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

Bretton Woods Committee  | Tue, May 28, 2024

The IMF should sell a very modest amount of its gold holdings to generate resources for maintaining subsidized interest rates on its future lending to Low Income Countries (LICs).

The IMF is a prized global institution, having helped nations across the globe for 80 years in promoting economic reform.  Its membership includes nearly 70 LICs and over 40 in Sub-Saharan Africa.  

The Fund’s primary job is to support macroeconomic stabilization, a necessary but not sufficient condition for growth and poverty alleviation. It does so in LICs through program lending from the IMF’s Poverty Reduction and Growth Trust (PRGT).   

LICs face enormous economic challenges which have intensified following the pandemic -- 16% are in debt distress and 39% at high risk of debt distress.1

PRGT lending is highly concessional.2 It is distinct from IMF quota resources. The PRGT is financed by members making voluntary loan contributions.  Then, subsidy resources allow those loans to be made at a zero percent interest rate with a maturity of 5-1/2 to 10 years.  There are now over 30 PRGT programs; total lending commitments are nearly $35 billion. 

But the PRGT’s future finances are not sustainable given high prospective demands and rising interest rates.3 The amount of subsidy resources is increasingly falling short in being able to furnish zero (or even near-zero) interest rate loans in a way that is self-sustainable for the future. 

IMF gold sales are a simple, practical way to shore up the PRGT’s finances.  Precedent exists to sell IMF gold.4

The IMF now holds 90 million ounces of gold, valued on its books under $50 an ounce, in contrast with gold prices over $2300. IMF gold sales for PRGT subsidies would require US Congressional approval.

In the late 1990s, gold sales were proposed to finance the IMF’s contribution to the enhanced Heavily Indebted Poor Countries debt relief initiative for LICs.  The announcement, on top of gold sales at the time by leading European central banks, sharply drove down gold prices. Gold producing countries and US gold producing firms protested loudly.  The requisite resources were ultimately generated instead by complex opaque IMF book transactions.

Around 2005, IMF gold sales were suddenly proposed to finance the IMF’s part of the Multilateral Debt Relief Initiative.5 Surprised gold producing countries and firms protested, fearing detrimental gold market consequences.  Alternative means of generating IMF MDRI resources were found. 

In 2007, amid a quiescent global economy with little IMF lending and looming deficits, gold sales were proposed as part of a “new income model” for generating resources to sustain the global public goods afforded by IMF non-program operations.6 The membership agreed and 12.9 million ounces were later sold.  Between the time of the agreement and the sales, gold prices rallied and the IMF received windfall profits beyond the “new income model” needs, which were allocated to PRGT subsidy resources.  

Why did this effort prove successful when prior attempts failed?  Success was achieved on this occasion largely due to quiet cooperation between US Treasury and the World Gold Council.7

The WGC – the pivotal association of the world’s largest gold producing firms -- recognized the IMF’s systemic importance and that the IMF had valid reasons to wish to mobilize an undervalued asset.  

Accordingly, the WGC worked constructively with US Treasury on designing sales that would not upset global gold markets:  sales would be limited; not add to official golds sales planned by Europe at the time8; be conducted to the greatest extent possible off-market9; and any on-market sales would be stretched out over time, if needed.  The WGC informed US Congressional representatives from gold-producing states of its willingness to go along with such a sales plan.10 

Today, the PRGT lacks sufficient subsidy resources to operate on a self-sustained basis that would allow the IMF to meet the prospective needs of LICs on appropriately concessional terms, especially at a time of higher global interest rates and rising demands.  

The IMF could presumably transfer some of its future earnings for PRGT subsidization (e.g. future surcharge income exceeding its capital needs), but such income can be unpredictable, the Fund is considering reducing its surcharges, and the IMF will continue to face risks and need to protect its financial strength.  

Limited gold sales instead could fill the void. Given current gold prices, sales of even 5-6 million ounces – little more than 5% of IMF gold holdings – could generate more than $10-12 billion in PRGT subsidy resources.11 That is a much smaller sales amount than earlier with a far larger return and would still leave massive IMF gold holdings to protect the Fund’s rock-solid balance sheet.   There is currently strong demand for gold from global central banks and investors – especially from China, from all reports -- such that off-market sales could be easily conducted.  Any needed remaining market sales, especially if stretched over time, would represent a fraction of global gold demand.    

It might take a few years to reach agreement on and execute limited gold sales.  Yet it is an idea whose time has come – again! 
 

1See IMF: “Macroeconomic Developments and Prospects for Low-Income Countries – 2024”.

2LICs arguably need grants, but the IMF doesn’t have the capacity to provide grants nor can it extend decades-long support such as IDA.

3https://www.imf.org/en/Topics/PRGT#:~:text=The%20PRGT%20is%20the%20Fund's,institutions%2C%20and%20the%20private%20sector

4For an earlier piece on this topic, https://www.csis.org/analysis/us-call-modest-imf-gold-sales-help-africa

5https://www.ft.com/content/d4bbfe32-7697-11d9-b897-00000e2511c8

6https://www.imf.org/en/News/Articles/2015/09/28/04/53/soint051b

7These gold sales would not have been possible without the extremely helpful and constructive support of George Milling-Stanley, then Managing Director for Government Affairs at the WGC.  George is now Chief Gold Strategist at State Street Global Advisors.

8https://www.gold.org/what-we-do/official-institutions/central-bank-gold-agreements/first-central-bank-gold-agreement. Francesco Papadia, then Director General for Market Operations at the ECB, helped invaluably facilitate Europe’s role. 

10Legislation incorporating US support was passed in 2009.

11The amount of needed gold sales will require an up-to-date assessment of financing needs. The IMF will be doing so in the near future as part of an upcoming review of the PRGT facilities and financing.  The IMF discussed these financing assumptions in a July 2021 staff paper – Fund Concessional Financial Support for Low-Income Countries – Responding to the Pandemic.  The data are further discussed in https://www.csis.org/analysis/us-call-modest-imf-gold-sales-help-africa

Mark Sobel is a member of the Bretton Woods Committee Advisory Council, US Chair of OMFIF, and former US Treasury Deputy Assistant Secretary for International Monetary and Financial Policy and US representative in the IMF. 

