tag:theconversation.com,2011:/africa/topics/world-bank-2308/articlesWorld Bank – The Conversation2024-03-02T12:59:12Ztag:theconversation.com,2011:article/2248862024-03-02T12:59:12Z2024-03-02T12:59:12ZAli Hassan Mwinyi: the Tanzanian former president who oversaw the transition to market economy<p>Ali Hassan Mwinyi, Tanzania’s second president <a href="https://www.theeastafrican.co.ke/tea/news/east-africa/former-tanzania-president-ali-hassan-mwinyi-dies-at-98-4541336">who has died aged 98</a>, pushed through tough economic and political reforms that transformed the East Africa nation from socialism to an open economy and a multi-party democracy. He was president from 1985 to 1995.</p>
<p>He did all of this in the shadow of Julius Nyerere who had led Tanzania since independence in 1961 and turned the country into a one-party socialist state. Tanganyika joined together with Zanzibar in 1964 to form the United Republic of Tanzania. Nyerere stepped down in 1985 but remained chairman of the party that had ruled Tanzania since independence.</p>
<p>Mwinyi’s presidency was always going to be a test, coming at a difficult period. The country was in a serious economic turmoil. Nyerere had admitted that the <a href="https://books.openedition.org/africae/713?lang=en">Ujamaa policy</a> – Tanzania’s socialist experience – had failed. Nyerere decided it was time the country tried another leader. He stepped aside in 1985. During that period, the country had experienced drought, the impacts of the oil shocks and the <a href="https://www.oxfordbibliographies.com/display/document/obo-9780199791279/obo-9780199791279-0242.xml">Kagera War</a>, which Tanzania fought to oust Uganda’s dictator Idi Amin.</p>
<p>As a <a href="https://scholar.google.com/citations?user=kxptJf0AAAAJ&hl=en">political science scholar</a>, I have studied the politics, political parties and democratisation of Tanzania and Zanzibar in the last 10 years. It is my view that it took Mwinyi’s careful balancing act to ward off Nyerere’s influence after taking the presidency. He had to take bold decision amid the shadow of Mwalimu Nyerere who remained as the chairman of the ruling party CCM.</p>
<p>Mwinyi will be remembered for steadying the economic ship and setting ground for <a href="https://theconversation.com/tanzanias-benjamin-william-mkapa-a-life-of-achievements-and-regrets-143422">President William Mkapa</a> to consolidate economic liberalisation. Although there are controversies as to whether he was truly a Zanzibari. This notwithstanding, his elevation as the first Zanzibari Union president somewhat helped to ease the Union tensions. In the postscript of his memoir, Mwinyi reflects on several issues and prided his legacy on the economic reforms he initiated. </p>
<h2>Early life</h2>
<p>A trained teacher, Mwinyi was born on 8 May 1925 in Mkuranga, Coast region, Tanzania Mainland. Between 1933 and 1942, he attended primary school at Mangapwani and Dole – Zanzibar. He studied for Diploma in Education from 1954 to 1956 at the University of Adult Education in Dublin, United Kingdom. He specialised in English and Arabic languages. He taught at Mangapwani and Bumbwini schools in Zanzibar. He later served as an ambassador, and minister in various government ministries before becoming president of Zanzibar.</p>
<p>A rank outsider, Mwinyi’s elevation to the presidency of Tanzania was rather fortuitous. Nyerere had other preferred successors. <a href="https://www.britannica.com/biography/Aboud-Jumbe">Aboud Jumbe</a>, the man who Mwinyi succeeded as president of Zanzibar in 1984 was Nyerere’s preferred successor. Nyerere had always wished a Zanzibari to succeed him as a way of galvanising the Union which was formed in 1964. However, the tense political period between 1983 and 1984 culminated with Jumbe falling out of favour, and being <a href="https://www.thecitizen.co.tz/tanzania/news/national/aboud-jumbe-he-dared-and-paid-the-price-2564240">kicked out</a> as the president of Zanzibar and as vice president of the Union government. By virtue of being president of Zanzibar and vice president of the Union, Mwinyi became Nyerere’s compromise successor. Nyerere had described Mwinyi as honest, humble, and a loyal socialist.</p>
<h2>The reforms</h2>
<p>Mwinyi was not a socialist. <a href="https://www.jstor.org/stable/45341629">At the time he was taking over as president</a> of Tanzania, Mwinyi compared himself to an anthill, succeeding the colossal socialist ideologue. He carefully negotiated and struck a balance between loyalty to Nyerere and driving the reforms. Chief among his reforms was re-initiating negotiations with the World Bank and the International Monetary Fund – two institutions Nyerere had fallen out with. These negotiations meant that Tanzania was transitioning to a liberal market-led economy. </p>
<p>During Mwinyi’s first term in office, he <a href="https://www.elibrary.imf.org/downloadpdf/book/9781557752321/ch003.xml">launched</a> the three-year Economic Recovery Program in 1986. The aim was to spur positive growth, reduce inflation and restore sustainable balance of payments. </p>
<p>With this programme, there was an <a href="https://www.elibrary.imf.org/display/book/9781557752321/ch003.xml">upturn</a> in the country’s economy with the GDP growing at an average rate of 3.9% compared, to 1% during the 1980-1985 period. There was also a 4.8% increase in agricultural productivity, a 2.7% upsurge in manufacturing as well as a significant growth in external investment. The downside to these reforms was the rise in corruption and misappropriation of public funds. These economic reforms necessitated political reforms. President Mwinyi was able to rally the ruling CCM party, which was reluctant to accept International Monetary Fund and World Bank conditions. </p>
<p>In 1992, the Mwinyi administration acceded to constitutional amendments with a return to multiparty politics.</p>
<h2>Foreign policy</h2>
<p>Mwinyi also changed Tanzania’s foreign policy. Tanzania had modelled itself as a champion of <a href="https://theconversation.com/tanzania-south-africa-deep-ties-evoke-africas-sacrifices-for-freedom-202448">pan-Africanism and African liberation</a>. This was the key pillar of the country’s post-independent foreign policy. </p>
<p>In line with Tanzania’s position regarding apartheid South Africa, Mwinyi called for tough sanctions as a means of defeating white minority rule. </p>
<p>The transition from Nyerere to Mwinyi in 1985 heralded a new foreign policy with major conflicts in the Great Lakes Region. As President Mwinyi was settling into his second term, conflicts in the Great Lakes began, with Tanzania feeling the need to act as a mediator. In the 1990s, Tanzania was the key facilitator in the Rwanda domestic crisis. The Rwanda Genocide of 1994 had immediate impact on Tanzania with massive inflows of refugees. </p>
<p>President Mwinyi admitted in his <a href="https://www.africanbookscollective.com/books/mzee-rukhsa">autobiography</a> that the Rwanda Genocide was one of his greatest foreign policy challenges. He recalled the circumstances leading to the events of 6 April 1994, the start of the genocide. He had called for the meeting to discuss the peace and security in Burundi and Rwanda in Dar es Salaam. </p>
<p>After the meeting ended, Burundian President Cyprien Ntaryamira and Rwandan President Juvenal Habyarimana left in one plane which was shot down, sparking off the genocide in Rwanda. Tanzania received many refugees fleeing the killings. In 1995, Tanzania’s city of Arusha became host of the UN backed International Criminal Tribunal for Rwanda to investigate those charged with genocide. During Mwinyi’s second term in office, plans to revive the East African Community began with the signing of an agreement to establish the permanent commission for East African Cooperation in 1993. This process culminated with reformalisation of the East African Community in 2000.</p>
