Despite the idyllic setting and notwithstanding recent global growth, the International Monetary Fund-World Bank meetings took place in a context of apprehension, according to published reports. As the Fund’s 2018 World Economic Outlook (WEO) stressed, economic growth has been more uneven than expected.
Global financial leaders wrapped up an annual meeting of the IMF- World Bank in October by urging countries to brace for potential risks from trade disputes and other tensions. The International Monetary and Financial Committee (IFC) urged countries to keep debt under control and to ensure credit is available in line with their levels of inflation and ensure sustained economic growth. IMF members also pledged to avoid devaluing currencies to seek a trade advantage by making a country’s exports relatively cheaper.
According to “The New York Times”, IMF Managing Director Christine Lagarde said while global growth is still strong, it has levelled off. The IMF started the meetings by downgrading its 2018 estimate for global growth to a still robust 3.7 percent from an earlier forecast of 3.9 per cent. China’s central bank governor, Yi Gang noted Washington’s imposing of penalty tariffs on tens of billions of dollars of imports of Chinese products and Beijing responding in kind.
U.S. Treasury Secretary Steven Mnuchin downplayed the level of alarm, noting he wasn’t concerned over the possibility that China might step up its sales of U.S. treasuries in retaliation for pressure from Washington to alter national economic strategies aimed at nurturing Chinese leaders in many advanced technologies. Media reports indicate that at one point Chinese President Xi Jinping portrayed Beijing as the champion and defender of globalisation at the Davos World Economic Forum amid rising fears of trade protectionism. But now the interest in Beijing’s trade and investment story has dulled amid rising U.S. tariffs, higher interest rates and capital flight from emerging markets, all of which threaten to erode global growth.
Calls to fix global trading rules are tellingly coming not just from the Trump administration. IMF managing director Christine Lagarde this week laid out what needed to be done. U.S. Treasury Secretary Steven Mnuchin struck a more confident tone at the Bali meetings compared with similar gatherings over the last year, when he was the target of near-universal criticism over Trump’s tariff plans.
China is still a major political and economic power, but Chinese officials appeared more on the defensive , according to reports in “The New York Times” among others, that with the tone of debate at some IMF forums shifting more quickly than Beijing may have expected. Vice finance minister Zou Jiayi, on a World Bank panel on Xi’s signature Belt and Road Initiative, found herself fielding questions from other panelists and the audience over debt sustainability, how effectively small countries could negotiate with Beijing, and whether the effort was viable in the midst of a protracted trade war.
Elsewhere, media reported the “Belt and Road” initiative came into sharper focus as Pakistan, a major recipient of Chinese-financed port, rail and road projects, formally sought an IMF bailout programme during the Bali meetings. Zou said China was using risk analysis methods from bodies such as the IMF and World Bank, and would supervise the projects’ debt more vigorously. But she also said that they are essentially commercial projects and that countries should exercise caution and make their own evaluations of their commercial viability.
Brettonwood.org noted that the launch of an Intergovernmental Panel on Climate Change (IPCC) report on the eve of the meetings revealed the urgency and dramatic scale of the challenge that countries face in adapting to climate change – with ”The Guardian” pointing out that the spectre of catastrophic climate change would provide less flexibility in the event of a new financial crisis. The IPCC report found that in order to achieve the Paris Agreement – and keep average global temperature rise at 1.5 degree Celcius relative to the pre-industrial average – drastic cuts in greenhouse gas (GHG) emissions are needed by 2030. Given that countries’ current commitments to reduce emissions collectively amount to a trajectory of 3 degrees Celcius projected warming, this is cause for grave concern.
At the Annual Meetings the World Bank also confirmed it will withdraw support from a coal project in Kosovo – the last legacy project in the WBG’s project pipeline that was potentially exempt from the Bank’s 2013 moratorium on project lending for coal.
The Bank’s 2019 World Development Report on the changing nature of work further highlights contradictions between the call for greater financial stability that can only be achieved through more equitable and inclusive growth.
The Human Capital Project (HCP) and Index (HCI) were launched during the meeting, where meetings and discussions on the very important topics of health and education financing managed the difficult task of avoiding a focus on human rights instruments and state obligations. While the HCI was criticised in some corners, as expected it received a largely positive reception among those who were willing to discount its methodological and theoretical shortcomings.
The situation in Indonesia, which many blame on the long-term involvement of Bank and Fund policies, has left Indonesians with little to cheer, as made evident by recent reports, critiques and alternative events held at the side-lines of the meetings
Indonesian civil society issues ranged from broad critiques to efforts to hold their government and the World Bank accountable for the deficient implementation of the old and new Environmental and Social Framework (ESF) in Indonesia. During a CSPF event, civil society raised myriad concerns, including on forced displacement, lack of access to relevant information, environmental harm and the intimidation by security forces during ESF consultations, only to be waved off by Bank officials as being “misinformed,” it was reported.