IMF Gold Sales to Support the World’s Poorest Countries: A Small and Simple Step to Help Fight Global Poverty

In an op-ed for Project Syndicate, the authors of BWC's latest Multilateral Reform Working Group report call for the International Monetary Fund and the World Bank to continue their demonstrated ability to adapt to changing circumstances. In the face of increasingly complex, shared challenges like climate change, both institutions must evolve to fill major gaps in today's global-governance architecture.

The piece outlines the findings of the gaps analysis employed in the group's inaugural report. The analysis finds gaps in governance, implementation, and accountability for both the public and private sector that need to be filled in order to adequately address challenges of the global commons. 

OP ED: The Bretton Woods Institutions We Need

BWC's latest publication calls for the IMF and WB to be significantly strengthened and empowered to meet the challenge of the 'global commons’—issues that transcend national borders—with a particular focus on climate change.

The report points to several 'gaps’ in both the public and private sector –-in governance, implementation and accountability – that must be tackled if climate progress is to be made at the speed and scale required. The World Bank and the IMF—given their global membership, shareholding model, and weighted voting structures—are best placed to fill the global governance gap. However, for them to take the global leadership in coordinating and implementing the necessary climate change solutions, the report proposes that their roles should be augmented, and not supplanted, to help fill these gaps. 

This is the first report from BWC’s Multilateral Reform Working Group, led by Joaquim Levy and Axel Weber.

NEW RELEASE: Strengthening the Bretton Woods Institutions to Meet 21st-Century Global Challenges

Bretton Woods Committee  | Mon, Nov 20, 2023

Read the Climate and Energy Transition Finance Team's Latest Brief Here.

How a new climate accelerator in the World Bank can help

The summer of 2023 may go down in history as the season climate change became impossible to deny. Nearly 20,000 heat and precipitation records were broken in the month of August alone. In the US, major insurance companies pulled out of California and Florida because of rising costs of covering more – and more powerful – fires and floods. Devastating wildfires in Maui, Hawaii killed 115 people. In the last weeks, storm Daniel deluged northern Libya with 16 inches of rain in 24 hours, causing two dams to burst and creating a tidal wave that has killed more than 11,000 people.

And the damage does not only result from catastrophic events; new research shows that by the end of the decade, half a billion people – nearly all in developing countries – will routinely suffer through such extreme heat that it will deteriorate their health and cause other social harm. By 2050, that number could climb to 1.3 billion.

To address this enormous and desperately urgent challenge the world needs to make much faster progress in mitigating greenhouse gas emissions to prevent future climate change and in adapting to the climate change that is already certain to come.

Estimates vary, but it is clear that finance on a vast scale – as much as $3.8 trillion a year up to 2025 alone, according to a report from the Rockefeller Foundation and BCG – will be required to make the necessary changes in the way our economies work. But only a fraction of this financing is currently being provided with the biggest short fall in low income and emerging economies which often suffer the most from climate change.

It is also clear that while the multilateral development banks (MDBs) will not be able to close the climate finance gap on their own, they have a critical role to play which is currently far from being being met. The public international finance they provide is vital to undertake investments that the private sector will not touch and to create the environment where private finance can flow on a much larger scale.

Recognizing this need, the leaders’ declaration at the September G20 Summit called for “bigger, better, more effective development banks”, and the October Annual Meetings of the IMF and World Bank resulted in a joint statement setting key principles for global cooperation. The upcoming COP28 in December will be the first step taken to turn this into concrete action.

The Bretton Woods Committee’s Climate and Energy Transition Finance Project Team has looked in detail at the role of MDBs in climate finance. MDBs undertook just $50 billion of climate finance projects last year, mainly in low- and middle-income countries. Within this, the World Bank Group – based on its own definitions – delivered $31.7 billion to help countries address climate change. While some have questioned this data, it is nonetheless the highest figure ever.

But much more is clearly needed, and to help deliver this, we recommend the World Bank Group set up a new “Climate Action Accelerator” to dramatically increase the scale, speed, and impact of the Bank’s climate financing.

Led by a managing director and reporting directly to the President and the Board, the Climate Action Accelerator would coordinate all of the World Bank’s climate finance activities – mitigation, adaptation, project and policy lending, debt, and equity.

It would ensure that the Bank uses its existing capital and expert teams devoted to climate action to the maximum effect. But it would also ensure that sharply increased new lending capacity, underpinned by new capital (which shareholders should provide) and more efficient use of existing capital has the maximum impact.

The Accelerator would become the World Bank Group’s center of expertise and capital allocation on all climate finance, with staff recruited and seconded from across the organization and the private sector. And it would maintain a comprehensive database of climate and energy transition projects – prioritized according to agreed-upon climate-related standards, such as Co2 emissions – enabling the Bank’s financing teams and private investors to search for projects by country, sector, impact, estimated rate of return, and risk profile.

The Accelerator would also ensure that the Group's lending processes are made much faster and less bureaucratically onerous – which is critical for an effective response to climate change. The timeline from project inception to loan disbursement at the Bank has ballooned by up to seven years and we recommend that the Bank - and indeed all MDBs - target shortening timelines for climate finance to 12-18 months and commit the additional resources to make this possible without jeopardizing quality.

Bending the arc of climate disasters will require enormous financial resources, on a scale unmatched in human history. Developing countries desperately need vastly more climate financing right away, and with the backing of their shareholders the MDBs have a critical role to play in ensuring it flows.

At the same time, we’re in the midst of one of the greatest opportunities humankind has encountered. Cities, countries, and entire regions can slingshot past antiquated forms of energy into a more sustainable future. Both the needs and the opportunities are in the trillions. And the urgency has never been greater.

Multilateral Development Banks Need to Play a Bigger Role in Closing the Climate Finance Gap

Artificial Intelligence (AI) is at the core of the future of the global capital markets. The World Bank can capitalize on it by leaning in from a governance and operational standpoint to leverage AI to accelerate investments for emerging markets and developing economies (EMDEs). This is critical to driving needed development and climate investments into EMDEs since currently only 8.6% of global private capital investment goes to emerging markets, despite the fact that these markets account for almost two-thirds of global GDP growth. 