<p>But it is Mwinyi’s contribution to liberalisation that will be his enduring legacy.</p><img src="https://counter.theconversation.com/content/224886/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nicodemus Minde is affiliated with the Institute for Security Studies. </span></em></p>Ali Hassan Mwinyi successfully drove economic and political reforms in Tanzania, all in the shadow of his predecessor, Julius Nyerere.Nicodemus Minde, Adjunct Lecturer, United States International UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2213932024-01-22T13:29:16Z2024-01-22T13:29:16Z‘No cash accepted’ signs are bad news for millions of unbanked Americans<p>How many people don’t have a bank account? And just how difficult has it become to live without one?</p>
<p>These questions are becoming increasingly important as <a href="https://www.chicagotribune.com/business/ct-biz-cashless-backlash-20180710-story.html">more businesses refuse to take cash</a> <a href="https://www.wmtw.com/article/cashless-businesses-south-portland-come-under-fire/40450267">in cities across the U.S.</a> People without bank accounts are shut out from stores and restaurants that refuse to accept cash.</p>
<p>As it happens, a lot of people are still “unbanked”: <a href="https://www.fdic.gov/analysis/household-survey/2021report.pdf">roughly 6 million</a> in the U.S., the latest data shows, which is about the population of Wisconsin. And outside of the U.S., <a href="https://www.worldbank.org/en/publication/globalfindex/Data">more than a billion people</a> don’t have a bank account.</p>
<p><a href="https://www.bu.edu/questrom/profile/jay-zagorsky/">I am a business school professor</a> <a href="https://blogs.bu.edu/zagorsky/">who researches society’s transition</a> from cash to electronic payments. I <a href="https://www.govtech.com/workforce/data-seattle-area-becoming-increasingly-cashless">recently visited Seattle and was amazed</a> by the mixed signals I saw in many storefronts. Numerous shops had one sign proudly proclaiming how welcoming and inclusive they were — next to another sign saying “No cash accepted.” This tells people without bank accounts that they aren’t welcome.</p>
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<figcaption><span class="caption">Not far from Seattle, Mount Rainier National Park stopped accepting cash in May 2023.</span></figcaption>
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<h2>Why not have a bank account?</h2>
<p>Why would someone want to avoid using banks? Every two years, the Federal Deposit Insurance Corporation surveys households about their connections to the banking system and asks people without bank accounts <a href="https://www.fdic.gov/analysis/household-survey/2021execsum.pdf">why they don’t have one</a>. People can respond with multiple answers. In 2021, the top reason — with over 40% of respondents choosing it — was that they didn’t have enough money to meet the minimum balance.</p>
<p>This is consistent with data showing that poorer households are less likely to have bank accounts. About one-quarter of those earning less than $15,000 a year are unbanked, the FDIC found. Among those earning more than $75,000 a year, almost every person surveyed had some type of bank account.</p>
<p>The second- and third-most common answers show that some people are skeptical of banks. Roughly one-third of survey respondents agreed that “Avoiding a bank gives more privacy,” while another one-third said they simply “don’t trust banks.”</p>
<p>Rounding out the top five reasons were costs of dealing with a bank. More than one-quarter of respondents felt bank account fees were too high, and about the same proportion felt fees were too unpredictable.</p>
<p>While many middle-class and wealthy people don’t pay directly for their bank accounts, fees can be costly for those who can’t maintain a minimum balance. A recent Bankrate survey <a href="https://www.bankrate.com/banking/checking/checking-account-survey/">shows basic monthly service fees</a> range between $5 and $15. Beyond these steady fees, <a href="https://www.fdic.gov/resources/consumers/consumer-news/2021-12.html">banks earn $4 to $5</a> each time people withdraw cash from an ATM or need services <a href="https://www.bankrate.com/banking/checking/what-is-a-cashiers-check/#fees-for-a-cashier-s-check">like getting cashier’s checks</a>. Unexpected bills can result in <a href="https://www.bankrate.com/banking/checking/checking-account-survey/#overdraft-fees">overdraft fees of about $25</a> each time an account is overdrawn.</p>
<h2>Being unbanked in America</h2>
<p>The FDIC calls people without a bank account “<a href="https://www.pbs.org/newshour/show/millions-of-unbanked-americans-lack-adequate-access-to-financial-services">the unbanked</a>.” People with a bank account but who primarily rely on alternative services such as check cashing outlets are called “<a href="https://guides.loc.gov/fintech/21st-century/unbanked-underbanked">the underbanked</a>.”</p>
<p>The latest FDIC data shows almost 6 million unbanked and 19 million underbanked U.S. households. Given that <a href="https://www.census.gov/content/dam/Census/library/visualizations/time-series/demo/families-and-households/hh-6.pdf">2.5 people live in the average household</a>, this means there are over 15 million people living in a home with no connection to banks, and 48 million more in homes with only a tenuous connection to banks.</p>
<p>Combining the two figures means roughly one out of every five people in the U.S. has little or no connection to banks or other financial institutions. That can leave them shut out from stores, restaurants, transportation and medical providers that don’t take cash.</p>
<p>The true number of unbanked people is likely higher than the FDIC estimates. The questions on being banked or unbanked are supplemental questions <a href="https://www.census.gov/programs-surveys/cps/about.html">added to a survey</a> given to people at their homes. This means it misses homeless people, transients without a permanent address and <a href="https://www.dhs.gov/immigration-statistics/population-estimates/unauthorized-resident">undocumented immigrants</a>. </p>
<p>These people are likely unbanked because you need a verified address and a government-issued tax-identification number <a href="https://www.federalreserve.gov/boarddocs/supmanual/bsa/bsa_p5.pdf">to get a bank account</a>. Given roughly <a href="https://www.npr.org/2023/12/22/1221006083/immigration-border-election-presidential">2.5 million migrants crossed the U.S.-Mexico border</a> in 2023 alone, there are millions more people in the cash-only economy than the FDIC estimates. </p>
<h2>How many people globally are unbanked?</h2>
<p>While the U.S. has relatively high rates of people with bank accounts, the picture is different in other parts of the world. The <a href="https://www.worldbank.org/en/topic/financialinclusion/overview">World Bank has created a database</a> that shows the percentage of each country’s population that has access to financial services. The World Bank’s definition of being banked is broader than the FDIC’s, since it includes anyone who uses a cellphone to send and receive money as having a bank account.</p>
<p>Overall, the World Bank estimates about <a href="https://www.worldbank.org/en/publication/globalfindex">one-quarter of the world’s adults</a> don’t have access to a bank or mobile-phone account. But that varies dramatically by region. In countries that use the Euro, almost everyone has a bank account, while in the Middle East and North Africa, only about half the population does.</p>
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<h2>A more inclusive economy</h2>
