gender lens institutional-level policy commitment and the methodology for accountability are insufficient to ensure that IDA21 will actually realize that claim.

Throughout the IDA21 replenishment negotiations, colleagues and I have articulated the uniquely important role that IDA plays in advancing gender equality, based on evidence of impact, and the risks associated with the drastic cutbacks in the number of policy commitments. I think streamlining, institutional alignment, and reducing administrative burdens for IDA recipients are sensible goals, but these need to be weighed against IDA21’s potential for impact in recipient countries. As emphasized in a recent blog post, I see the revised policy package as a further step back in terms of IDA’s impact and value-add in target setting, financing, and accountability for gender equality.

Upon the release of the May 2024 version of the policy package, I supported the gender-based violence (GBV) and childcare gender lens policy commitments but pushed the World Bank to go further with specific recommendations for additional gender lens and cross-cutting policy commitments to not lose ambition and impact compared to IDA20. There was no uptake of these recommendations. Instead, the revised policy package cut the GBV and childcare country-level policy commitments and replaced them with a single institutional-level policy commitment on implementing the gender strategy “in a customized way” in all IDA countries.

While an IDA country-wide institutional commitment is admirable, and clarity on what will be required to consider the gender strategy implemented welcomed, I find the criteria too broad to ensure meaningful impact. From the draft report:

“The Strategy will be considered implemented if the country program includes gender equality outcomes in a new CPF, supports institutional and policy reforms toward gender equality, or finances at least one operation that primarily focuses on gender equality, aims to reach gender equality at scale, or includes a gender transformative intervention.”

Notably, the list of what will constitute implementation is strung together with “or” between them, when what is needed to achieve impact must combine these components. Specifically, implementation must go beyond the simple inclusion of gender equality outcomes in a country partnership framework (CPF), and ensure there is concrete support for gender equality reforms through substantive and appropriately resourced operations.

Moreover, what constitutes a “gender transformative” intervention is not defined in the draft report or in the recently released World Bank Group 2024-2030 Gender Strategy Implementation Plan. Absent clarification, this amplifies concerns that the proposed institutional commitment will be hard to assess and measure, and thus less robust than what is achievable through more specific country-level policy commitments. Though areas of focus within IDA21 gender strategy implementation are listed, besides sexual and reproductive health (SRH), there are no country targets.

Country-level targets remain an important aspect of accountability for key gender equality issues in IDA countries, in part because the methodology for measuring impact on gender equality results across sectors is deeply flawed. The report states that the reporting of sex-disaggregated data across the World Bank Group/IDA scorecard indicators is illustrative of “the inclusiveness of IDA’s results across diverse outcome areas, from health to climate resilience.” Unfortunately, they intend to use the proportion of the female population in each country to estimate and report on female beneficiaries when sex-disaggregated project results data are not available. This method relies on the dubious assumption that the project benefits the same percentage of women as their share in the total population. I have already stressed that this approach is neither accurate nor transparent and undermines credibility.

Fortunately, there is still opportunity for important actions to support greater ambition and accountability. These include: strengthen and clarify the criteria for the institutional-level policy commitment; restore country-level action policy commitments on childcare and GBV which exceed targets in IDA20; integrate gender equality and inclusion in the other focus areas and lenses, particularly climate, infrastructure, and prosperity; integrate country targets for fragile and conflict-affected states (FCS) throughout policy commitments; commit to only reporting sex-disaggregated data where it is based on actual project results; and commit to reporting on IDA country-level impact for gender issues publicly, not just to the IDA Deputies, as stated in the report.

Thomas Ginn on the Window for Host Communities and Refugees

In June, Helen Dempster and I published a blog post that outlined concerns about the proposal to merge the Window for Host Communities and Refugees (WHR) with the Regional Window. We see the WHR as one of the most important instruments to fund development interventions in displacement settings and to incentivize necessary policies for refugees like labor market access. In IDA21, the WHR will be a sub-window within the Global and Regional Opportunities Window (GROW). We appreciate that some of our recommendations have been incorporated into the new window, specifically that the financing in the sub-window will remain dedicated to refugee situations, that the levels of financing are at least as large as IDA20, and that half of the WHR financing will be grants.

However, we are disappointed that an explicit commitment on policy change toward refugees has not been included in IDA21. In IDA20, the commitment for at least 60 percent of eligible countries to implement significant policy reforms was integral for aligning WHR priorities with client countries and the rest of the World Bank. However, it is clear from discussions with Bank staff and external stakeholders that these policy discussions—even with IDA20’s explicit commitment—are often low priorities for key World Bank staff and client governments, given the WHR’s relatively small share of funds. Dropping this policy commitment only reinforces this narrative. We believe it is critical that this commitment is strengthened, not removed.

Furthermore, the proposed new window ends the requirement for countries to finance 10 percent of WHR projects with their performance-based allocations (PBA). In previous WHR cycles, this requirement has served as a (minimal) screening mechanism to ensure host governments—who are often opposed to integrating refugees—are invested in the project’s success. Combined with the lack of a policy commitment discussed above, the new sub-window unnecessarily waters down both the self-selection and external accountability that help allocate WHR funds effectively toward countries and projects that are focused on reform and inclusion for refugees. This is counter-productive and should be reconsidered.

Finally, we appreciate the statement that “IDA21 will continue to strengthen partnerships and systematic cooperation” and hope this will be exercised in practice. As our forthcoming paper on the WHR argues, opportunities are often missed because of inadequate attention and lack of coordination with humanitarian and diplomatic partners on key priorities for refugees. We strongly encourage additional staffing and meaningful engagement from relevant country leadership to maximize the potential of WHR funds in IDA21.