At the recent 78th Session of the United Nations General Assembly, President Biden reiterated that he has asked the U.S. Congress for support that would release new concessional World Bank financing by more than $25 billion. Furthermore, the World Bank and International Monetary Fund (IMF) continue to highlight the increases in private finance needed to mitigate climate change and cope with its effects in EMDEs. The IMF’s most recent Global Financial Stability Report estimates investment in EMDEs must collectively reach at least $1 trillion in energy infrastructure by 2030 and $3 trillion to $6 trillion per year across all sectors by 2050. Employing innovative financing instruments and expanding the investor base are a few key solutions the report emphasizes. The newly released policy brief by the Bretton Woods Committee Climate and Energy Transition Finance Project Team reinforces these principal solutions. As capital is unlocked through the World Bank to support economic development and climate finance in EMDEs, AI is an innovative and strategic tool to optimize the scale of the financing instruments used and impact of private investor groups. However, to capitalize on AI’s benefits, the World Bank must continue to broaden the scope of its governance to support the operation of AI and foster an effective ecosystem of AI solutions and partners. 

Senior management support for AI should continue to be strengthened for the World Bank to leverage the technology to achieve its development and climate goals. This governance shift begins with enhancing AI governance at the World Bank. AI should be regularly included on the agenda at governance meetings for key units, such as the World Bank IFC Asset Management Company which provides capital to private funds for investment in EMDEs. Leading international governance associations such as the Institute of Directors provide high-level governance guidance through an AI in the Boardroom checklist that can be used by the World Bank to assess ongoing AI preparedness. An evaluation of the World Bank’s technical debt—the cost of maintaining outdated technology systems as opposed to investing in more efficient solutions—associated with its legacy systems should also be undertaken. The checklist and technical debt activities can have far-reaching governance benefits in driving new private capital to support the World Bank’s development and climate investment goals. 

Within the World Bank’s investment operations, AI presents opportunities to improve value chains in making investments. In doing so, AI requires existing operational process maps within the World Bank to be updated to account for the necessary changes to support AI’s advantages in facilitating investments. This value chain improvement can enable new private capital flows. The World Bank has demonstrated its openness to adopt AI in supporting investments through its MALENA Project—an AI powered platform that extracts investment insights from emerging markets Environmental, Social and Governance (ESG) data. MALENA is scheduled to be officially released in late 2023. Still, adoption of additional AI solutions is needed to scale up the World Bank’s efforts to meet the pressing development and climate finance goals. There are existing and proven commercial solutions available to the World Bank that offer AI-based deal-making and investor matching. For instance, the Kognetics® platform uses AI to identify companies in emerging and developing markets that are likely to hit the primary buy-out market and can be attractive targets for an IPO or buy-out. The platform additionally provides ongoing growth analysis to these companies using AI to identify growth opportunities and critical gaps based on market trends and competitor activity. The World Bank IFC’s Growth Equity and Sector Funds can incorporate a solution like Kognetics® to support the private funds they invest with in deploying capital to boosting fast-growing mid-sized emerging market companies and preparing them for an eventual IPO or buy-out. In 2021, I presented at the World Bank IFC External Speaker Series and the United Nations about the platform’s AI capabilities and benefits for emerging markets economic development and climate finance. 

AI has the potential to accelerate capital across EMDEs. AI governance practices and commercial solutions are available for the World Bank to proactively continue implementing. As AI fundamentally shifts the core of the capital markets, the World Bank must further position itself to leverage AI’s capabilities to assist markets in meeting their investment demand for economic development and climate change.  

Dr. Jonathan R. Everhart, CAIA, CPA, Esq. is the CEO & Chief Investment Officer of Global ReEnergy Holdings. The company is 1 of only 15 companies globally to be selected to the United Nations Green Technology Startup Initiative Global Community. He serves on a United Nations Advisory Board for this initiative. He is an appointed member to the United States Investment Advisory Council for the U.S. Department of Commerce, Industry Trade Advisory Committee on Digital Economy for the U.S. International Trade Administration, and Expert Advisory Group on Tech, Science & Innovation for the Institute of Directors. He is a member of the Bretton Woods Committee. 

*Thank you to Helen Turner, Esq. of Locke Lord LLP for the valuable comments. 

To continue reading at Bretton Woods Committee , click here.

The World Bank & AI: Leveraging AI to Accelerate Global Investments for Economic Development and Climate Finance

Bretton Woods Committee  | Tue, Sep 12, 2023

19th St. and the rest of the world may not be fully pleased*

Jay Shambaugh, US Treasury’s Under Secretary for International Affairs, recently delivered a thoughtful, wide-ranging speech on Treasury’s vision for the International Monetary Fund. The speech rightly backs the IMF’s global financial role, touting the Fund as a creative, essential first-responder to world economic shocks. But it argues for strengthening the Fund’s pursuit of its traditional “core” macroeconomic focus and balancing of adjustment and financing. The speech also offers proposals to strengthen IMF governance and operations.  Even if adopted, they may be perceived outside 19th Street’s corridors as falling short on a more up-to-date governance vision,  support for the “Global South” and US expressions of the willingness to cooperate with China.

IMF Lending, adjustment and financing – Don’t Cry for Me Argentina:  Treasury correctly praises the IMF for its rapid pandemic response in providing emergency liquidity support.  But with the pandemic largely behind, Treasury calls for redirecting the Fund toward core macroeconomic stabilization policies and temporary financing.  It exhorts the IMF to walk away if countries don’t adopt needed steps.  Treasury decries that IMF lending has increasingly facilitated repeat programs and prolonged use. 

“ARGENTINA” is the unspoken word in a hefty critique of IMF lending standards.  Reading between the lines, Treasury disapproves of the continued refinancing of the IMF’s large Argentine exposure, while averting eyes from horrid policies.  Though the US acquiesced in this endeavor, Treasury is seemingly and correctly calling for the Fund to buckle down after the upcoming Argentine Presidential elections, halt evergreening, demand serious reforms and if not, stop support, even if this causes IMF arrears and impairs its financial health.  What Argentina could ultimately mean for the Fund’s de facto preferred creditor status understandably goes untouched. 

The Treasury’s arguments also should rightly reverberate for other IMF wards, notably such countries as Pakistan and Egypt. 
Whether US geopolitical interests ultimately align with Treasury’s vision may be a question for another day.  

Resources, Shares and Chairs:  The international community has long called for concluding an IMF quota review this year, along with a new quota formula to guide determination of relative IMF weights.  Shambaugh helpfully delivers a clear US position. Whether others like it is another question.