<p>Many of us swipe our credit cards, tap our phones or insert a debit card to pay without thinking. However, there are at least 6 million people in the U.S. and almost <a href="https://ufa.worldbank.org/en/ufa">1.5 billion worldwide who are unbanked</a>.</p>
<p>When businesses stop accepting cash, the unbanked are forced to use payment methods like prepaid debit cards. However, these <a href="https://www.consumerfinance.gov/ask-cfpb/what-types-of-fees-do-prepaid-cards-typically-charge-en-2053/">prepaid cards are costly</a>. For example, Walmart, one of the largest U.S. retailers, <a href="https://www.walmartmoneycard.com/">offers a reloadable basic debit card</a>. The card <a href="https://www.investopedia.com/articles/personal-finance/112315/6-ways-load-your-walmart-money-card.asp">costs $1 to buy</a> and charges <a href="https://www.walmartmoneycard.com/helpcenter/getting-started/why-walmart-moneycard/how-can-i-waive-my-monthly-fee-for-walmart-moneycard">$6 per month in fees</a>, in addition to <a href="https://www.walmartmoneycard.com/helpcenter/adding-money/how-much-does-it-cost-to-use-walmart-rapid-reload">$3 each time someone wants to load the card with cash</a> at Walmart’s registers. Paying a minimum of $10 just to set up a debit card for a few purchases is a steep price.</p>
<p>The next time you see a sign in a shop or restaurant window stating “No cash accepted,” you’re really looking at a business excluding many unbanked and underbanked people. Insisting that all businesses accept cash is a simple way to ensure everyone is financially included in the modern economy.</p><img src="https://counter.theconversation.com/content/221393/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jay L. Zagorsky does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A cashless economy is a less inclusive economy.Jay L. Zagorsky, Clinical Associate Professor of Markets, Public Policy and Law, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2166212024-01-07T19:05:27Z2024-01-07T19:05:27ZChina’s capitalist reforms are said to have moved 800 million out of extreme poverty – new data suggests the opposite<figure><img src="https://images.theconversation.com/files/562651/original/file-20231130-29-ouom1s.jpg?ixlib=rb-1.1.0&rect=464%2C408%2C2016%2C1153&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hong-kong-apr-22-streets-old-410311939">Shutterstock</a></span></figcaption></figure><p>It has become an article of faith among many economists that China’s pro-market reforms of the 1980s and 1990s ushered in a sustained reduction in poverty.</p>
<p>This narrative relies on figures from the World Bank, showing that over the past 40 years the number of people in China living in “extreme poverty” (less than US$1.90 per day) fell by <a href="https://www.worldbank.org/en/news/press-release/2022/04/01/lifting-800-million-people-out-of-poverty-new-report-looks-at-lessons-from-china-s-experience">almost 800 million</a>. That’s a fair chunk of the world population, which is currently about eight billion.</p>
<p>The World Bank’s calculations suggest China’s rate of extreme poverty has plummeted from one of the highest in the world – 88% – in 1981, to virtually zero today, with the fastest gains in the 1980s and 1990s during the capitalist reforms of Chairman Deng Xiaoping.</p>
<h2>It depends how you define purchasing power</h2>
<p>The World Bank calculations use <a href="https://ourworldindata.org/what-are-ppps">purchasing power parity</a>, which is a standard way of comparing <em>general</em> purchasing power over time and between countries. But this approach does not tell us about people’s purchasing power over the <em>specific goods and services</em> that are necessary for survival. Because of this, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=893159">scholars warn</a> that the World Bank’s method cannot give an accurate picture of real poverty trends.</p>
<p>In a new paper published in <a href="https://www.tandfonline.com/doi/full/10.1080/13563467.2023.2217087">New Political Economy</a> we calculate extreme poverty rates for China using data published by the OECD, assessing people’s incomes against the prices of necessary subsistence goods; among them 2,100 calories per day, essential nutrients, three square meters of housing per person, clothing, heating and soap.</p>
<p>In contrast to the World Bank, we find that from 1981 to 1990 – at the end of the socialist period – China’s rate of extreme poverty was one of the <em>lowest</em> in the developing world. It averaged only 5.6%, compared to 51% in India, 36.5% in Indonesia and 29.5% in Brazil. </p>
<p>We find extreme poverty increased dramatically during the market reforms of the 1990s. It reached a peak of 68% as price deregulation pushed up the cost of basic food and housing, cutting the buying power of low-income people. </p>
<p>Extreme poverty then slid during the 2000s, but has yet to fall to the levels calculated by the World Bank.</p>
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<h2>Under communism, China subsidised necessities</h2>
<p>The two approaches produce different answers because purchasing power parity adjusts incomes in accordance with the cost of all purchases including luxury goods rather than in accordance with the <a href="https://www.aeaweb.org/articles?id=10.1257/aer.20161080">cost of basic items</a> needed for survival.</p>
<p>The difference matters a lot when comparing socialist and capitalist systems and assessing transitions between those systems. Socialist policies can keep the cost of meeting basic needs low in a way overall price measures don’t pick up. </p>
<p>This seems to have been the case in China. Until its market reforms, China’s government provided food and shelter at little or no cost. This meant US$1.90 was able to buy more basic necessities in China than in comparable capitalist countries.</p>
<p>As the government removed controls on the prices of basic goods and <a href="https://www.scirp.org/html/6-3800327_53057.htm">dismantled</a> its social security system throughout the 1990s, the price of necessities moved beyond the means of many.</p>
<p>Of course, these results may not hold if low-priced essentials were difficult to obtain in practice, something the <a href="https://www.oecd-ilibrary.org/social-issues-migration-health/how-was-life-volume-ii_e20f2f1a-en">OECD data</a> we used cannot tell us.</p>
<p>But other social indicators support our finding that extreme poverty was lower in China than in India, Indonesia and Brazil in the 1980s.</p>
<p>China performed better than these countries on several key social indicators, including <a href="https://pubmed.ncbi.nlm.nih.gov/25495509/">life expectancy</a>, infant and child mortality, mean years of schooling, and the share of the population with <a href="https://www.tandfonline.com/doi/full/10.1080/13563467.2023.2217087">access to electricity</a>.</p>
<p>It’s impossible to measure extreme poverty with absolute certainty. But our results are corroborated by other indicators and seem to suggest extreme poverty worsened during China’s reforms.</p>
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<h2>Economic growth by itself is not enough</h2>
<p>It is important to clarify that our findings refer only to extreme poverty, defined as the inability to purchase essential food, shelter and a few basic necessities. </p>
<p>China’s impressive industrial development has, of course, led to substantial improvements in access to modern appliances, information technology and other goods. But when it comes to access to basic nutrients and housing, a large share of China’s population appears to have suffered during the move to a market economy.</p>
<p>Our findings have important implications. They suggest that although industrial development is an important goal, it can’t be relied upon to cut extreme poverty in and of itself, at least not in the context of capitalist reforms and social policy retrenchment.</p>