Our Take on the IDA 21 Draft Replenishment Document

The global projected investment requirement for climate action as estimated by the latest IHLEG report is around $6.3–6.7 trillion per year by 2030, of which $2.3 - 2.5 trillion will be in developing countries (incl. emerging economies) other than China. As a means of comparison, the IMF estimated that the world spent $7 trillion on fossil fuel subsidies in 2022 alone. This shows that while the figures may seem staggering, it is possible to mobilize the financing to address climate change effectively.

Developing countries, and in particular the Least Developed Countries (LDCs) and Small Island Developing States (SIDS) will continue to require international support to be able to fund their response to the climate crisis and provide their population with renewable energy access. The New Collective Quantified Goal (NCQG) outcome will have to determine the level of support they will be able to count on in the future.

Many countries and experts have been calling for the NCQG to reach at least $1 trillion per year to help poorer and more vulnerable countries with the just energy transition and address adaptation challenges. The core of the NCQG must be funded through international public finance and include a significant amount in highly concessional financing, including grants for highly indebted countries. While part of this funding must continue to come from wealthy countries’ budgets, for instance as part of their Official Development Assistance (ODA), it is insufficient to limit the concessional financing on ODA only, mostly for two reasons: ODA in key donor markets is being cut heavily, as Global Citizen’s tracker shows; and even if all donors were to meet their commitment to allocate 0.7% of their GNI to ODA, the amount (around $420 billion, nearly twice as much as today) wouldn’t be enough to address for instance climate adaptation in poorer countries, let alone other priorities such as access to health and education.

The below table shows that agreeing on an ambitious NCQG is not a question of means, but of political will. The money is there - and most often, the instruments to mobilize more resources could also help to drive down emissions. It also shows that an ambitious quantum for the NCQG doesn’t have to come at the detriment of the quality of funding, as most instruments below would raise money which could be reallocated in the form of grants. The only exceptions are MDB reform and Special Drawing Rights (SDRs). Agreeing on a clearly defined NCQG while giving it credibility through the endorsement of new financing sources such as levies, an ambitious timeline on the phaseout of fossil fuel subsidies and further MDB reform is needed and possible.

An ambitious and credible NCQG delivering high quality funding, including to the poorest and most indebted countries, is a matter of political will!

More details can also be found in Global Citizen’s Where’s The Money report and on the There Is Enough Money page.

Over the last year, the International Development Association (IDA), the arm of the World Bank that provides grants and concessional loans to the world’s poorest countries, has undergone its 21st replenishment (IDA21). This replenishment comes as the World Bank Group implements significant reforms aimed at becoming a “Better and Bigger Bank,” including by aligning IDA policy commitments with the new Corporate Scorecard. These priorities are reflected in the IDA21 Draft Replenishment Report, “Ending Poverty on a Living Planet: Delivering Impact with Urgency and Ambition,” released ahead of the final pledging session on December 5-6, 2024. This draft report details IDA’s policy commitments for the next three-year cycle, starting July 2025. BIC provided input on the draft report, emphasizing the importance of IDA in providing added value for the world’s poorest countries and the most marginalized groups within those countries. 

As the world faces compounding crises, including climate change, economic downturns, and the rise of authoritarianism and conflict, IDA plays an essential role in addressing our most critical development challenges and setting high standards across the field. IDA21 should build on IDA20 to include specific, actional policy commitments, as detailed above, that prioritize supporting all countries to adapt to climate change, the inclusion of marginalized groups, and accountability and transparency for IDA-funded projects. Such commitments would maximize IDA’s value to the citizens of borrowing countries and help fulfill countries’ unique development goals. An oversimplification of the IDA21 policy package by duplicating the Corporate Scorecard and increased emphasis on scale and speed without proportional accountability measures puts this impact at risk.

BIC’s comments on the IDA21 Draft Replenishment Report

BIC Provides Input on the IDA21 Draft Replenishment Report

Development finance institutions owned by European governments and the World Bank Group are spending hundreds of millions of dollars on expensive for-profit hospitals in the Global South that block patients from getting care, or bankrupt them, with some even imprisoning patients who cannot afford their bills.

At the height of the COVID-19 pandemic, some of these same hospitals denied entry to patients suffering from the virus or sold intensive care beds at eyewatering prices to the highest bidder. These development institutions have woefully inadequate safeguards, invest via a complex web of tax-avoiding financial intermediaries, and offer little to zero evidence on the impacts their investments are having. Oxfam is calling on rich-country governments and the World Bank Group to immediately halt their spending on for-profit private healthcare, and for an urgent independent investigation to be conducted into all active and historic investments.
 

2024 Washington DC Panel | Public Health vs Private Wealth?

On June 6, 2024 Oxfam hosted an expert panel event, Public Health or Private Wealth? to explore fundamental questions about the appropriateness of public funds mandated to fight poverty and achieve global development goals being used to finance for-profit private healthcare in the Global South.

The aim of the panel was to bring together global health stakeholders to discuss the impact of World Bank Group financing of private healthcare in the Global South.  

The discussion – moderated by Oxfam America’s Global Economic Change Manager Maaza Seyoum – looked at the impacts of these investments in a world where half the global population is currently denied access to even the most essential healthcare.  

In response to this challenge, actors like the World Bank Group are advocating for greater inclusion of the private sector in the financing and delivery of healthcare in low- and middle-income countries.  