Resources:  The IMF has an ample $1 trillion in available financing, distributed in three pots – quotas, emergency backstop resources, and bilateral borrowings.  Quotas are supposed to be the key pot for generating loanable resources, but the others are larger. Buttressing quota resources at the expense of opaque bilateral borrowings, as Shambaugh argues, is sensible.  

Shares:  But quotas determine countries’ IMF voting shares.  China is now 6% of the IMF, but roughly 18% of the global economy.  While emerging market/developing countries often believe they deserve more weight in a more democratic IMF, there are few other clearly underweight countries – such as India, Indonesia and Vietnam.  Europe and many emerging/developing countries are overweight.  
Given tough US politics, there is scant chance of securing Congressional support for a quota increase that would boost China’s share.  Nor are many countries willing to take reductions.  
Hence, Treasury calls for an “equiproportional” quota increase – a pro rata increase leaving shares unchanged.  Treasury argues without saying the word “China” that countries which are not responsible global shareholders or run untransparent foreign exchange policies do not deserve increases.  Treasury posits a new quota formula is needed to guide realignment, knowing full and well this is a quagmire if not poison pill. 
China has little interest in global financial instability and generally worked well with, and supported, the IMF, with the humongous exception of debt issues.  China deserves a boost in its weight, solidly into the #2 position ahead of Japan. If the US is unwilling to support a boost lest the aforementioned legitimate concerns be squarely addressed, the US could explicitly  offer China a grand bargain – a higher share for providing significant debt relief, coming clean on debt data and contracts and meeting foreign exchange transparency standards.  Regardless, even if Janet Yellen has repeatedly stated the US is not seeking to contain China and seeks cooperation where possible, the US can’t likely move on quota shares because of domestic realities.  

Thus, while backing for increased quotas is welcome, the US is also effectively supporting the perpetuation of the IMF’s outdated share structure.  Does this run the risk of causing China to drift further away from multilateral institutions toward regionalism and inwardness?  It is unclear if emerging markets/developing countries will back the US view, though an overweight Europe must be silently cheering.  

Chairs: There are 24 Board seats.  In a significant new announcement, Treasury’s  call for a third IMF African chair is welcome.  But the Board is cumbersome and cacophonous.  Europe is overrepresented and agreed in 2010 to reduce advanced European seats by two. It still hasn’t fully done so.  In supporting a 25th chair, the US is unfortunately giving up on Europe to shrink its outsized role.  
Treasury’s call for a fifth Deputy Managing Director, though a positive overture for more universal governance, is small potatoes and more unneeded bureaucracy.
Lending to Low Income Countries (LICs):  LIC lending via the Poverty Reduction and Growth Trust (PRGT) is a key IMF activity.  PRGT lending is financed through loans and subsidies, allowing lending at zero interest.  With global interest rates rising, the subsidy bill soars. Managing Director Georgieva rightly sees mobilizing PRGT subsidies as a top priority.  
The PRGT now needs some $1.2 billion in subsidies.  Last year, the US gave $70 million to the PRGT – a welcome departure from the last two decades, though a drop in the bucket.  Treasury reasonably supports mobilizing IMF “internal resources” to raise subsidy finance.  Over the long term, though, internal resources won’t likely suffice.  In response to whether the IMF could sell a small portion of its large gold holdings to generate subsidy resources, Shambaugh argues that doing so would take much longer, but left it at that.  
Boosting PRGT lending firepower offers the US the ability to make a strong multilateral statement and push back against China’s outsized role in Africa. Using IMF internal resources is a good first step. Rather than kicking potential gold sales into the long grass, the US should also announce its readiness to start discussions now over gold sales.1  

LIC Debt: The Common Framework to secure relief from unsustainable LIC debt, notwithstanding recent progress on Zambia, is still floundering. That is because China has often become a dominant creditor and intransigently drags its feet. The IMF has worked hard to bring China on board, but China is sovereign with complex internal politics standing in the way.  

The speech was largely silent on this consequential topic.  Treasury could have usefully discussed its thinking on the Common Framework and possible IMF actions.2  The Fund has scantly used its Official Lending into Arrears policy, given downsides, to accelerate timely PRGT support for affected countries. Further, the IMF needs to take a hard look at whether its Debt Sustainability Analyses are supporting sufficiently deep relief to allow countries to escape debt overhangs.3 

Climate: Climate change is the epic issue of our times. The Managing Director has exhorted the Fund to play a key role, including through its creative Resilience and Sustainability Facility.4 But the IMF has often been criticized for going too far, traipsing beyond the macroeconomic realm into MDB terrain. Shambaugh’s speech welcomes the RSF and IMF efforts to address balance of payments strains from climate change.  But it may ultimately generate controversy, arguing the IMF should not be an all-purpose expert on climate, but rather confine itself to macro-critical work and rely more on the World Bank.  The basic message is clear – to help countries better deal with climate challenges, the IMF should more narrowly keep its focus on bread-and-butter macroeconomic policies, such as domestic resource mobilization and avoiding distortionary energy subsidies.

Special Drawing Rights (SDRs)/Recycling: Tremendous academic, think tank and diplomatic interest exists in further SDR allocations and rechanneling SDRs for climate and other causes.  Shambaugh disappointed them, reminding that the purpose of SDR allocations is to provide supplemental global liquidity, when needed, and that is not required now.

In clarifying US positions and opening a discussion on the IMF’s future directions, Shambaugh’s speech is highly positive.  How much the global community accepts and likes that vision is yet to be seen.  

1 https://www.csis.org/analysis/us-call-modest-imf-gold-sales-help-africa

2 Assistant Secretary Neiman offered useful views in 2022 on these questions.  https://home.treasury.gov/news/press-releases/jy0963

3 https://www.ft.com/content/34f53d81-3cd9-4105-97e5-4fc40133162f; these issues are also relevant for Sri Lanka.

4 https://www.imf.org/en/About/Factsheets/Sheets/2023/Resilience-Sustainability-Facility-RSF

Mark Sobel is a member of the Bretton Woods Committee Advisory Council, US Chair of OMFIF, and former US Treasury Deputy Assistant Secretary for International Monetary and Financial Policy and US representative in the IMF. 
*Thanks to Charles Collyns for helpful comments. 