<p>Public ownership, price controls, and universal access to social services, of the kind advanced in China before the market reforms, can be at least as effective, especially at low levels of economic development.</p>
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Read more:
<a href="https://theconversation.com/chinas-population-is-now-inexorably-shrinking-bringing-forward-the-day-the-planets-population-turns-down-198061">China's population is now inexorably shrinking, bringing forward the day the planet's population turns down</a>
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<img src="https://counter.theconversation.com/content/216621/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jason Hickel acknowledges support by the María de Maeztu Unit of Excellence grant from the Spanish Ministry of Science and Innovation.</span></em></p><p class="fine-print"><em><span>Dylan Sullivan and Michail Moatsos do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The World Bank used a tool known as purchasing power parity to make its calculations. An improved methodology suggests China’s pro-market reforms increased rather than shrank extreme poverty.Dylan Sullivan, Adjunct Fellow and PhD candidate in the Macquarie School of Social Sciences, Macquarie UniversityJason Hickel, Professor at the Institute for Environmental Science and Technology, Autonomous University of BarcelonaMichail Moatsos, Assistant Professor, School of Business and Economics, Maastricht UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2201422023-12-20T13:38:01Z2023-12-20T13:38:01ZWhy the COP28 climate summit mattered, and what to watch for in 2024<figure><img src="https://images.theconversation.com/files/566693/original/file-20231219-17-i3ffem.jpg?ixlib=rb-1.1.0&rect=6%2C9%2C2038%2C1352&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">U.S. Special Presidential Envoy for Climate John Kerry and his Chinese counterpart, Xie Zhenhua, had front-row seats at COP28's final session. </span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/unfccc/53394837161/in/album-72177720313353788/">Kiara Worth/UN Climate Change via Flickr,</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>Reading down the lengthy <a href="https://unfccc.int/sites/default/files/resource/cma2023_L17_adv.pdf">final agreement of the COP28</a> United Nations climate conference held in December 2023, you’ll go a long way before finding a strong, active verb. The lengthy recitation of climate impacts “notes with concern” and occasionally with “significant concern” <a href="https://www.unep.org/resources/emissions-gap-report-2023">glaring gaps</a> in countries’ current policies. But while countries volunteered pledges to act, they were less keen to have those pledges framed as binding agreements in the final text.</p>
<p>Reactions to COP28’s conclusion have been understandably mixed. Going into the talks, the world was <a href="https://www.carbonbrief.org/qa-what-is-the-global-stocktake-and-could-it-accelerate-climate-action/">more on track</a> to avert catastrophic warming than it would have been without the <a href="https://unfccc.int/process-and-meetings/the-paris-agreement">2015 Paris Agreement</a>, but a long way from where it needs to be.</p>
<p>Even <a href="https://www.iea.org/news/iea-assessment-of-the-evolving-pledges-at-cop28">if all the pledges made at COP28 are implemented</a>, the world will still exceed the Paris goal of keeping global warming under 1.5 degrees Celsius (2.7 Fahrenheit) compared to preindustrial temperatures.</p>
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<a href="https://images.theconversation.com/files/566601/original/file-20231219-27-qde9s6.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Chart shows if all COP28 pledges were met, the world would be closer to the goal of keeping emissions under 1.5 C but not on track." src="https://images.theconversation.com/files/566601/original/file-20231219-27-qde9s6.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/566601/original/file-20231219-27-qde9s6.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=368&fit=crop&dpr=1 600w, https://images.theconversation.com/files/566601/original/file-20231219-27-qde9s6.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=368&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/566601/original/file-20231219-27-qde9s6.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=368&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/566601/original/file-20231219-27-qde9s6.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=462&fit=crop&dpr=1 754w, https://images.theconversation.com/files/566601/original/file-20231219-27-qde9s6.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=462&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/566601/original/file-20231219-27-qde9s6.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=462&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The Climate Action Tracker assessment of countries’ pledges at COP28 to reduce emissions shows progress toward the 2030 goal, but a large gap.</span>
<span class="attribution"><a class="source" href="https://climateactiontracker.org/publications/cop28-initiatives-create-buzz-will-only-reduce-emissions-if-followed-through/">Copyright Climate Analytics and NewClimate Institute</a></span>
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</figure>
<p>Politically, the agreement may have been the best that nations could reach at this time of <a href="https://www.foreignaffairs.com/middle-east/age-great-power-distraction-kimmage-notte">rising geopolitical tensions</a> and under the leadership of the United Arab Emirates. The UAE is a country of contradictions – a petrostate with renewable energy ambitions, keen to emerge onto the global stage as a green champion, but also <a href="https://www.theguardian.com/environment/2023/nov/30/the-new-scramble-for-africa-how-a-uae-sheikh-quietly-made-carbon-deals-for-forests-bigger-than-uk">accused of colonization tactics</a> in Africa.</p>
<p>Most headlines have focused on the COP28 agreement’s mention of fossil fuels for the first time. The convoluted language called for countries to “<a href="https://unfccc.int/sites/default/files/resource/cma2023_L17_adv.pdf">contribute” to</a> “transitioning away from fossil fuels,” not the phaseout supported by a majority of countries. With an <a href="https://www.theguardian.com/environment/2023/dec/05/record-number-of-fossil-fuel-lobbyists-get-access-to-cop28-climate-talks">unprecedented number of energy industry lobbyists</a> on hand, the consensus was described by the most vulnerable countries as a <a href="https://theconversation.com/how-cop28-failed-the-worlds-small-islands-219938">litany of loopholes</a>.</p>
<p>The final agreement was, in large parts, written in a way to secure the future of the natural gas industry. It portrayed natural gas as a necessary bridge fuel while renewable energy expands, an argument that was <a href="https://www.iea.org/reports/world-energy-outlook-2023">disproved by the International Energy Agency</a> before COP28. The agreement also furthered the expectation of continued heavy subsidies for carbon capture and storage, which many energy analysts and economists have dismissed as <a href="https://apnews.com/article/carbon-capture-removal-cop28-fossil-fuels-oil-gas-2bc53c6a8df6d337c1afcabad56377e8">unscalable at a reasonable cost</a>.</p>
<p>Nevertheless, the UAE blasted through some of the old shibboleths of climate negotiation. It broke the polarity of climate finance – the Global South waiting for the Global North to fulfill its promises of public finance – by <a href="https://www.climatechangenews.com/2023/12/10/what-is-alterra-the-uaes-30-billion-green-investment-fund/">focusing on private investment</a> and putting tens of billions of dollars of its sovereign wealth into play. It was not able to persuade others to match its generosity, but there will be more pressure in 2024.</p>