Mounting evidence indicates that in pursuing this approach the World Bank’s International Finance Corporation (IFC) and other Development Finance Institutions (DFIs) are funding expensive out-of-reach private hospitals and clinics in low- and middle-income countries that are widening healthcare inequalities, exacerbating poverty and gender-based discrimination and violating human rights. Far from advancing progress towards Universal Health Coverage as governments have committed, this form of development finance is undermining it.  

Who were our panellists and what did they have to say?

Award-winning US journalist and author Gretchen Morgenson opened the panel to speak to the findings of her new book on the role of profit-hungry private equity firms in American public services and help situate the discussion of international development funds being used to encourage a greater role for private finance and private equity funds in global health in the US experience. She explained the varied insidious tactics used by profit-hungry private equity firms to extract profit from US public services, including healthcare. There is a growing body of evidence highlighting how the resource extraction tactics of these firms - that lead to fewer staff, less resources and poorer working conditions - result in worse patients' outcomes. For example, in nursing homes owned by private equity firms, residents experienced 10% greater mortality.

Why is this relevant to the discussion on IFC investments in healthcare? Well, a significant tranche of IFC healthcare investments are made indirectly, through financial intermediaries, mostly private equity firms. As Gretchen explained, these firms are notorious in the US healthcare system for maximising short-term high returns for investors at any cost and via the IFC they are being entrusted with minimal accountability to invest in the name of development and poverty reduction. She was unsurprised by the steady encroachment of private equity firms into lower-income and less regulated settings - such as the case of US based Blackstone buying up Care Hospitals in India - and described this as being “depressingly familiar” to what has happened for years in the US healthcare system.

Read "These Are The Plunderers: How Private Equity Runs and Wrecks America." 

Oxfam’s Global Health Lead Anna Marriott went on to spotlight what the profit motivations of private equity firms and IFC-investee hospitals means for patients in practice by sharing the stories of two women, including Franciska, whose mother’s dead body was detained by Nairobi Women’s Hospital for over 2 years, due to the family’s inability to pay the astronomical fees for her medical care which continued to soar with interest.  

Anna shared Oxfam’s evidence showing a pattern of IFC investing in out-of-reach expensive private hospitals that block patients from getting care, or bankrupt them, with some even imprisoning patients who cannot afford their bills. At the height of the COVID-19 pandemic, some of these same hospitals denied entry to patients suffering from the virus or sold intensive care beds at eyewatering prices to the highest bidder. She explained how the IFC’s safeguards are inadequate, how it invests via a complex web of financial intermediaries, and how, despite decades of healthcare investing, it offers little to zero evidence of impact.

For more on these findings, read Oxfam’s "Sick Development" report.  

We were pleased to be joined by a representative from the World Bank’s IFC, Global Sector Specialist Raju Narayan, to continue Oxfam’s engagement with the organisation since our reports were published last year. We have had words aimed to reassure from IFC that they intend to act upon our findings, but are yet to receive detailed commitments on what this will look like in practice. In his interventions, Raju did not directly respond to Oxfam’s findings or Gretchen’s evidence of the US experience, but pointed to global healthcare gaps and emphasised the need for a coming together of actors in order to address them. We intend to continue engaging IFC on this issue and will keep hoping for meaningful and transparent responses.

More specifically, in response to a query on the lack of impact reports and public evidence on the merits of this approach, Raju referenced a benchmarking initiative that the IFC works on to collate a range of indicators measuring hospital performance against investment aims. These findings are not currently made publicly available however, and Raju did not share any other examples of impact.

This panel also welcomed panellists to talk about the impacts on patients and health workers in India and Kenya – two countries with a high prevalence of these types of investments. Dr Abhay Shukla of SATHI and the People’s Health Movement (PHM)-India described the reported horrific ‘cash for kidneys’ racket happening in the Apollo Hospital chain – a recipient of nearly two decades of IFC funding in India - whereby impoverished people from Myanmar are being enticed to sell their kidneys to wealthy patients. He highlighted the incoherence of wealthy, powerful healthcare corporations like Apollo and Max being funded by IFC in the first place and questioned how this model can possibly be expected to help the poorest people in India.  

Abhay challenged the IFC, arguing that after twenty-five years of investing the organisation has not contributed in any meaningful way to expanding healthcare access to the poor in India, has driven up costs of healthcare dramatically due to its model of investing and has failed to act on alarming evidence of patient rights abuses.

Dr Mercy Nabwire, of the Kenya Medical Practitioners Pharmacists Dentists Union (KMPDU) turned the focus from patients to healthcare workers as she highlighted how IFC funding is going to private hospitals with a monopoly on private healthcare provision in Nairobi. She stated that one private equity firm in which IFC is invested at one point owned 66% of private healthcare provision in the capital.  

Mercy highlighted how IFC-funded hospitals in Nairobi have been litigated against for the abuse of patients and worker rights. She described the prolific use of short-term or otherwise precarious contracts, and pressuring of healthcare workers to turn a profit by overcharging, overprescribing and delaying discharge of patients. Despite IFC’s oft repeated claims that they are creating jobs with these investments, Mercy questioned the quality and stability of these jobs, and asked how they can better align with the International Labour Organisation (ILO) standards for ‘decent work’. She also highlighted the lack of capacity for enforcement of labour standards in Nairobi and called on IFC not to shirk their responsibility for due diligence and regulation to ensure workers are protected.