US Treasury’s IMF Worldview:  Multilateralism, More Macroeconomics, Domestic Realities

Bretton Woods Committee  | Wed, May 17, 2023

Ajay Banga takes the helm of the World Bank at a singularly important time in determining the institution’s contributions to economic development. 

This is a time of severe economic/international debt distress for many developing countries, with higher levels of absolute poverty than have been seen in many years; a time of mounting public concern about climate change; and a time when authoritarian governments control nations that account for more than one-half of the world’s population.

Never before have so many leading foreign aid experts, notably including Samantha Power, the current Administrator of the U.S. Agency for International Development, been so ready to acknowledge that the success of aid agencies critically depends on their skills in partnering with non-governmental organizations (NGOs).  

At the international level, for example, Banga’s Bank needs organizations like the Bretton Woods Committee to publicly advocate for far more resources for loans and grants to enable the World Bank group to substantially scale-up its operations – as it must, for example, if it is to provide vital leadership in protecting the world’s environment. 

Further, only with far deeper partnerships with such global NGOs as those at the forefront of confronting refugee, environmental, human rights, and corruption challenges, can the Bank build the partnerships and alliances that are crucial at this time. After all, for example, failures of governance including rampant corruption, enormous violence, environmental degradation, and failures of development assistance, have combined to produce a situation where we now have more than 100 million refugees in the world. This is a record. The outlook could be even worse.

At national levels, civil society organizations in many countries, including the poorest, have developed professional skills and deep local knowledge in areas of development, delivery of social services and anti-corruption that can provide vital qualitative inputs for World Bank project operations. Inputs both in terms of project design and project monitoring. While the Bank has notionally embraced the idea of working with in-country civil society, its consultations are for the most part superficial and unlike a number of leading bilateral aid agencies, the Bank has failed to directly provide significant funding to these organizations.

The World Bank needs to revive a commitment to partnering with NGOs that was evident in the distant past. For example, the Bretton Woods Committee was created in the early 1980s when then World Bank President A.W. Clausen called on the private sector to advocate for strong support by the U.S. Congress to fund the International Development Association (IDA) at a time when then President Reagan’s Director of the Officer of Management and Budget David Stockman announced more than a 50 percent cut in U.S. funding for IDA. Support from NGOs helped the Bank at that time to establish a special grant facility for sub-Saharan Africa that partially offset the sharp U.S. Administration reduction in IDA funding.

In 1995/’96, then World Bank President, James Wolfensohn, engaged in substantive discussions with Transparency International that led to the formulation, for the first time, of a World Bank anti-corruption strategy. This in turn influenced the development of anti-corruption mandates for major bilateral aid agencies and other multilateral institutions, including the International Monetary Fund.

And it was largely under Wolfensohn that the World Bank sought to engage on a regular basis with a rising number of civil society organizations across the globe – inviting representatives to meetings, promoting forums to publicize their views, and encouraging consultations between them and Bank staff.

While World Bank leaders since Wolfensohn have all spoken publicly in support of partnering with civil society, the reality is that there has been scant senior management support for Bank staff to work with civil society in Bank projects.  When concrete proposals for projects have been made, then approvals can take far longer than the timeframes that are meaningful for most in-country civil society organizations. And Bank staff often seek full project control.

Ajay Banga’s success in his position will demand a far greater level of Bank-NGO partnership – if he fails to make this a priority, then he may find that the Bank will fall short in meeting the crucial goals economic, development and environmental goals that it has the potential to attain.  

1  For Example, major speech by Samantha Power in December 2022 

Frank Vogl is the former World Bank Director of Information and Public Affairs (1981-1990), is a co-founder of Transparency International and the Partnership for Transparency Fund. He is an Adjunct Professor at Georgetown University.
 

Towards a New Era of World Bank-Civil Society Partnership

Now that Biden-nominated World Bank presidential candidate Ajay Banga has been confirmed, the chatter around Washington (apart from the debt ceiling debacle and the King Charles coronation) is all about whether he will be able to navigate the enormous challenges facing the institution. Banga certainly has a herculean task ahead of him when he takes the reins on June 2. While most of the current conversation is focused on whether Banga’s resume and skill set can deliver on an ambitious World Bank reform agenda, it’s worth taking a moment to reflect on outgoing President Malpass’s tenure and the state of the institution he leaves to his successor. 

When Malpass took office in April 2019, many wondered whether the Trump-appointed nominee would shed hawkish rhetoric on China and climate skepticism to be an effective leader of a global, multilateral institution. Plenty of detractors argue he did not. He certainly didn’t do himself any favors with his avoidance of pointed questions on whether he was a climate denier at last year’s Climate Week NYC which he later walked back. But on balance, Malpass leaves the World Bank in a stronger position than when he arrived and shepherded it through one of the toughest macro environments in its history. 

Malpass took over a World Bank in the midst of an organizational culture crisis with a visibly and vocally disillusioned staff. His first order of business was to get the Bank back to basics by streamlining its operations and footprint and reinvigorating staff around its core mission of poverty alleviation. When the pandemic hit, the Bank moved with speed and scale to provide assistance to developing countries. It did the same in response to Russia’s invasion of Ukraine.  

Throughout the economic fallout from these twin crises, Malpass tirelessly promoted debt transparency and sustainability initiatives to help developing countries break the cycle of unstainable debt. Under his leadership, the Bank Group more than doubled its climate finance to developing countries, reaching a record $32 billion last year. He also led successful and expedited IDA replenishments, re-upping the funding window for the world’s poorest countries.   

Is it fair to say the Bank could have lent more under his leadership over the past few years to facilitate the net-zero transition or been more ambitious in its pandemic response? Sure, if you think the core mission of the World Bank is to address global challenges and you measure success by lending volume. But, if like Malpass, you believe in a World Bank whose core mission is economic growth and a country-driven approach to development, then it’s fair to say he effectively implemented that vision.  

This poverty reduction vs. global public goods crossroads is exactly where his successor, Ajay Banga, inherits the Bank. As the largest shareholder of the World Bank, the United States has been pushing for a reform agenda that seeks to reorient the institution to better address global challenges such as pandemics, education, and climate change. But borrowing countries, particularly African countries, have been noisy about their interests in ensuring that poverty reduction remains a core priority for the World Bank, which is the largest provider of concessional finance for these countries. With donor countries so far unwilling to consider a capital increase for the Bank to lend more, their concerns over how the pie will be sliced are valid (especially with the IDA financing cliff they’re facing). 

