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Developing states call for cheaper capital and debt pause

Banks sets out its reform plan to boost lending capacity and IMF hosts global debt roundtable

Held in Marrakech from 9-15 October, a month after Morocco was hit by a devastating earthquake, the first annual meeting of the the IMF and World Bank in Africa for 50 years is facing the strongest calls for institutional and financial reform since their foundation. Much of that focus will be on Africa as the host continent.

African Development Bank President Akinwumi Adesina, Kenyan President William Ruto and African Union Commission Chairman Moussa Faki Mahamat have called for a pause in African debt repayments to help states to invest in climate mitigation and adaptation projects. This message will be reinforced in the run up to the UN COP28 climate summit in Abu Dhabi on 30 November.

The three African leaders, writing in the New York Times, echoed demands for radical reform of the Bretton Woods institutions which they described as 'outdated, dysfunctional and unjust', based on last year's proposals by Barbados Prime Minister Mia Mottley (AC Vol 63 No 23, Delegates haggle in Egypt as the planet burns).

World Bank President Ajay Banga has been on the diplomatic trail trying to drum up support for capital increases from wealthy countries to drive an additional US$100 billion of lending capacity. He may have been helped by United States President Joe Biden's pledge at the G20 summit in India that Washington would contribute $20bn extra to boost the World Bank's capital. Other western economies declined to offer their own pledges, reckoning that the divided US Congress would block Biden's request. Western governments have been slow to offer new funding in the wake of the pandemic downturn (AC Vol 64 No 10, No brave new Bretton Woods in sight).

On 12 October, the Bank is expected to confirm plans to boost lending by $50bn over the next decade through balance sheet changes, using a combination of new instruments based on more loan guarantees and hybrid public-private sector lending.

None of this will do much to ease the austerity conditions that many countries are facing. A report by Oxfam on the eve of the summit argued that developing economies face spending cuts worth $220bn over the next five years because of tighter financing conditions.

Officials from Ghana and Zambia are hoping to use the gathering to seal fresh agreements with their creditors which should unlock the next tranches of funding from their IMF loan programmes.

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