<p>So, what should we look for in the coming months?</p>
<h2>1. Turning new energy pledges into action</h2>
<p>COP28 included <a href="https://www.ft.com/content/af71fc48-b89f-4920-a35b-2867b7adcc0c">significant commitments toward an energy transition</a> away from fossil fuels, including pledges to triple <a href="https://www.cop28.com/en/global-renewables-and-energy-efficiency-pledge">renewable energy capacity, increase energy efficiency</a> and cut <a href="https://www.aljazeera.com/news/2023/12/2/at-cop28-oil-companies-pledge-to-lower-methane-emissions">methane emissions</a>.</p>
<p>Now it’s up to countries and companies to show progress. That will depend on investments and overcoming supply bottlenecks, as well as new policies and, in the case of methane, <a href="https://www.piie.com/publications/policy-briefs/how-international-agreement-methane-emissions-can-pave-way-enhanced">standards for imports and exports</a>.</p>
<p>The new <a href="https://www.unep.org/resources/report/global-cooling-pledge">Global Cooling Pledge</a> to reduce emissions from cooling by 68% while increasing access to cooling technology is increasingly critical. <a href="https://www.iea.org/energy-system/buildings/space-cooling">Demand for cooling is driving up energy demand</a> across the globe, particularly in populous countries hard hit by extreme heat, such as India. Developing technologies that help the billions of people most at risk and improve cold supply chains for food and medicine will require more investment and greater priority from governments.</p>
<p>Watch for <a href="https://www.climateresilience.org/">more cities to appoint heat czars</a> to spearhead efforts to protect populations from extreme heat, <a href="https://time.com/6336537/america-tree-equity-urban-climate-solution/">adoption of tree equity plans</a> to increase shade and cooling, and more investment in cooling technologies.</p>
<h2>2. Deploying innovations in finance</h2>
<p>COP28 saw significant innovation in finance, including the UAE’s announcement of the Alterra Fund – a <a href="https://www.climatechangenews.com/2023/12/10/what-is-alterra-the-uaes-30-billion-green-investment-fund/">$30 billion commitment</a> to mobilize private investment in developing countries.</p>
<p>The <a href="https://www.iosco.org/news/pdf/IOSCONEWS717.pdf">International Organization of Securities Commissions</a> sent a strong statement in support of <a href="https://www.ifrs.org/groups/international-sustainability-standards-board/">corporate sustainability disclosure standards</a> and welcomed <a href="https://icvcm.org/icvcm-and-vcmi-join-forces-to-operationalize-a-high-integrity-market-to-accelerate-global-climate-action/">corporate integrity standards in the voluntary carbon markets</a>. Look for more countries to add rules around <a href="https://www.un.org/en/climatechange/net-zero-coalition">“net-zero emissions” pledges</a>.</p>
<h2>3. Putting trade to work for the climate</h2>
<p>Linked to finance and investment is trade, which <a href="https://www.thebanker.com/How-trade-and-trade-finance-can-assist-the-transition-to-net-zero-1701941013">COP28 welcomed</a> to the main stage for the first time.</p>
<p>There are two things to look for in 2024. First, look for the World Trade Organization, International Monetary Fund and the World Bank to align their advice to governments on effective carbon pricing.</p>
<p>Second, while trade and climate negotiators traditionally move in different circles, they will <a href="https://earth.org/free-trade-agreement/">need to work together</a> to ensure the trade system supports climate action. For example, making sure green products and services are not made more expensive than their polluting alternatives.</p>
<h2>4. Fixing the carbon markets</h2>
<p>2023 was a year of pushback on the voluntary carbon markets, as <a href="https://www.theguardian.com/environment/2023/jan/18/revealed-forest-carbon-offsets-biggest-provider-worthless-verra-aoe">investigations questioned their effectiveness</a>. COP28’s failure to advance agreements on carbon markets under <a href="https://www.undp.org/energy/blog/what-article-6-paris-agreement-and-why-it-important">Article 6 of the Paris Agreement</a> means they will be a focus in 2024.</p>
<p>In this case, <a href="https://carbonmarketwatch.org/2023/12/13/cop28-article-6-failure-avoids-a-worse-outcome/">no deal was better than a bad deal</a>, but the delay means countries that plan to use carbon markets to meet their net-zero targets are left with uncertainty.</p>
<h2>5. Getting more adaptation funding where it’s needed</h2>
<p>An agreement on a global goal on adaptation, a collective commitment to build resilience and adaptive capacity across the world, was finally reached, but negotiators left the <a href="https://www.carbonbrief.org/guest-post-what-would-an-ambitious-global-goal-on-adaptation-look-like-at-cop28/">details to be filled in over the next two years</a>.</p>
<p>To get adaptation funding flowing to where it is most needed, top-down discussions will need to start, including <a href="https://www.wri.org/initiatives/locally-led-adaptation/principles-locally-led-adaptation">locally led efforts</a>. Look for adaptation to become a much bigger part of countries’ second-generation climate plans to be submitted to the U.N. before COP30.</p>
<h2>6. Turning new food and ag pledges into action</h2>
<p>A majority of the world’s countries, 159, signed the <a href="https://www.cop28.com/en/food-and-agriculture">UAE Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action</a>. They agreed to include food systems, which contribute a significant percentage of global emissions and which are fundamental to adaptation and resilience, in the next generation of climate plans to be submitted to the U.N.</p>
<p>The pledge was thin on details, however, so how each country turns words into actions will be crucial in 2024.</p>
<h2>The next big climate milestones</h2>
<p>In late 2024, COP29 will take place in Baku, Azerbaijan – another oil-producing nation. The focus will be on finance. But the <a href="https://unfccc.int/news/cop28-agreement-signals-beginning-of-the-end-of-the-fossil-fuel-era">next big milestone is in 2025</a>, when governments must submit their future pledges and plans for reducing emissions.</p>
<p>COP30 is to be held in Belen in the Brazilian state of Para – the <a href="https://theconversation.com/the-great-amazon-land-grab-how-brazils-government-is-clearing-the-way-for-deforestation-173416">frontline of Amazon protection</a>. This will bring a focus on nature-based solutions, but from the perspective of the Global South. President Lula da Silva, who is also the host of the G20 in 2024, wants to see change in the international trade and finance system to reflect shifts in the global economy.</p>
<p>COP28 set forth important initiatives but balked at binding commitments. As countries work on their next generation of plans to try to get the world on track to limit global warming, they will have to consider the whole of their economies and cover all greenhouse gases. The world can’t afford to balk twice.</p><img src="https://counter.theconversation.com/content/220142/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rachel Kyte is affiliated with VCMI - Voluntary Carbon Markets Integrity Initiative, and Climate Resilience for All CRA</span></em></p>The UN climate conference brought some progress. A former UN official who has been involved in international climate policy for years explains what has to happen now for that progress to pay off.Rachel Kyte, Visiting Professor of Practice, Blavatnik School of Government, University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2189992023-12-01T02:24:05Z2023-12-01T02:24:05ZCOP28 climate summit just approved a ‘loss and damage’ fund. What does this mean?<p>Day one of the COP28 climate summit saw the first big breakthrough: <a href="https://www.cop28.com/en/news/2023/11/COP28-Presidency-unites-the-world-on-Loss-and-Damage">agreement on a “loss and damage” fund</a> to compensate poor states for the effects of climate change.</p>