Banga will need to use every bit of his impressive resume to sow divisions among advanced economies, emerging markets, and low-income countries to build a shared agenda for all. And he will need to build on his extensive private sector experience to find ways to unlock the highly cited, and thus far unrealized, private finance. Expectations for him are sky- high. Based on what we’ve seen of him during his candidacy, he looks poised to be a transformational leader. He appears to possess the same charisma, ambition, and willingness to challenge orthodoxy, that the late Jim Wolfensohn brought to the job – arguably, the most revered World Bank President in its history.  

Banga has an unenviable task ahead of him. No less is at stake than the existential relevance of the World Bank. While he looks like the man for the job, he deserves time (more than 100 days) and a fair shot at success before we start pulling out the scorecard.  

Any leader’s job is to leave an institution in a better place than you found it. Wolfensohn did. Malpass did. Banga likely will too. But at the Bank’s current crossroads, leaving it a better place is a greater task than ever before. I’m certainly rooting for him. 

Emily Slater is the Executive Director of the Bretton Woods Committee

World Bank Presidents: Heavy is the Head that Wears the Crown

In October 2002, IFC and ABN AMRO Bank convened in London the 12 largest project finance banks (including Citibank, Barclays, others) to discuss social and environmental issues in our lending practices with local communities, trade unions, NGO’s. We had 12 different cases in the morning and 1 common cause at the end of the afternoon, resulting in June 2003 into the Equator Principles, based on the IFC Performance Standards on Environmental and Social. A landmark achievement: it was the first voluntary sector agreement among sector industry leaders to raise the values’ bar.

The convening role of IFC and the ability to have its Performance Standards as reference, was crucial for the success of this private financial sector accord.

This year, 20 years later, a similar landmark initiative should be initiated, addressing the urgent issue how the financial sector can be a steward for a better world, with ethical standards, environmental sustainability and social justice worldwide, by fundamentally improving our practice of risk & impact management in the entire financial and non-financial private sector, with a clear focus on values’ based true value creation for all stakeholders with true prices for products and true profits for companies.

ROLE OF FINANCE: MOVING BEYOND ESG, IN SEARCH OF A NEW PURPOSE

The private financial sector is in search of a new purpose and its role in society, considering its own long-term interest, as well as its duty of care to serve the real economy and the public interest towards a peaceful, fair and thriving society “for generations to come”. It is uniquely placed to credibly offer perspectives and solutions using its knowledge, networks, financial capital mobilization ability, within its regulatory environment.

Playing ESG-defense is just the beginning:

Active embracing of the values-based, “do no harm” ESG-agenda (notably GHG emissions, loss of biodiversity, human rights, illicit money flows) by advising, supporting, even conditioning its customers and investees how to become more resilient and have no undue negative impacts, is an essential, already on-going first step by the financial sector.

Transformation towards a new income model:

However, there is an urgent need for much better by actively creating new “true” value: a fundamental rethink on how to drive a positive transformation by way of a “doing good and well”-opportunity-agenda with a clear mission towards “better business, clients and investees for a better world”. A more macro-prudential risk & impact approach, addressing systemic risks, should prevail over the traditional short term micro-prudential orientation. The 1st Line of Defense (the business line in the banking sector) should be reframed as the business force to contribute to serve, on a profitable basis, the public interest through its customers and investees.

This transformation should be seen in the context that our traditional beliefs, mindsets, tools and screens on investing, the economy and our society have become fundamentally flawed in our “age of consequences” (natural resources’ depletion, pollution, climate change, social divides) in which we face a massive markets’ failure: Adam Smith’s “invisible hand” needs brains and a heart.

MAKING THE ECONOMY, CAPITALISM AND MARKETS FIT FOR PURPOSE                                                                

GDP as key indicator of economic success is mis-measuring our real economy and, hence, misdirecting our policies and lives, as the sole focus is on economic performance by financial flows, without recognition of “external” factors:  issues such as dependency of and/or access to increasingly scarce natural resources, social cohesion, human dignity & skills, any negative impacts we cause, contribute to or incur, such as climate change, pollution, loss of biodiversity.

We are living and doing business well beyond our planetary boundaries, which is unsustainable: “net zero” is only stabilizing the patient, we need to move to “net positive”: to repair and regenerate. We are leveraging our financial, natural, and social balance sheets. We are mortgaging the future of next generations.

Our market economy is dysfunctional, with markets not being efficient, not only because of too much and too long monetary and fiscal stimuli during the last couple of years, but, even more, because of lack the right performance and valuation information, disciplines, and disclosures. We are mis-pricing long term risks, and our asset valuations are misleading as the costs and returns of increasingly scarce types of other than financial capital (i.e. Natural, Social, Human) are not considered, let alone reported and verified.

Business’ long-term self-interest and the expectation, even imperative of responsible business conduct (by international agreements and many national jurisdictions) implies much stronger due diligence and duty of care in its entire value chain (“Scope 1, 2, and 3”), addressing the traditional, material “outside-in” financial risks as well as, equally, material “inside-out” impacts on stakeholders and wider society. Active stakeholder engagement (“what matters to whom”) is important, including in governance. “Impact Weighted Accounts” should be a key feature of investment analysis and corporate reporting (www.impacteconomyfoundation.org).

Green transformation scaling and accelerating:

The Net Zero GHG emission targets and other green policies and initiatives are only the beginning of a much needed, more systemic transformation in our economies and societies, all related to sustainability. The big challenge hereby is to address global issues (climate, biodiversity, public health) in a fragmenting world on a global basis, effectively and fairly.

We are offloading many social and environmental costs in the value chain of a product on others than the end-user of such products: true pricing (www.trueprice.org) should become a generally accepted, principles’ -based approach by internalizing such externalities and reflecting these in end-prices (without necessarily being higher).

The COVID-related monetary and fiscal stimuli were initially justified as rescue-funds to maintain relative economic and social stability, but prolonged too long and by too much, it may have seriously destabilizing effects, exacerbating the markets’ failure.