In closing, Anna expressed her regret that the IFC continues to fall short in engaging and responding to the growing evidence base demonstrating the harms of their healthcare investments. She made clear that as much as the IFC wishes to dismiss the evidence as a case of a few bad apples, the evidence shows a systemic pattern of harmful and inequitable investing that is prioritising profits over patients. She wrapped up, “This isn’t just ‘feedback’. This is urgent. These are lives that need protecting.”  

Many questions came from the audience, several directed at the IFC. One audience member questioned how IFC reconciles the channelling of development funds to private equity funds who are “laser-focused on profit” and another asked for examples of countries that have successfully achieved universal health coverage through private sector investments. Abhay weighed in, stating that we must take note that there are no comprehensive and satisfactory examples of countries achieving UHC through the private sector, and that countries that have achieved UHC have done so through public finance.  

At the end of the session Abhay shared, “We have a saying in India that if a man is asleep, you can wake him up. But if he is only pretending to be asleep, you will not be able to wake him.”

We hope that IFC now has its eyes wide open and are awake to the harms that their investments in private, for-profit hospitals in low- and middle-income countries have – and continue – to cause.

An open statement supported by over 70 civil society organisations from all around the world was launched at the event, calling on all the IFC – and other DFIs – to stop spending development funds of for-profit private healthcare providers.  

Sick Development: How rich-country government and World Bank funding to for-profit private hospitals causes harm, and why it should be stopped

The global community is running out of time and falling behind on financing shared climate and development goals, with the United Nations warning that 85 percent of the 2030 Sustainable Development Goals (SDGs) are either off track, stagnant or regressing. The economic and social costs of inaction will be catastrophic.

Multilateral development banks (MDBs) have a central role to play in raising ambition to get the international community back on track. But do they have the necessary policies and processes to regularly assess how they can increase financing to meet shared development and climate goals by 2030 and beyond?

A new report by the Boston University Global Development Policy Center finds that while MDBs have made important strides toward increasing their lending headroom, more ambition will be necessary to achieve development and climate goals in a timely and affordable manner.

The report estimates that to meet the lower-bound estimates of the system’s lending needs by 2030, MDBs will need to increase their lending by at least a factor of three to provide the necessary non-concessional and concessional financing.

Additionally, the study finds that, with some notable exceptions, the MDBs lack uniform, evidence-based policies and processes to assess new lending targets and resource needs.

The report was commissioned by the Brazilian Presidency to the Group of 20 (G20) as an input for the ‘G20 Roadmap towards Better, Bigger, and more Effective MDBs.’

Further raise ambition to create more lending headroom: G20 members should further raise ambition to create more MDB lending headroom to meet financing needs and provide buffers to maintain current credit ratings at the least level of new capital from shareholder taxpayers.

Identify where further ambition may be needed: The G20 should encourage MDBs to review resource needs calibrated to achieving the SDGs and Paris targets and conduct MDB-led reviews every three to five years.

Coordinate efforts to fill gaps in the MDB system: The G20 can be a platform for setting principles and tracking progress over time to assess the extent to which the individual MDB capital needs sum to a level of capital adequacy and financial capacity to put the MDB system on track ahead of 2030. Tracking would be conducted on a regular basis while avoiding impinging on the work of MDB boards and guided by robust frameworks that promote coherence with strategic objectives, operational effectiveness and resource efficiency. The G20 will need to develop a common methodology and reporting template for MDBs to report on progress.

The report ultimately argues that there is no time to waste, but MDB capital cannot be wasted either. As agents at the center of global resource mobilization for development, bigger, better and more efficient MDBs can enable new growth trajectories in emerging market and developing economies that will spill over to the broader global economy.

Energizing MDB Financing Capacity: Identifying and Filling Gaps to Raise Ambition for the 2030 Agenda and Beyond

Oxfam finds that for World Bank projects, many things can change during implementation. On average, actual expenditures on the Bank’s projects differ from budgeted amounts by 26–43% above or below the claimed climate finance. Across the entire climate finance portfolio, between 2017 and 2023, this difference amounts to US$24.28–US$41.32 billion. No information is available about what new climate actions were supported and which planned actions were cut.

Now that the Bank has touted its focus on understanding and reporting on the impacts of its climate finance, it is critical to stress that without a full understanding of how much of what the Bank claims as climate finance at the project approval stage becomes actual expenditure, it is impossible to track and measure the impacts of the Bank's climate co-benefits in practice.

The Bank should improve its reporting practices, undertake a climate finance assessment on closed projects, standardize how it reports on climate finance in projects and create a public climate finance database.

A webinar was hosted on October 17, 2024 to launch this report and you can access the recording here.

Climate Finance Unchecked: How much does the World Bank know about the climate actions it claims?

By Sally Paxton and Gary Forster | Oct 16, 2024 | Blog

Ahead of next week’s World Bank Annual Meetings, Sally Paxton and Gary Forster discuss the critical role of development banks in mobilising private capital to meet global development goals, and why we still don’t understand what is working. They present new recommendations from Publish What You Fund to fill the current knowledge gap by improving the measurement and disclosure of private capital mobilisation, and stress why action is urgently needed.

Why do we need (more) private capital mobilisation?

There is no shortage of crises today, all of which are creating both unprecedented human needs and significant strains on budgets. While donors of all stripes are being asked to substantially increase resources, there is a clear recognition that public money alone will not suffice to meet the scale of financing needed; the private sector must be an active partner.

