Bretton Woods Flagship Publications Weave Checkered Reputation

As the IMF and World Bank convened largely virtually again for their annual meetings, the traditional October release of annual/semi-annual publications was relatively uninterrupted by the immediate pandemic.  Global growth disparities, elevated debt levels, the vaccine divide, and climate change were dominant themes.  Analysts review the hundreds of pages with content and process in mind, distressed over the IMF’s board decision to retain Managing Director Georgieva after she was involved with artificially inflating China’s ranking in the discarded “Doing Business” report.

They argue that country research distortions from World Bank top officials documented in the independent legal review of “Doing Business” are unacceptable. The absence of regret and accountability as the Bretton Woods institutions has prompted calls for immediate and widespread revamping of ethical and practical structures to prevent a repeat episode.  Internal integrity was breached despite both the World Bank and IMF offering easy reporting of lapses on their websites.  Following the board’s decision, MD Georgieva stated that “the problem was on the other side of 19th Street” as if she bore no responsibility as chief operating executive at the time.

As the drama unfolded the IMF’s “World Economic Outlook” downgraded the global growth forecast for this year to 5.9% on lower expectations in developed countries attributed to supply chain issues and pandemic lockdowns in emerging economies. After the latter turned in a “better” 2020 performance than advanced counterparts –  contracting 2.1% and 4.5% respectively — they are expected to outperform again this year and next.  The WEO emphasized that advanced economies are expected to regain pre-pandemic levels next year and output exceed 2019’s pre-virus by 2024 while EMs, ex-China, will have lost 5% over 5 yrs.  The report also highlighted that the “balance of risks for growth is tilted to the downside,” and warned that the forecast for low-income countries is worsening due to inadequate vaccines.

The Fund’s “Global Financial Stability Report” notes “risks have been contained so far” due to ongoing monetary and fiscal policy support and this year’s economic rebound. It focuses on inflationary pressures, with some countries entirely reversing pandemic easing.  For emerging and frontier markets, the outlook for portfolio flows has improved.  While hard currency issuance has “rebounded strongly,” with lower rated issuers returning to the international markets, local currency debt flows have not recovered from early year weakness. GFSR cautions that a “sudden change” of monetary policy in advanced economies, like a US Fed rate hike, would reverse capital flows and aggravate debt sustainability concerns. It urged central banks to act if inflation lingers and called for global policymakers to strengthen the “global climate information architecture,” including data, disclosure, and sustainable finance classifications.

The “Fiscal Monitor” concluded that poor country growth will lag pre-pandemic expectations “for years.” It estimates that 65-75 million more people will fall into poverty by year-end. The Monitor attributed the delayed rebound to lagging revenue growth and higher global debt levels.  They surged to a record last year, up USD 27 trillion to USD 226 trillion, far more than the combined 2008-09 global financial crisis rescue gain of USD 20 trillion, with government borrowing just below 100% of world GDP.

The World Bank’s “International Debt Statistics” found that the external debt stocks of low- and middle-income countries soared 5.3% last year to USD 8.7 trillion, led by a 12% spike in low-income countries to a record USD 860 billion, Bank head Malpass, also under the microscope in the Doing Business expose for China and Saudi Arabia actions, is calling for follow-on restructuring efforts when the G-20’s Debt Service Suspension Initiative stops at year-end. He also reiterated the need to enlist private sector creditor participation, less than half a percent of DSSI relief. The expanded annual debt report now includes country breakdowns by creditor type, currency, and terms, after years of transparency–building efforts backed by both sides.

Hundreds of IMF and World Bank professionals produce these prominent references and other analyses: compiling and crunching statistics, writing/editing, and peer reviewing. An equal number provide technical assistance and guidance to policy makers in emerging and frontier markets. Under the rules some reports – on specific countries or issues – are never released due to member objection, often when findings are unfavorable.  Conclusions and policy recommendations may ultimately be mistaken, but prior to the “Doing Business” saga the basic data-information collection and formulation process was not in question. Those named in the investigations should at least temporarily step aside from analysis function oversight, and a longer-term fix could permanently separate it from other management duties. An immediate reputation balm could also come from developing a formal analyst code of conduct with enforcement as a model for all official lenders.