<p>Met with a standing ovation in Dubai, the agreement means wealthy states and major polluters will put millions of dollars towards a fund that will in turn distribute funds to poor states harmed by climate change. The fund will be administered by the World Bank. Initial commitments amount to US$430 million.</p>
<p>It will come as a huge relief to the United Arab Emirates, the summit’s host. The country was under pressure even before talks began about its fossil fuel expansion plans and the fact the president of the climate talks is <a href="https://theconversation.com/cop28-inside-the-united-arab-emirates-the-oil-giant-hosting-2023-climate-change-summit-217859">chief executive of a national oil company</a>. This undoubtedly featured in the UAE’s decision to commit US$100 million to the fund.</p>
<p>Other countries to make <a href="https://www.theguardian.com/environment/2023/nov/30/agreement-on-loss-and-damage-deal-expected-on-first-day-of-cop28-talks">initial commitments to the fund</a> include the United Kingdom ($75 million), United States ($24.5 million), Japan ($10 million) and Germany (also US$100 million). Pressure will now build on other wealthy countries, including Australia, to outline their own commitments to the fund.</p>
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<a href="https://theconversation.com/as-disasters-and-heat-intensify-can-the-world-meet-the-urgency-of-the-moment-at-the-cop28-climate-talks-217063">As disasters and heat intensify, can the world meet the urgency of the moment at the COP28 climate talks?</a>
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<h2>What’s the history of the fund?</h2>
<p>The Loss and Damage Fund was <a href="https://edition.cnn.com/2022/11/03/opinions/cop27-climate-loss-and-damage-vanuatu-sutter/index.html">first suggested by Vanuatu</a> in 1991.</p>
<p>At the heart of the push for this fund is a recognition that those countries likely to be most affected by climate change are the least responsible for the problem itself. The fund would ensure those who created the problem of climate change – developed states and major emitters – would compensate those experiencing its most devastating effects.</p>
<p>With global warming now locked in and effects already being felt, from natural disasters to rising sea levels, the fund also recognises the world has failed to prevent climate change from happening.</p>
<p>A <a href="https://theconversation.com/cop27-one-big-breakthrough-but-ultimately-an-inadequate-response-to-the-climate-crisis-194056">commitment to establish such a fund</a> was one of the most important outcomes of last year’s climate talks in Egypt. Since then, a series of meetings had taken place to try to secure international agreement about how the fund would work, who would commit to it, and who would be eligible to receive funds.</p>
<p>These meetings have been characterised by <a href="https://www.theguardian.com/environment/2023/nov/03/un-climate-crisis-talks-resume-loss-damage-funding-poorest-countries">significant disagreement</a> over each of these points.</p>
<p>In that sense, the COP28 announcement is a welcome and significant breakthrough.</p>
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<h2>Questions remain</h2>
<p>There’s still a lot that needs clarifying about this fund. Some of the big outstanding questions include the fund’s size, its relationship to other funds, how it will be administered over the long term, and what its funding priorities will be.</p>
<p>In response to the announcement, leading <a href="https://abcnews.go.com/Health/wireStory/1st-day-climate-conference-sets-fund-countries-hit-105269216">African think-tank representative Mohamad Adhow noted</a> there were “no hard deadlines, no targets, and countries are not obligated to pay into it, despite the whole point being for rich, high-polluting nations to support vulnerable communities who have suffered from climate impacts”.</p>
<p>There is also concern about the World Bank’s role in overseeing the fund in the first instance. Developing countries expressed opposition to this idea in the lead up to COP28, questioning the <a href="https://www.theguardian.com/environment/2023/nov/29/why-loss-and-damage-funds-are-key-to-climate-justice-for-developing-countries-at-cop28">World Bank’s environmental credentials and the transparency</a> of its operations.</p>
<p>While initial funding may seem generous, most analysts would also agree this fund is a long way from covering the full range of effects. Some estimates suggest the costs of climate-related harms <a href="https://assets-global.website-files.com/605869242b205050a0579e87/655b50e163c953059360564d_L%26DC_L%26D_Package_for_COP28_20112023_1227.pdf">are already at $400 billion</a> annually for developing states: roughly 1,000 times the amount initially pledged.</p>
<p>Finally, we should not assume pledges will actually translate to countries putting their hands in their pocket. The Green Climate Fund announced in 2009 – designed to help developing states with their transition away from fossil fuels and to help with adaptation initiatives – included a commitment for developed states to provide <a href="https://www.carbonbrief.org/analysis-why-climate-finance-flows-are-falling-short-of-100bn-pledge/">$100 billion per year by 2020</a>. They fell well short of this goal.</p>
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<h2>The legacy</h2>
<p>Agreement on this fund is a good thing in recognising the inequality at the heart of the causes and effects of climate change, and may ultimately be one of the key outcomes of these talks.</p>
<p>Early agreement also means it cannot be used as a bargaining chip over other crucial parts of these negotiations. Now the talks can now focus on the <a href="https://theconversation.com/as-disasters-and-heat-intensify-can-the-world-meet-the-urgency-of-the-moment-at-the-cop28-climate-talks-217063">assessment of progress</a> towards meeting commitments to the Paris Agreement, which aims to hold warming to 1.5°C to limit further dangerous levels of climate change.</p>
<p>Whether the UAE organisers and the rest of the world take up this challenge effectively will determine the effectiveness of these talks, and quite possibly the fate of the planet.</p>
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<a href="https://theconversation.com/cop28-begins-4-issues-that-will-determine-if-the-un-climate-summit-is-a-success-from-methane-to-money-218869">COP28 begins: 4 issues that will determine if the UN climate summit is a success, from methane to money</a>
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<p class="fine-print"><em><span>Matt McDonald has received funding from the Australian Research Council and the Economic and Social Research Council in the UK.</span></em></p>Through the Loss and Damage Fund, developed states and major emitters will compensate developing countries experiencing the most devastating effects of climate change. The fund is now operational.Matt McDonald, Associate Professor of International Relations, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2145972023-11-14T14:11:48Z2023-11-14T14:11:48ZWest Africa’s plastic waste could be fuelling the economy instead of polluting the ocean: experts<figure><img src="https://images.theconversation.com/files/557777/original/file-20231106-23-bfkep5.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4031%2C3024&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A beach littered with plastic and other waste in the fishing village of Kayar, north of Dakar, Senegal.</span> <span class="attribution"><span class="source">Bara Deme</span>, <span class="license">Author provided</span></span></figcaption></figure><p>Plastic pollution is an urgent environmental issue, globally. Every year, about eight million tonnes of plastic <a href="https://www.unoceandeplastique.fr/ocean-les-faits/">end up</a> in the oceans.</p>