Meeting these needs is largely what is behind the push for reform of the multilateral banking system. Some changes have been made, but on the calls for greater involvement of the private sector, including private capital mobilisation (PCM), the progress has been underwhelming. The G20 Independent Expert Group recommended that, by 2030, PCM should be increased to US$240 billion annually. A recent MDB joint report noted PCM reached US$71 billion in 2022, following a period of PCM stagnation at under US$64 billion. This is not the pace of progress that is required.

What is preventing the scaling of private capital mobilisation?

Against this backdrop, Publish What You Fund has undertaken an ambitious, 18-month initiative to tackle the two pressing issues that stand in the way of scaling up PCM: improved measurement and disaggregated disclosure. Our work entailed not only extensive research but more importantly, extensive consultations with the private sector, development finance institutions (DFIs), multilateral development banks (MDBs), shareholders and other experts.

What became clear is that scaling of PCM is hampered by (primarily two) different measurement systems that not only increase reporting burdens but also provide contradictory data on the same investments. Incentives were not necessarily aligned to approaches that best mobilise the private sector and the same instruments were not always treated consistently. Finally, the current level of PCM data aggregation hides insights into what works, distorts the data, and makes serious analysis impossible. We cannot ascertain what works and what doesn’t. Given the unprecedented needs, this status quo cannot be tolerated.

How can we improve the measurement and disclosure of private capital mobilisation?

Today we launch our final recommendation on how PCM should be measured and disclosed. This follows from our initial proposal released in April of this year and a subsequent period of public consultation. If implemented, we believe that both our measurement approach and our model for disaggregated disclosure will transform the understanding of how mobilisation works which, in turn, will help us learn, make more informed decisions, and allocate scarce public resources for maximum impact.

As a result of our public comment discussions, we made four changes to our original proposal. With these adjustments, we think there is now a solid consensus on our measurement approach. But measurement is just the first step. Probably more important is achieving the level of disaggregated disclosure that will allow for much greater understanding, decision-making, and ultimately, the scale of PCM that is required.

Measuring PCM is, frankly, complicated. DFIs play a variety of roles in their efforts to mobilise the private sector. This includes instances where DFI’s lead or play an active and direct role in an investment, but also instances where they are withdrawing from investments to allow the private sector to take their place. We’ve tried to reflect this in our proposal by splitting these roles into different baskets, all of which must be calculated and disclosed separately. Our proposal, which builds on existing work from the MDB Task Force on Mobilization and the OECD, also recommends a consistent approach to measuring PCM that aligns with incentives to promote the most effective investments and captures all relevant instruments and practices.

The changes to measurement will likely boost overall PCM figures. But that will only distort the picture if it is not accompanied by disaggregated disclosure. Discussions around disclosure have taken the bulk of our effort. We’ve talked to a range of private investors who are supportive of our proposal, and do not share the concerns of commercial sensitivity that have been made by DFIs. Our report also highlights where detailed investment data already exists on paywalled sites. Yet we are still met by claims – never detailed – that our disclosure proposal would violate commercial confidentiality. We think that is now mainly an excuse for lack of disclosure. We’ve set out a sensible path forward for mobilisation disclosure that’s achievable and in line with market standards. It calls for more detail on investments, including by sector, country, amounts, financial instrument and the type of organisation being mobilised, but it would also allow for more aggregation for certain instruments where there are legitimate sensitivity claims.

Taken together, these improvements in measurement and disclosure would give us the insights we need to target public money where it is most effective and start to reach the scale of private sector investments needed to meet global development needs.

What are the wider implications of better data?

This time last year, at the World Bank Annual Meetings in Marrakech, Ajay Banga took to the stage to share his vision for a more streamlined, more impactful Bank. His remarks included the following quote:

“We are asking a lot of the private sector. We are asking them to operate in places and in situations that their algorithms and expertise may not extend, on roads the DFIs have travelled for years. And if we are asking others to follow – we should be willing to share our map.”

Yet the maps aren’t forthcoming. The current information gap is preventing donors from judging where and how their scarce funds can be most productively deployed, shareholders from performing their oversight function, private investors from being aware of and informed about investment opportunities, and citizens from holding the banks to account.

This lack of data extends to beyond private capital mobilisation, to include climate finance and even risk data from GEMs, the Global Emerging Markets Risk Database. Disclosure of this data through strong leadership and changes to contracting practices that prevent disclosure would allow for the publication of timely, disaggregated, project level detail so it can be used by a range of actors for a range of purposes. Our proposal, launched today, provides the evidence, analysis, and concrete next steps to enable MDBs and DFIs to share their maps. This is an opportunity that shouldn’t be missed.

“What works: How to measure and disclose private capital mobilisation to increase private investment and close the SDG financing gap” will be launched at an event co-hosted with the Center for Global Development in Washington DC (and online) on 23 October, 2pm EST, 7pm BST.

Transforming our understanding of what works to mobilise private investors

by Victoria Dimond, Roland Rajah and Georgia Hammersley

This week World Bank President Ajay Banga is visiting Pacific small states, many of which benefit from the Bank’s concessional lending arm, the International Development Association (IDA). As IDA approaches its next three-year replenishment cycle, IDA21, Banga is seeking a record $28–30 billion from donors to support his headline number of a $100 billion replenishment—a big ask for many major donors facing weak currencies, economic headwinds, and other competing priorities. Still, a well-funded IDA remains crucial for the world’s poorest countries, especially in small states where it accounted for nearly a third of official development assistance (ODA) from 2018–2022, compared to roughly a quarter in non-small states. As our newly published paper argues, beyond strong funding, the Bank should also prioritize policy reforms to maximize IDA’s impact in small states.

