The outbreak of a new Middle East war cast a long shadow over demands for some of the world's biggest financial institutions to boost aid and relief for African nations grappling with conflicts, climate and debt burdens.
The amount of debt relief is insufficient despite some "positive momentum toward multilateral bank reform" at the Morocco-hosted World Bank and International Monetary Fund meetings that ended on Sunday in Marrakech, said U.N. Development Program Administrator Achim Steiner, who urged far more investment to tackle poverty and protect the planet.
“We welcome reform of multilateral development banks under new leadership but the twin crises of poverty and climate demand significantly more," Steiner said. "What is still missing is a broader and urgent discussion around restructuring debt, attracting private capital, and stimulating domestic resource mobilization – each of which is larger in scale than financing from development banks alone."
The weeklong meetings – which marked the first time in half a century that the world's finance ministers and central bank governors gathered in Africa – coincided with the start of a new Israel-Hamas war.
Hundreds of thousands of Gaza's 2.3 million civilians were scrambling to evacuate the territory's northern half as a humanitarian crisis began unfolding with Israel massing troops on the border for a ground invasion. The war has killed at least 3,600 people since Hamas attacked Israel.
About 600,000 people were displaced from the north ahead of the Israel Defense Forces' expected ground invasion. Supplies of food and water were running dangerously low in Gaza, where hospital will soon run out of fuel, the U.N. Office for the Coordination of Humanitarian Affairs said on Sunday.
The World Bank-IMF meetings were affected. "The shock people have felt, it came in our meetings," International Monetary Fund Managing Director Kristalina Georgieva told a press briefing. "This is yet another source of uncertainty."
World Bank President Ajay Banga, who began his five-year post in June, suggested that some of the US$1.25 trillion that the world spends each year on subsidies for fossil fuels, agriculture and fisheries should be redirected to climate action.
"Some of these are very important and needed, but in other cases we can do better. The economic costs of fertilizer runoff, unnecessary air pollution, and overfishing is US$6 trillion every single year," he said. "By repurposing some of this money to incentivize sustainable practices — we can protect, air, water, and forests – while continuing to support those most in need."
Banga also acknowledged that debt has increased throughout emerging markets, and has doubled in Africa. "Dig deeper and you’ll find people struggling to provide for themselves and their families as incomes have stagnated," he said.
African leaders had sought far more financing for climate resiliency programs. Anywhere from US$50 billion to US$190 billion a year is needed, according to the Global Commission on Adaptation and International Energy Agency. But many of their nations struggle to pay the debt service to multilateral development banks that far outstrips the aid they receive.
The average low-income country spends as much as 2.3 times more on servicing their net interest payments than it does on social assistance, and 1.4 times more than it does on domestic health expenditures – equal to about 60% of what it spends for education, according to U.N. figures.
“Last year, 46 countries paid more than 10% of government revenues in interest payments alone," said Steiner. "We must address debt restructuring urgently, because debt overhang could derail expanded lending over time."
Austerity programs versus debt relief
An analysis by Oxfam International showed 57% of the world’s poorest countries, home to 2.4 billion people, will be forced to cut public spending by a combined US$229 billion over the next five years due to the interest and debt repayments.
Yet the World Bank and IMF keep demanding that these nations cut their spending and fire public service workers to erase their debts, Oxfam said, while dozens of IMF loan programs for low- and middle-income countries since 2020 have encouraged governments to make drastic cuts through austerity measures.
“Rather than canceling unpayable debts, rich countries want to use the annual meetings to fiddle with the bank’s balance sheet to squeeze out money for yet more loans,” said Oxfam International interim Executive Director Amitabh Behar.
“In the next room, poorer countries are still being told to slash spending on public services and social programs critical to fighting poverty, reducing inequality, and realizing the rights of women and girls," he said. "Their answer to the debt crisis is more austerity, and their answer to the financing gulf is more loans. True win-wins, like fairly taxing the rich, are being left on the table.”
The heads of some of the world's biggest multilateral development banks – including the World Bank, African Development Bank and eight others – said the world faces a global “polycrisis” affecting development at an unprecedented scale.
"Progress towards the Sustainable Development Goals has been painfully slow," it said. "For many countries, that progress has stalled or reversed, while the climate emergency is felt in intensifying force around the globe, hitting the most vulnerable the hardest. A much scaled-up global effort is thus required to eradicate poverty, accelerate inclusive socioeconomic development, and tackle transboundary challenges."
The United Nations had sought backing for a stimulus plan that would send half a trillion dollars primarily to heavily indebted and fragile countries by the end of next year. That would help achieve the U.N.'s 17 Sustainable Development Goals for 2030, an ambitious program that the world approved in 2015.
But due to the COVID-19 pandemic, conflicts, climate-affected disasters and other factors, just 15% of the so-called SDGs remains on track, the U.N. estimates. The goals include 169 specific targets and 17 broad goals for spreading peace and prosperity that the U.N.'s 193 member nations agreed to in 2015.
"Realizing equitable global development and advancing the Sustainable Development Goals hinges on reshaping the global financial system so that the poorest and most vulnerable are prioritized," Steiner said.
This story has been updated with additional details.
