The Need to Mobilize Development Finance Equitably and Accountably

By Michael Jarvis (Executive Director TAI)

Reflections from the recent IMF and World Bank Spring Meetings

If you were visiting Washington DC this past week it was hard to get a hotel room, restaurants were packed, and the streets close to the White House were clogged with badge holders for the International Monetary Fund (IMF) World Bank Spring Meetings. In recent years there has been less attention to these meetings – a far cry from the early 2000s when there were mass protests. However, this year had more buzz.

I’m told virtually every country sent a delegation, which hasn’t always been the case, and the protests were back, albeit on a smaller scale. This reflects the pressures on the Bretton Woods Institutions to help find solutions in the “polycrisis” era. 

So, what stood out from a sampling of the many official seminars, Civil Society Policy Forum sessions, side events and private breakfasts and dinners? Here are 3 sets of takeaways relating to the prominence of fiscal issues, hints of International Financial Institutions (IFI) accountability and more to be done on more meaningful civil society engagement.

It’s all about the money

“Fiscal space” was one of the terms of the week - reflected in the number of sessions on debt and tax. The puzzle is how to help countries meet climate and development needs when they face rising debt levels and cuts in official development aid. 

Innovations in debt relief and future debt sustainability are needed, but there is also no escaping the need to raise more taxes. Calls for more radical steps on debt appeared to elicit little movement, although it was encouraging to hear talk of demands for debt transparency and accountability coming from beyond the traditional debt justice community. For example, from those leading feminist movements and anti-corruption efforts.

There was more sense of innovative potential on tax, buoyed by attention from the climate movement and climate funders. Nobel Prize winner Esther Duflo made a passionate case for making polluters pay in a Tax the Rich session and a related opinion piece in the Financial Times. The mere fact that the IMF was hosting such a session and that it was standing room only in the main space and overflow room was a sign of a shift in attitudes. 

A wealth tax is becoming more politically viable, as the Brazilian finance minister reminded us as his government’s push in the G20 gains some headway. It can unlock significant revenues if coordinated internationally. As Gabriel Zucman noted even a 2% tax on assets of a restricted set of 3,000 billionaires could generate $250 billion. 

Positive energy was also created by the first in person gathering of sherpas for the International Tax Taskforce chaired by Barbados, France, and Kenya. The push to test innovative taxes ranging from shipping or aviation taxes to windfall profit taxes, is creating impetus for greater sharing and strategizing between the climate and tax justice communities. Hopefully, if the Taskforce members demonstrate meaningful action, more countries will join and follow suit.

With money comes responsibility

In response to today’s global pressures the prevailing assumption is that the international financial institutions must step up and do more. That means mobilizing more resources at their disposal. Last week’s meetings were too early to see significant progress on the fundraising push for the International Development Association that provides concessional finance to the poorest countries, but did see $11 billion in commitments from a range of bilateral donors for the World Bank’s hybrid capital mechanism, and Livable Planet Fund.

Yet there were signs that increased financing should not be without further reform and accountability. The Civil Society Policy Forum included several sessions touching on accountability in delivering projects, including lessons from the recent Bridge Academies scandal involving sexual abuse in an International Finance Corporation (IFC) backed project. Some key shareholders appeared to be paying attention, too.

Referring to the World Bank’s independent accountability mechanism, US Treasury Secretary Janet Yellen warned in her speech that, “Any threats to the CAO’s independence, real or perceived, are unacceptable, and the United States will pursue necessary reforms to support the CAO’s effectiveness.” 

More broadly there were calls for more voice for client countries and for civil society and for more urgency to meet the moment (e.g., on reallocating Special Drawing Rights). Based on the tenor of last week’s discussions, I hope we can expect more scrutiny on how the IFIs are managing funds and how they are delivering on promises. A case in point – it was encouraging to the see the United States among those countries welcoming a proposed methodology from Publish What You Fund for measuring and disclosing private capital mobilization, a priority for development banks.

Those without money deserve a say

The country delegations are typically the stars of the show at these meetings along with the wheeled-out experts, but last week also was a reminder of the value of broader civil society engagement inside and outside the conference rooms. The IMF and World Bank would do well to embrace that, even if it is not the natural instinct. There were great conversations at the Civil Society Policy Forum, but it can still feel somewhat of a contained sideshow. The World Bank Evolution document only belated included references to civil society after feedback on its omission in the first draft. And yet, last week was a reminder of the ideas, energy and expertise that civil society offers in addressing today’s pressing issues.

That message certainly came through in the side event on The Role of Civil Society in Enhancing the Quality and Effectiveness of Development Finance. Speakers highlighted the important role of civil society partners in offering development solutions and in pushing for accountability of financing down to community level (the “follow the money” agenda).

Both are essential. Social entrepreneurs create innovations ripe for scaling but need access to finance to do so. Civil society organizations can push for community inputs into how projects are designed and help oversee their delivery, helping minimize leakages and inefficiencies (see last year’s Better Accountability, Better Finance paper). But that is too often an unfunded mandate. We need both functions with urgency. We need more opportunity for those who question default ways of doing things.

The challenge is finding the right interface between civil society and development finance institutions. The proposed Civil Society and Social Innovation Facility at the World Bank could be one important entry point – a space to demonstrate the potential of social innovations and support the accountability architecture. Perhaps it can be the bridgehead for raising civil society voices and ideas that tend to get lost in big institutions where the shareholders and the client countries call the shots. Such a culture shift would be good for all. 

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