Small states have been at the forefront of recent calls to reform the international development finance architecture, largely due to their vulnerability to climate change. Examples include the Bridgetown Initiative led by Barbados and UN Secretary-General Antonio Guterres’ urgent call for swifter climate action at last week’s Pacific Island Forum. Small states have contributed negligible carbon emissions to the global total, yet are at the forefront of experiencing the impacts of climate change, including extreme weather, ocean acidification, and rising sea levels. These impacts threaten livelihoods and economies.

Yet small states are a heterogeneous group of countries, and whether this heterogeneity extends to these countries relative climate vulnerability is a major point of debate. For example, GNIs per capita range in small states from less than $1,600 in Comoros to over $30,000 in the Bahamas. There is no agreed-upon approach to measuring climate vulnerability, and different methodologies produce different outcomes for small states. For example, Figure 1 below highlights that for small states there is no pattern between the UN’s new Multidimensional Vulnerability Index (MVI) and the 2021 World Risk Index. Both these indexes prioritize the vulnerability of small states to some degreerelative to other vulnerability indexes available, yet both indexes still have small states ranging across the available scores, and there no correlation between countries across the two indexes. Both indexes have higher scores implying greater vulnerability.

This debate on small states’ relative climate vulnerability is increasingly pivotal to these countries’ access to international development finance. The IDA Small States Exemption (SSE) allows countries access to IDA if they have populations under 1.5 million and GNI per capita below the World Bank’s high-income country threshold. The SSE covers nearly a third of countries with IDA access and recognizes that the unique characteristics of small states—including their size, limited economic base, and remoteness—results in these countries having comparable challenges to other IDA-eligible countries with lower per capita incomes. The SSE costs the international community relatively little, with these countries receiving just three percent of IDA’s total envelope. Figure 2 below shows that many higher-income small states are excluded from IDA. Many of these countries are considered vulnerable in the new MVI. Our paper shows that the IDA SSE functions like a climate vulnerability criterion for many lower-income small states that are vulnerable across other climate indexes access to IDA. We also show that using the MVI in place of the SSE could potentially create worse financing outcomes for many of these lower-income countries who are unlikely to be considered vulnerable under the MVI and would therefore possibly lose access to IDA under such a proposal. Going forward, questions remain as to whether the MVI could be incorporated into IDA’s eligibility criteria. Presently, it seems unlikely the global community would support this, as such a change could result in adding new countries to IDA that on average have GNI per capita of nearly fifteen times that of the FY24 IDA cut-off.

A key element of small states’ climate advocacy is to scale up concessional adaptation finance. Our paper highlights that these countries disproportionately use IDA’s concessional funds for adaptation compared to non-small states. Figure 3 below shows that between 2015 and 2022, SSE countries generally had a higher proportion of their IDA commitments tagged as adaptation finance compared to non-SSE countries. Given the scale up in IDA’s financing over this period and that IDA’s financing programs are demand-driven, this finding could potentially indicate that if small states were to receive more concessional finance, they would be more likely to allocate it to adaptation than other countries. We also highlight that small states disproportionately use IDA for place-based investments, while non-small states tend to use IDA to invest more in people-based investments. Our paper argues that going forward, small states may benefit from increasing their investment in human capital and social protection systems as part of their adaptation programming.

Small states need options to better scale up  adaptation finance. Many developing countries advocate for adaptation financing to be provided on grant terms given historic injustices, yet the volume of grant finance needed has not been forthcoming. Given this, our paper makes the case for careful consideration for giving small states the ability to trade off some of their IDA grant allocation for a larger volume of concessional loans in cases where additional financing is needed for macro-critical adaptation investments. Recent analysis by the IMF highlights that in some circumstances, concessional loans for adaptation can enhance debt sustainability by improving the economy’s resilience to future climate-driven shocks. Such an option would need to be made available to small states on a demand-driven basis, while the debt sustainability implications would need to be assessed carefully case-by-case. Additionally, given the relatively good debt management in most small states, we argue that in the future, IDA could consider further hardening its terms for countries with poorer debt management. This would likely free up considerable resources for IDA as a whole and incidentally benefit small states.

Another key concern for small states is disaster financing. Our paper explores the World Bank’s programming in this space to date and the new Comprehensive Toolkit to Support Countries after Natural Disasters. Historically small states have benefited the most from IDA’s disaster products when they provide new funding and when countries can control their access (rather than being dependent on a disaster meeting a predefined trigger). IDA’s disaster tools have typically been small relative to the scale of the disaster and the funding needed to respond. New tools designed to scale up financing in disasters mostly provide flexibility for using existing funding, rather than new resources. These tools range in the size of their response and the degree of control countries have in using them. Ideally, these new tools will provide countries with greater flexibility for using their World Bank funds and could be deployed together for a greater impact. As these tools are new, their usefulness is untested.

Lastly, we argue the Bank should focus on key administrative reforms, including improving data quality in small states, to improve effectiveness. Given their limited institutional capacities, small states could gain from reform efforts within the IDA21 policy package, including the SimplifIDA initiative aimed at reducing the complexity of IDA’s policy framework, and the new World Bank Scorecard, which narrows the focus to 22 performance indicators, down from 150. However, concerns remain about the Scorecard’s focus on absolute figures, which may disadvantage countries with smaller populations, alongside perennial data quality issues that hinder coverage in these states. For instance, the World Bank’s Country Opinion Survey Program has only reached 56 percent of IDA small states, largely due to poor coverage in Pacific Island microstates. Streamlining efforts and resolving data challenges will be crucial for greater impact.