UN-SG has called in his 2021 Report “Our Common Agenda” for renewed solidarity between peoples and future generations and proposes a 2023 “Summit of the Future”, including drafting a follow-up of the Sustainable Development Goals post 2030. The IFI’s can make a very important and tangible contribution by rethinking, redrafting, and recommending the outlines for a new economy, together with leading actors of the financial sector.

IFI’s as Game Changers for a new Economy

Afghanistan was a signature security as well as economic failure as the historical retrospectives pile in 6 months after the Taliban’s return to power, with the banking sector’s quick seize-up becoming the culmination of a decade of incomplete international lender-backed cleanups. The U.S. freeze on $7 billion in foreign exchange reserves created an overarching bottleneck highlighting the accumulation of bad loans and fraud scandals over time despite donors throwing comparable billions at these issues. Afghanistan, despite the lack of progress in standing up a self-sustaining economy, was an exception in conflict countries when it comes to bilateral and multilateral aid priorities. The United Nations typically has the lead role, in coordinating complex emergency response, with humanitarian relief being the overriding imperative. The IMF, World Bank and other agencies tend to focus on general economic policy and specific social spending support, with the core financial system pillar as a linchpin of post-war viability is relegated to an afterthought.

When the financial sector base is in focus, small-scale micro-finance is the popular tool with the conventional banking industry, capital markets, credible central banks, and monetary policies in mind. This pattern has been repeated constantly in the headline fragile state crises of recent years beyond Afghanistan, including Libya, Yemen and Haiti. The UN understandably shies away from these topics without the expertise or mandate in its basic needs and peacekeeping functions. The international financial institutions have delayed more sophisticated analysis and technical assistance until later development stages, but in light of the glaring lapses in these locations, they should offer guidance and grants at the outset to establish solid financial sector foundations.

The deposed Ghani government in Kabul had run down currency reserves regularly flown in from the U.S. before the pullout, and  the Afghani depreciated to 80/$. It has since breached 100/$, and   loans were half dollarized, rendering them un-payable as depositors are now unable to access their accounts beyond a weekly several hundred dollar limit. Government workers have not received salaries since the 75% aid lifeline to the budget was severed, and local banknotes are also scarce as the German printer with the previous contract has no replacement. The Taliban administration has no money on hand to cover the $90 million electricity bill from neighboring Tajikistan, nor large scale borrowing means other than turning to informal hawala networks. Both the main state banks and nascent private banks are presumed technically insolvent. It is not the first time the system faced collapse, as a major institution insider scandal previously required multilateral lender rescue.

Libya during the Qaddafi era had a single central bank, startup stock exchange to woo Western investors, and the continent’s biggest sovereign wealth fund  with $70 billion in assets. Over the decade-long civil war, the monetary authority split along east-west lines, the securities market was abandoned, and the UN froze SWF holdings so combatants could not grab them. In the past year, with a cease-fire in effect, an interim government, and an election timetable in place, the dual central banks agreed on a currency depreciation at 4/$.  In theory, they agreed to unify branches and operations, but they are on their own without outside technical or policy advice. Officials failed to pass a budget and have pressed the UN to release billions of dollars from the sovereign pool, without a way to raise funds through banks already owed from past borrowing or bond markets.

Yemen is another case with dueling monetary bodies in the Houthi and recognized government-controlled areas, and the rupture extends to non-acceptance of the other side’s banknotes. With the rebel advance and already in charge of more territory, the exchange rate in Sanaa is at 600/$ compared to over 1,000/$ in Aden. The US is again considering a terrorist designation after missile attacks on the residual administration’s military ally the UAE. This move would isolate the financial system already on its back from years of destruction and neglect. Washington has already cited the main currency dealer and bank for money laundering, and at the same time a special envoy was dispatched to attempt diplomatic compromise. The new UN representative has signaled a shift to economic issues to find common ground, without the technical capacity in hand.

In these instances the international financial institutions must fill the breach from the earliest days of deployment while maintaining their broad economic monitoring and social welfare mandates. They can act with their own knowledge and resources and draw in private sector bankers and fund managers willing to contribute time and expertise. Conflict zone work should aim for financial sectors to eventually flourish in the fullest sense instead of inviting balance sheet alongside physical blowups. 

War-Torn Country Banking Systems Beg Repair

It is no secret that the West is exceedingly uncomfortable with China’s Belt and Road Initiative (the BRI) and its role in building infrastructure in developing countries, and for good reasons. The terms of these investments by China’s parastatal banks are opaque and recent research reveals that contracts include non-disclosure covenants to keep them so. That said, it is China that is pouring the most money into infrastructure investments into Sub-Saharan Africa in particular in a way that no one else can match. A recent volume from the Council on Foreign Relations on the BRI argues that institutions like the World Bank need to step up and counter Chinese actions; however, this is easier said than done. 

What is really limiting the West’s investments in infrastructure in the developing world? Looking at multilateral institutions such as the World Bank, one can in the first instance point to a shift in mandates, with shareholders wanting the Bank to operate more in fragile states, focusing on social sectors, and to eschew projects like roads and dams. This shift has come largely to placate development lobbies at home in Europe, and it is mirrored in similar ideological shifts in bilateral programs.  

This shift in development thinking goes beyond legitimate concerns for poverty reduction and greater economic opportunity, and it has led groups like the World Bank to become risk-averse on infrastructure projects, leaving the field open to competitors like China, often involving harsher terms, lower standards, and minimal local job creation.  

The second reason for inadequate lending for power, roads, water and sewage is the Bank’s conservative approach to its own capitalization and leverage. Its loans are backed both by repayments as well as donor capital. Relaxation on lending levels would mean more for infrastructure and more for middle-income countries where most of world’s poor now live. 

The risks of so doing are eminently manageable. 

The third limitation on offering countries alternatives to the BRI rests on the mistaken notion inside multilateral lenders that the private sector will undertake these investments. This is largely incorrect and not supported by the facts. Public spending in fact crowds in private investment rather than supplanting it. Except for airport management and a few other projects, governments need to do the dirty work of investing in water and sewage and most roads and rails, and they need multilateral support to do so. 

The fourth reason for limited infrastructure activity in many aid recipient countries lies with the governments themselves. Poor regulation, corruption, implementation issues, and weak institutional environments mean that Chinese package deliveries of projects have some appeal. 

Lack of transparency may suit some governments very well. 

