UN Secretary General Antonio Guterres says the International Monetary Fund has benefited rich countries instead of poor ones. And he describes the IMF and World Bank’s response to the COVID-19 pandemic as a “glaring failure” that left dozens of countries deeply indebted.
Guterres comments were issued ahead of meetings called by French President Emmanuel Macron in Paris on Thursday and Friday to address reforms of the multilateral development banks and other issues.
Neither the IMF nor the World Bank would comment directly on the secretary-general’s criticisms and proposals. But Guterres’ comments echo those of outside critics, who see the IMF and World Bank’s leadership limited by the powerful nations that control them — a situation similar to that of the United Nations, which has faced its own calls for reform.
Developing countries also complain that the bank’s lending rules are weighted against them.
Guterres said it’s time for the boards of the IMF and the World Bank to right what he called the historic wrongs and “bias and injustice built into the current international financial architecture.”
The IMF and what is now known as the World Bank Group were created at a conference in Bretton Woods, New Hampshire, in July 1944 to be key institutions of a postwar international monetary system. The IMF was to monitor exchange rates and lend reserve currencies to countries with balance of payment deficits. The World Bank would provide financial assistance for postwar reconstruction and for building the economies of less developed countries.
Guterres said the institutions haven’t kept pace with global growth. He said the World Bank has $22 billion in paid capital, the money used for low-interest loans and grants for government development programs. As a percentage of global GDP, that’s less than one-fifth of the 1960 funding level.
At the same time, many developing countries are in a deep financial crisis, exacerbated by inflation, rising interest rates and a standstill in debt relief.
The UN Chief said, adding that “Africa now spends more on debt service costs than on health care.
“Some governments are being forced to choose between making debt repayments or defaulting in order to pay public sector workers — possibly ruining their credit rating for years to come,”
The IMF’s rules unfairly favor wealthy nations, he said. During the pandemic, the wealthy Group of Seven nations, with a population of 772 million, received the equivalent of $280 billion from the IMF while the least developed countries, with a population of 1.1 billion, were allocated just over $8 billion.
“This was done according to the rules,” Guterres said. This is “morally wrong.”
He also called for major reforms that would strengthen the representation of developing countries on the boards of the IMF and World Bank, help countries restructure debts, change IMF quotas, and revamp the use of IMF funds.