A successful IDA21 replenishment is needed to sustain essential development and climate support in small states, but key policy reforms would also improve the World Bank’s effectiveness in these countries. Over the last decade, IDA has grown to become a vital source of support for highly climate-vulnerable small states. But with financial pressures on IDA, strong donor support is required for this to continue. As December’s replenishment deadline nears, President Banga’s visit to Pacific small states also offers a prime opportunity for donors and small state recipients themselves to push for reforms that will maximize IDA’s impact.

CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.

The World Bank’s IDA Is a Vital Lifeline for Pacific Islands and Other Small States

As the World Bank assesses its progress after one-year of its claim to be Paris-aligned, it is an opportune time to reflect on how the process can be strengthened to be more aligned with the goals of the Paris Agreement. The Bank has produced instrument and sector notes detailing how it will operationalize Paris alignment in lending instruments and in each sector. BIC has reviewed a number of sector notes (our recommendations can be found here). 

While reviewing the Transport Sector Note, we were concerned that the Note does not prohibit financing of internal combustion engine (ICE) vehicles despite the need to reduce emissions by 80 to 97 percent in the next 26 years to limit warming. In addition, we found little to no recognition of how the vulnerability of transport systems to climate change will disproportionately affect marginalized groups, including persons with disabilities, who are most exposed to the negative consequences of climate change. The Note does not recognize different transport needs and how they can either support transport decarbonization efforts or lead to an increase in transport emissions. For instance, persons with disabilities may be more reliant on low-occupancy vehicles to meet their transport needs, leading to more vehicles on the road and higher greenhouse gas emissions. As the Bank designs and implements new transport operations that are Paris-aligned, these systems should be accessible to all. In this brief, we provide recommendations for the Bank to adopt a disability-inclusive approach to climate action in the transport sector. 

How Can the World Bank Integrate Climate Action and Disability Inclusion in Transport?

During 1-22 July 1944 over 700 representatives from 44 countries met in Bretton Woods, New Hampshire for the United Nations Monetary and Financial Conference. 

This conference (also known as the Bretton Woods Conference) set up international monetary and financial architecture post-World War II, by launching the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). 

The President of the conference was Henry Morgenthau, US Secretary of Treasury. The US was the organizing country and the largest economy in the world, contributing around 35% to the global GDP in 1944.  

The debates were organized in three Commissions, following talks between the representatives of the US and UK in Atlantic City in June 1944: 

Commission I of the Fund, with Harry White (chief international economist of the US Treasury) as President; 

Commission II of the Bank, having as President the famous British economist J.M. Keynes; 

Commission III on Other Means of International Financial Cooperation, headed by Eduardo Suarez from Mexico. 

The White Plan was focused on the creation of the IMF, an institution to play the role of a central bank. It would control capital flows and use the US dollar as the reference currency of the international system. 

The Keynes Plan mentioned the creation of a new international currency (BANCOR) to support foreign exchange transactions within the IMF. In a system characterized by the creation of the International Clearing Union (ICU), the quota of the participating countries was dependent on their weight in international trade. According to this plan, the countries confronting imbalances in terms of balance of payments were debited/credited in order to avoid competitive depreciations. 

The spirit of the Bretton Woods Conference in 1944 consisted of promoting economic cooperation as a fundamental principle for peace and prosperity. 

The representatives to the Bretton Woods Conference supported the creation of the international financial institutions, with the IMF playing the central of promoting economic growth through trade and financial stability, in line with the White Plan. 

The quotas of the participating countries were established based on the formula of the United States (belonging to Professor Raymond Mikesell, from the Treasury), taking into account several macroeconomic variables, including national income, international reserves, and dynamics of the international trade flows (exports, and imports). 

The first five countries (USA, UK, USSR, China, and France) had a cumulative weight of over 70% in the initial structure of quotas.

Initially the currencies of the participating countries were convertible to US dollars (at a fixed parity), while the US dollar was the only one convertible to gold for foreign governments and central banks (at the price of USD 35/ounce). 

The Bretton Woods model was sustainable during the first decades following WW II, as emphasized by Professor Eichengreen, given the control of international capital flows, the high degree of financial regulation, and the dominant position of US economy and US dollar. 

However, the Bretton Woods System as launched in 1944 turned unsustainable in the 1960s, due to the challenges the US economy was confronted with: focus on domestic full employment and the persistence of a balance of payments deficit. 

In fact, the challenges the system was confronted with in the 1960s contributed to the development of international literature on optimum currency areas, starting with the seminal paper of the Nobel Prize Economist R. Mundell.  

In this context, at the IMF Annual Meetings in 1967 (Rio de Janeiro) there was an agreement on Special Drawing Rights (SDR) (paper-gold), while in August 1971 US President Nixon suspended the convertibility of the US dollar to gold. 

Furthermore, in December 1971 the Smithsonian Agreement marked the end of the international monetary system of Bretton Woods, with free-floating exchange rates regime in function from the Spring of 1973. 

80 years since the Bretton Woods Conference the world economy is confronted with unprecedented challenges for the period following World War II, among which I mention: 

economic confrontation between US and China (the largest economies of the world, contributing more than 40% to global GDP); 

the arms race – world military spending per capita hit record levels in 2023; 

the race of subsidies and trade barriers among the largest economies of the world; 

the decline of the weight of the European economies in global GDP; 

the significant increase of the weight of the Global South countries in the world economy; 

the intensification of international cooperation among emerging and developing economies; 

Furthermore, there is an accumulation of signals and upside risks for the outbreak of a new global economic crisis, given the challenges of public finance (including the alarming increase of the public debt in US, where the snowball effect is imminent), persisting geo-political tensions, overvaluation of stock markets, and cyber risks. 