Finally, the additional political constraints imposed by donors who fail to see the very clear linkage between infrastructure and the achievement of the SDGs is to blame. The reality is that health gains will not happen without clean water and basic sanitation; educational attainment requires transport of students and electricity; and private entrepreneurship to create jobs requires better logistics and more reliable power. But these efforts don’t carry the political merits associated with feel good projects. 

To effectively compete with the BRI, the West and its institutions need to hold all lenders and borrowers accountable for the terms of loans; they need to increase the leverage of development banks; they need to pivot, not back to bricks and mortar, but to a healthy balance in their lending portfolios; they need to focus lending on places where positive results are more likely, using available metrics to gauge this; and finally, they need to undertake more joint projects with bilateral donors, including China, using best practices. 

Infrastructure investments are at the core of development success, as seen by the Growth Commission and other studies, provided that they are well designed and implemented and transparently financed for the benefit of the recipient countries. And, most importantly, infrastructure is a key element of any climate-compatible growth agenda. Focusing serious attention on the quality of investments and implications for the achievement of global climate goals is indispensable. For these reasons, leaving the field to others is not the answer. 

Dr. Leipziger, Professor at George Washington University and Managing Director of the Growth Dialogue, was an Infrastructure Director and Vice President at the World Bank and Vice Chair of the Spence Commission on Growth and Development. 

Amidst an historic global crisis, the Biden Administration’s first budget request reflects its commitment to U.S. global leadership and multilateralism. According to the World Bank, the coronavirus crisis, which shows no signs of abating in the developing world, threatens to push 150 million people into extreme poverty by the end of 2021 and reverse decades of developmental progress. For many developing economies, International Financial Institutions (IFIs) like the International Monetary Fund (IMF) and World Bank are a critical lifeline, providing invaluable resources and support. The Administration’s ambitious budget request constitutes a vital commitment to these institutions and their essential role in rebuilding the world economy.

The budget request includes $63.7 billion for the International Affairs Budget, an 11% increase compared to the FY21 enacted level. Of that, $3.3 billion is requested for Treasury International Programs, a $1.4 billion or 73% increase from the FY21 enacted level. Much of the requested increase in Treasury International Programs is to support the International Financial Institutions. Below, we outline what has been requested for the IFIs and related multilateral initiatives and describe how the money would be spent if appropriated.

The Biden Administration requested $102 million to support the International Monetary Fund’s Poverty Reduction and Growth Trust (PRGT) or another IMF lending facility.

As much as $100 million would be used as a grant to the PRGT, the first direct contribution to the Trust in U.S. history, or another IMF facility. By offering subsidized loans to the world’s poorest countries, the PRGT has helped countries respond to the pandemic and prevent deep economic depressions. 

$2 million or more would be used to cover the subsidy cost of loans of up to 15 billion (roughly $22 billion) Special Drawing Rights (SDRs) from Treasury’s Exchange Stabilization Fund to the PRGT or other IMF trust funds. The details of this loan have not yet been defined. The U.S. currently holds approximately 36.8 billion SDRs, an IMF reserve asset that can be exchanged for usable currency.

The Administration has requested $1.634 billion to support the World Bank.

$1.428 billion has been requested to support the International Development Association (IDA), the World Bank’s concessional lending window for low-income countries. Consistent with FY21 enacted levels, $1.01 billion of this covers the second of three contributions the U.S. committed under IDA’s last triennial replenishment exercise. The remaining $426.6 million would eliminate U.S. arrears – unmet contribution commitments that the U.S. government has made during IDA replenishments. (U.S. arrears to IDA’s Multilateral Debt Relief Initiative would remain $1.504 billion.) Throughout the coronavirus crisis, IDA has helped the world’s 74 poorest countries access vaccines, protect the poor and vulnerable, create new jobs, and strengthen policies and institutions to enable sustainable growth.

The Biden Administration’s budget request also supports the World Bank by waiving Securities and Exchange Commission registration requirements for IDA. Registration requirements increase the cost to IDA of issuing securities in U.S. capital markets and have been waived for all other multilateral development banks. Waiving registration puts IDA on a par with other IFIs and lowers IDA’s borrowing costs, increasing the resources available to the world’s poorest countries.

$206.5 million would go to the International Bank for Reconstruction and Development (IBRD), the World Bank’s vehicle for lending to middle-income and creditworthy low-income countries. This is consistent with FY21 enacted levels and represents the third of six payments committed by the U.S. during the IBRD’s last capital increase. IBRD funding has helped countries like Colombia, Indonesia, Jordan, and Ukraine reduce poverty, achieve sustainable development, and respond to crises like the coronavirus pandemic.

Other International Financial Institutions

The Administration has requested $361.9 million for other International Financial Institutions, including the African Development Bank, African Development Fund, Asian Development Fund, and International Fund for Agricultural Development.

The Administration requested $54.6 million for the African Development Bank (AfDB), the second of eight payments for the AfDB’s seventh capital increase. This is consistent with FY21 enacted level. The AfDB provides loans to the public and private sectors in Africa, a majority of which have supported pandemic response initiatives.  

$211 million would support the African Development Fund (ADF), the AfDB’s concessional lending window. Consistent with the FY21 enacted level, the U.S. would deliver a payment of $171 million per its commitment under the ADF’s recent replenishment. $40 million would be used to reduce arrears to the ADF. The ADF provides grants and low-cost loans to least developed countries in Africa, many of which are fragile states in need of inexpensive financing to achieve stability and sustainable growth.

$53.3 million would support the Asian Development Fund, the Asian Development Bank’s lending vehicle for low-income countries. This represents a $5.9 million increase over FY21. $43.6 million would cover current U.S. commitments and $9.7 million would reduce U.S. arrears. The Asian Development Fund provides grants to the poorest countries in Asia and the Pacific to support water, energy, financial sector development, agriculture, and health projects.

$43 million would constitute the first of three installments towards the International Fund for Agricultural Development (IFAD)replenishment. This represents a $10 million increase over FY21 enacted levels. IFAD supports rural economic development, including in conflict-afflicted and fragile environments, by boosting farmers’ agricultural productivity, incomes, and access to markets.

Along with the International Financial Institutions, the Biden Administration’s budget request includes support for a range of other multilateral initiatives, particularly related to climate change, environmental conservation, and sovereign debt relief.  

The Bretton Woods Committee

Contacts

Emily Slater

Greg Brownstein

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