<p>Most of the 17 west African countries have a problem managing plastic waste. Eight of them are <a href="https://www.science.org/doi/10.1126/science.1260352">among</a> the top 20 with the least effective plastic waste management practices – up from <a href="https://slacc.org.uk/wp-content/uploads/2017/12/10.-Jambeck2015.pdf#page=2">five</a> in 2015. This has worsened marine pollution and adversely affected activities in the region. </p>
<p>Coastal provinces account for about <a href="https://www.wacaprogram.org/">56% of west Africa’s GDP</a> and one-third of the population lives there. </p>
<p>In 2018, west African nations launched the West Africa Coastal Area Management Programme <a href="https://www.worldbank.org/en/news/press-release/2022/12/15/world-bank-approves-246-million-to-strengthen-coastal-resilience-in-west-africa#:%7E:text=The%20WACA%20Program%20was%20launched,erosion%2C%20flooding%2C%20and%20pollution.">to protect and restore</a> the ecological, social and economic assets of coastal areas. It’s supposed to do this by addressing coastal erosion, flooding and pollution. Last year it received an additional <a href="https://www.worldbank.org/en/news/press-release/2022/12/15/world-bank-approves-246-million-to-strengthen-coastal-resilience-in-west-africa#:%7E:text=The%20WACA%20Program%20was%20launched,erosion%2C%20flooding%2C%20and%20pollution.">US$246 million in funding</a> from the World Bank. This has brought the World Bank’s total financing of the project to US$492 million. </p>
<p>For many years, we have <a href="https://researchportal.port.ac.uk/en/persons/pierre-failler/publications/">researched</a> development economics, particularly the interface between the use of <a href="https://researchportal.port.ac.uk/en/persons/elhadj-deme/publications/">natural resources</a> and the development of countries. We’ve also been involved in research on plastic pollution through the interdisciplinary <a href="https://www.port.ac.uk/research/themes/sustainability-and-the-environment/revolution-plastics">“Revolution Plastics”</a> initiative of the University of Portsmouth’s Centre for Blue Governance.</p>
<p>Our findings on plastic pollution could help west African countries to spend World Bank funds effectively.</p>
<p>We recommend that nations first quantify the volume, type and origin of plastics discarded in coastal zones. Then they must focus on reducing plastics from source, as well as promoting reuse and recycling. They can draw on successful case studies globally, which can be adapted to local contexts.</p>
<h2>Healthy oceans and a circular economy</h2>
<p>The West Africa Coastal Area Management Programme has initiated studies to <a href="https://www.banquemondiale.org/fr/news/feature/2023/07/12/we-are-losing-our-treasure-the-west-african-coastal-areas-tackle-plastic-waste#:%7E:text=En%20Afrique%20de%20l%27Ouest,secteurs%20touch%C3%A9s%20de%20plein%20fouet">assess</a> the environmental and economic impact of plastic pollution in the region. These studies also aim to explore the benefits of moving to a circular economy: an economic system that reuses or regenerates materials or products in a sustainable way.</p>
<p>The programme expects that a circular economy will create new economic opportunities through markets for reusing products and materials. Rather than discarding products, they can be put back into the economy. This can create demand for services and technologies related to collecting and processing them. </p>
<p>The programme can benefit from research on sustainable plastic management from other regions to achieve its objectives.</p>
<h2>Research partnership</h2>
<p>The <a href="https://www.port.ac.uk/research/research-groups-and-centres/centre-for-blue-governance">Centre for Blue Governance</a> has expertise in blue economy, marine ecosystem management, climate change and circular economy. It has extensively researched plastic pollution in Portsmouth, a port city in the United Kingdom, and beyond. We have found that sustainable plastic management can be achieved in various ways. These strategies could be relevant for initiatives in west Africa. They include:</p>
<p>Inclusive partnerships: Collaborating with businesses, campaigners and citizens on the <a href="https://www.port.ac.uk/research/themes/sustainability-and-the-environment/revolution-plastics">Revolution Plastics</a> initiative, we apply research to develop eco-friendly fabrics and combat microplastic pollution. </p>
<p>Awareness campaigns through art: Community awareness of the harmful effects of plastic pollution is necessary. Through the <a href="https://www.port.ac.uk/research/research-projects/masibambisane">Masibambisane project</a> in South Africa, we explored street art, theatre and song to create awareness about plastic pollution. </p>
<p>The project achieved significant results in KwaMhlanga, in South Africa’s Mpumalanga province. It demonstrated that raising awareness through art could inspire people to change their behaviour. These communities now have a deeper understanding of the urgent need to act against plastic pollution. </p>
<p>In addition, the introduction of sorting facilities close to homes increased recycling rates and encouraged sustainable habits. The west African programme can incorporate these lessons into the e-book it is planning. This is a way to share information about best practices and encourage action in communities. </p>
<p>Reuse and recycling projects: Through our <a href="https://www.port.ac.uk/research/research-projects/indigo-project">inDIGO-EU</a> and <a href="https://www.port.ac.uk/research/research-projects/microseap">Microseap</a> projects we reduced plastic waste by promoting recycling and reuse. For example, the INdIGO project has developed biodegradable fishing gear that reduces the environmental impact of ocean fishing in the UK and France. Based on this project, the West Africa Coastal Area Management Programme can develop a sustainable alternative to the gear used for small-scale fishing in the region. </p>
<h2>From diagnosis to action</h2>
<p>Our research findings suggest that for optimal use of the World Bank fund, the West Africa Coastal Area Management Programme could consider the following action plans:</p>
<p>Collect data on plastic pollution: Start with a regional study to quantify the volume, typology and origin of plastics discarded in coastal zones. This could involve the use of technologies such as drones, sensors and remote sensing to map pollution hotpots. Perception surveys could also help to understand behaviours and attitudes related to plastic pollution. The aim is to establish precise indicators and predictive models that can measure how well future interventions work.</p>
<p>Plan for a switch to a circular economy: The plan should focus on source reduction, reuse, recycling and material recovery. A committee made up of government actors, private enterprises and local communities could oversee implementation.</p>
<p>Design community awareness and education programmes: These campaigns should instil a sense of environmental responsibility and give people tools to actively participate in reducing plastic pollution. Involving opinion leaders could increase their impact.</p>