In fact, the strong upward trend of the price of gold in recent months (close to the record level of USD 2500/ounce) confirms the increasing probability of the outbreak of a new global economic crisis. 

Therefore, nowadays the need for a new Bretton Woods is higher than ever. 

As it stands, Bretton Woods Institutions are very prepared to counter the current challenges the world economy is confronting, including the multiple crises, as reflected by the report of the Bretton Woods Committee in April 2024.

All views expressed by members are their own and not reflective of the views of the Bretton Woods Committee.

80 Years Since the Bretton Woods Conference

Jubilee USA partnered with Friedrich-Ebert-Stiftung New York to publish a series that gathered practitioners to write on the theme "Debt Sustainability Assessments and their Role in the Global Financial Architecture." The papers will be chapters in a report to appear later in the summer. 

Debt Sustainability Assessments and their Role in the Global Financial Architecture

July 2024 marks the 80th anniversary of the Bretton Woods Agreement that established the post-World War II multilateral economic order, including the International Monetary Fund (IMF), the precursor to the World Bank, and early global trade governance systems that provided the structure and form of the World Trade Organization (WTO), established in 1995.

A new flagship report by William N. Kring, Rishikesh Ram Bhandary, Rachel Thrasher, Marina Zucker-Marques and Tim Hirschel-Burns synthesizes the work of the Boston University Global Development Policy Center (GDP Center) on global economic governance focused on the Bretton Woods institutions across three key pillars of financial stability, development finance and trade.

While the Bretton Woods institutions have established a rules-based, multilateral system of global economic governance, the GDP Center’s policy-oriented research finds that this system is in urgent need of fundamental reform. This report recognizes both the benefits and contributions of the multilateral institutions established at Bretton Woods, while identifying areas where reform is required. While these institutions have expanded the range of options available for countries, they are indicative of a long gridlocked system that has not transformed itself to accommodate existing economic realities.

Building on GDP Center research, this report outlines key global economic governance reform proposals to ensure a bigger, better and more inclusive Bretton Woods System in the coming decades. The authors identify pathways to improving global economic governance architecture and ensuring that there are sufficient resources to foster financial stability and development; improving the functioning of the global economic governance system; and increasing voice and representation for emerging market and developing economies (EMDEs) within these institutions.

Scale up resources for financial stability and development finance.The IMF and the World Bank need to be equipped with resources that are commensurate with the needs and priorities of EMDEs. The World Bank and other development finance institutions need to play a key role in supporting the ‘big push’ of investments needed to achieve development and climate goals. Likewise, a well-resourced IMF is needed for an effective Global Financial Safety Net.The multilateral trading system should facilitate the scaling up of development, climate resilience and mitigation by increasing trade with developing countries in climate-friendly technology and products. An effective response to the climate crisis requires participation by all countries. If the Global South is left behind, without access to key technology to make the energy transition, or stuck once more with the short straw of supplying primary commodities for the new renewable energy supply chains, those countries will be hindered from taking climate action, and will face additional political obstacles to participating in the global project.

Overhaul lending practices and priorities at the Bretton Woods institutions.The World Bank needs to shift its lending towards supporting structural transformations in EMDEs. This structural shift needs to be supported by appropriately calibrated instruments. The social and environmental risks of a big push need to be minimized and the World Bank operating model needs to better recognize the financial risks faced by members.The IMF needs to improve its lending practices and tools. The IMF and World Bank should improve their Debt Sustainability Analysis framework to account for the necessary development and climate investments and shocks. Moreover, the IMF should eliminate surcharges on borrowing members to avoid further buildup of debt vulnerabilities. Finally, lending conditions and restructuring packages should be connected to growth enhancing plans, rather than austerity packages.WTO members need to proactively transform the multilateral trading system so that it facilitates increased innovation, production and trade in essential climate-related products and discourages continued reliance on fossil fuels.

Enhance voice and representation across all pillars of the Bretton Woods institutions.For the IMF and the World Bank, a significant rebalancing of voting power must be complemented by fundamental governance reforms to ensure more voice and representation for EMDEs.For the WTO, this means maintaining a commitment to multilateral decision-making, recognizing the economic and social impacts of Global North policymaking on the Global South, and allowing special and differential treatment for those countries that need more flexibility during the energy and economic transition.

Mounting global challenges and intersecting crises require an ambitious multilateral response. The 80th anniversary of the Bretton Woods Agreement presents a key opportunity to transform these institutions to meet the needs and aspirations of people around the world.

The Bretton Woods Institutions at 80: Towards A Bigger, Better and More Inclusive Global Economic Governance Architecture

Join us for the launch of the 2024 Aid Transparency Index with @BrookingsGlobal on July 16th.


Time and Date: 9:30 AM - 11:00 AM EDT, Tuesday, July 16, 2024 

Location: The Brookings Institution Falk Auditorium, 1775 Massachusetts Ave NW, Washington, DC, 20036

Transparency of data and other information on development and humanitarian assistance helps stakeholders understand where aid is provided, for what purpose, how it is delivered, and what results it achieves. Transparency also promotes collaboration among aid donors and implementers and ensures accountability to citizens of both donor and partner countries.