[Press release] World Bank / IMF / G20 Spring Meetings Paltry measures doomed to failure

11 April 2021 by CADTM International

At the spring meetings of the Bretton Woods institutions from 5 to 11 April 2021, the World Bank, IMF and G20 made new announcements in an attempt to respond to the debt crisis in the countries of the South, exacerbated by the economic and health consequences of the Covid-19 pandemic. Far from living up to expectations, these paltry measures are doomed to failure.

 One quarter of developing countries ignored

The measures ignore half of the countries under suspension of payments

102 countries (including 5 high-income countries) are potentially concerned by the various adopted measures: 86 by various IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

financial assistance measures, [1] as usual by loans, largely conditional on austerity policies; [2] 29 countries by the Catastrophe Containment and Relief Trust (CCRT) [3] and 73 countries by the Debt Service Debt service The sum of the interests and the amortization of the capital borrowed. Suspension Initiative (DSSI) [4] (launched by the G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). in close collaboration with the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

, with some countries combining all or some of the measures. Without going into the details of these measures here, they ignore half of the 21 countries currently under suspension of payments, [5] including Argentina, Lebanon, Venezuela and Zimbabwe. Isn’t there some inconsistency here?

 Still no debt cancellation by the World Bank and the IMF

The IMF and World Bank not cancelling any debt is strengthening the creditors’ grip

Since the beginning of the pandemic, the IMF and the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

have repeatedly called on bilateral and private creditors to cancel debts. Yet, although between them, the World Bank and the IMF hold 46% of the external public debt of the 73 DSSI countries, neither institution has deigned to set the example. In April 2020, the IMF announced US$251 million in “debt cancellation” for 29 countries through the CCRT. On 5 April 2021, it was increased to US$238 million. [6] In fact, several Northern countries have topped up this fund in order to pay the IMF debt service instead of the 29 countries concerned. The IMF is not cancelling any debt and the creditors are strengthening their grip. As for the World Bank, which is subjected to financial interests, it also refuses to cancel any debt, on the pretext of protecting its “triple A” rating, even though its 189 member states are its guarantee. Isn’t there some degree of equivocation here?

 The IMF has announced a fresh allocation of $650 million in Special Drawing Rights (SDRs), but who will benefit?

Barely 1% of the SDRs’ allocation would go to low-income countries, compared to 31.5% for middle-income countries. The lion’s share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. (67.5%) is made available to high-income countries

In order to solve Southern countries’ balance of payments Balance of payments A country’s balance of current payments is the result of its commercial transactions (i.e. imported and exported goods and services) and its financial exchanges with foreign countries. The balance of payments is a measure of the financial position of a country vis-à-vis the rest of the world. A country with a surplus in its current payments is a lending country for the rest of the world. On the other hand, if a country’s balance is in the red, that country will have to turn to the international lenders to meet its funding needs. difficulties and declining foreign exchange reserves, the IMF is expected to allocate US$650 billion in Special Drawing Rights by June. While SDRs have the merit of not further burdening debt payments, the proposal is likely to be totally ineffective. As SDRs are allocated according to quotas held by member countries based on their economic weight in the IMF, barely 1% of this allocation would go to low-income countries, compared to 31.5% for middle-income countries. The lion’s share (67.5%) [7] is made available to high-income countries. In any case, this is a far cry from the US$3 trillion in SDRs demanded by many organizations working on developing countries’ debts. The CADTM remains fiercely opposed to an additional allocation of SDRs. It lends legitimacy to the IMF and strengthens its position as a creditor, even though the institution is at the origin of the structural problems experienced by these countries since the 1980s. Isn’t there a measure of contempt here?

 The DSSI initiative prolonged, why?

Remember that the measure is once again conditional on the signing of an agreement with the IMF? This initative is definitely not worth the trouble

In April 2020, the G20 launched the DSSI initiative for 73 countries. It consisted of a temporary suspension of payments on official bilateral external debt for the period May to December 2020. As already mentioned, this was not a cancellation but a deferral of payment. According to this proposal the payment was postponed to 2022; then, given the evolution of the pandemic and the economic crisis, payment was again postponed to 2024. As the situation continued to deteriorate, the period of temporary suspension was extended for the first time until June 2021 and then until the end of 2021. Payments are due in 2026. As all the parties - including the G20-WB-IMF - agree that the DSSI is insufficient and inappropriate, why stubbornly persist with it? Most concerned countries clearly reject the initive since only 46 of the entitled countries have applied. Remember that the measure is once again conditional on the signing of an agreement with the IMF? This initative is definitely not worth the trouble.

 Rating agencies and private creditors snigger at IFIs and Southern populations

private interests continue to snigger at the IFIs and the people of the South

Meanwhile, private interests continue to snigger at the IFIs and the people of the South. Already contemptuous of them last spring, the rating agencies Rating agency
Rating agencies
Rating agencies, or credit-rating agencies, evaluate creditworthiness. This includes the creditworthiness of corporations, nonprofit organizations and governments, as well as ‘securitized assets’ – which are assets that are bundled together and sold, to investors, as security. Rating agencies assign a letter grade to each bond, which represents an opinion as to the likelihood that the organization will be able to repay both the principal and interest as they become due. Ratings are made on a descending scale: AAA is the highest, then AA, A, BBB, BB, B, etc. A rating of BB or below is considered a ‘junk bond’ because it is likely to default. Many factors go into the assignment of ratings, including the profitability of the organization and its total indebtedness. The three largest credit rating agencies are Moody’s, Standard & Poor’s and Fitch Ratings (FT).

Moody’s : https://www.fitchratings.com/
have once again brandished the threat of a downgrading of the sovereign rating of countries using DSSI. As for private creditors, the main holders of the external public debt of the countries of the South, they continue, sure of their impunity, to ignore the debt cancellations that are supposed to have become binding through the illusory application of the comparability of treatment principle since the creation of the Common Debt Framework in November 2020.

 Only alternatives: Suspension, audit and repudiation of debt

For the countries of the South, there is an urgent need to introduce unilateral measures of self-defence

The international financial institutions remain determined to keep the noose around the necks of the people of the South by not cancelling any debts. For the countries of the South, there is an urgent need to introduce unilateral measures of self-defence. First, by suspending debt payments on the grounds of necessity and fundamental change of circumstances which are legitimate legal arguments based on international law. Secondly, by carrying out a citizens’ audit of the public debt with the aim of repudiating illegal, illegitimate, odious and unsustainable debts.
It is time to override the inconsistencies, equivocation, contempt and ineptitude of the IFIs and international private creditors.



[5Countries in suspension of payment: Argentina, Cambodia, Congo, Cuba, Eritrea, Gambia, Grenada, Iraq, Lebanon, Mozambique, Sao Tome and Principe, Sudan, South Sudan, Suriname, Syria, Venezuela, Yemen, Zambia, Zimbabwe.

[7Daniel Munevar, Chiara Mariotti, The 3 trillion dollar question: What difference will the IMF’s new SDRs allocation make to the world’s poorest?, Eurodad, 7 avril 2021. Disponible à : https://www.eurodad.org/imf_s_new_sdrs_allocation

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