<p>Develop ways to use plastic waste: Value chains for sorting, recycling and valorising require infrastructure, like modern sorting centres. Advanced recycling technologies and market mechanisms for recycled materials are also necessary. Partnerships could be established with local businesses to create products from recycled plastics, such as construction materials or textiles.</p>
<p>By investing in these targeted areas, it is possible to create a sustainable system that offers economic and social opportunities to local communities.</p><img src="https://counter.theconversation.com/content/214597/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Initiating a circular economy can help coastal west African countries to address plastic pollution with a World Bank fund.Elhadj Bara Dème, Research Associate, University of PortsmouthPierre Failler, Professor in Economics and Director of the Centre for Blue Governance, UNESCO Chair in Ocean Governance, University of PortsmouthLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2174542023-11-14T14:10:37Z2023-11-14T14:10:37ZProjects funded by the World Bank Group’s private sector arm fuel violent conflict – it’s time to reform the system<p>To what extent does private investment help developing countries to reduce conflict and violence and to achieve the <a href="https://sdgs.un.org/#goal_section">Sustainable Development Goals</a>? </p>
<p>This is a hotly debated issue. Most international institutions such as the World Bank Group take the stance that the problem is <a href="https://documents1.worldbank.org/curated/en/738131573041414269/pdf/Closing-the-SDG-Financing-Gap-Trends-and-Data.pdf">not enough private investment</a>. So they mobilise public resources to subsidise and protect private sector actors with the goal of greatly increasing foreign direct investment. </p>
<p>Meanwhile, community, labour and human rights advocates – particularly in fragile and conflict-affected countries – tend instead to see the dominant patterns of foreign direct investment as part of a continuing history of <a href="https://www.oxfam.org/en/research/suffering-others">exploitation of the developing world</a>.</p>
<p>To help shed light on this debate, we undertook <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4540583">a comprehensive study</a> of thousands of projects of the <a href="https://www.ifc.org/en/home">International Finance Corporation</a> (IFC), the private sector arm of the World Bank Group. We focused on the period between 1994 and 2022. </p>
<p>We chose the IFC because it claims to invest with developmental purpose. It also purports to apply the highest standards of social and environmental performance. Additionally, many other private and public actors follow its lead in setting standards. If the IFC is getting it wrong it would be a good indicator of how things stand in the broader global system. We focused our study on the relationship between IFC projects and armed conflict, as violence has a clear and detrimental effect on human development. </p>
<p>The results establish that IFC projects cause significant increases in armed conflict around the world. A single project, on average, causes 7.6 additional armed conflict events in the year after it is introduced. These findings are consistent with <a href="https://www.jstor.org/stable/3877872">other large quantitative studies</a> that question the relationship between foreign direct investment and development. Foreign direct investment that <a href="https://www.tommasosonno.com/docs/GlobalizationConflict_TommasoSonno.pdf">increases violent conflict</a> and makes development nearly impossible appears the rule, not the exception.</p>
<p>We conclude that current approaches to foreign investment need urgent reconsideration, with particular focus on the risk of violent conflict.</p>
<h2>Our methodology</h2>
<p>Many factors influence violent conflict, including the history of intergroup and state-society relations. So the study used sophisticated econometric analyses to isolate the IFC’s impact. </p>
<p>We first geolocated IFC projects and noted the years in which they were approved. Then we tested whether armed conflict rose in the area proximate to the IFC project in the following year. We controlled for other factors – such as the presence of politically excluded groups, GDP, the regime type, or the population size – that affect conflict. </p>
<p>In the analysis, we were careful to match and compare an IFC project area with those areas without IFC projects to which it is most similar. Finally, we considered and controlled for the possibility that conflict was already rising before the IFC project arrived. By excluding these other explanations for conflict events, we were able to make reasonable causal attributions.</p>
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Read more:
<a href="https://theconversation.com/three-priorities-africas-newbie-on-the-world-bank-board-should-focus-on-181521">Three priorities Africa's newbie on the World Bank board should focus on</a>
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<p>Disturbingly, the study found that increases in armed conflict were concentrated in projects that the IFC told local and international stakeholders had potential limited adverse environmental or social risks. It claimed that these could be readily addressed through mitigation measures. These mitigation measures appear to be either ineffective or under-employed. Alternatively, the IFC is mis-classifying projects that carry more substantial conflict risk than it recognises or cares to make public.</p>
<p>One particularly disturbing example is the Ugandan government’s <a href="http://www.humanrightscolumbia.org/sites/default/files/SIPA%20Listening%20to%20community%20voices%20on%20effective%20remedy%20-%20final.pdf">campaign of terror against local citizens</a> to turn land over to an IFC client. The IFC also has yet to resolve activists’ complaints from 2019 of <a href="https://www.cao-ombudsman.org/cases/liberia-salala-rubber-corporation-src-01margibi-bong-counties">gender-based violence and threats of reprisals and intimidation</a> against one of its project partners, Salala Rubber Corporation in Liberia.</p>
<p>The study also demonstrated that capital-intensive projects (that is, agribusiness, oil, gas, mining and infrastructure) have a larger propensity for socio-political and socio-economic disruption. Areas that receive capital-intensive projects experience, on average, an additional death from armed conflict in the following year.</p>
<h2>Not above the rule of law</h2>
<p>These results should perhaps not be surprising. Civil society groups have long concluded that the IFC prioritises its own profits and business interests over the “<a href="https://www.oxfam.org/en/research/suffering-others">suffering of others</a>” in ways that contribute to “<a href="https://digitalcommons.csbsju.edu/cgi/viewcontent.cgi?article=1159&context=social_encounters">multiple paths of extraction, dispossession, and conflict</a>”. In 2020 Human Rights Watch characterised the IFC as “<a href="https://www.hrw.org/news/2020/08/24/world-bank-group-failing-remedies-project-abuses">failing at remedies for project abuses</a>”. This was based on the World Bank Group’s <a href="https://www.worldbank.org/en/about/leadership/brief/external-review-of-ifc-miga-es-accountability">own commissioned review</a>.</p>
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<strong>
Read more:
<a href="https://theconversation.com/cautious-welcome-world-bank-and-imf-return-to-africa-but-questions-remain-214888">Cautious welcome: World Bank and IMF return to Africa, but questions remain</a>
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<p>Yet, the IFC’s strategy has been to position itself above the rule of law. It continues to assert sovereign immunity. It claims that, as an international organisation, <a href="https://brill.com/view/journals/iolr/16/1/article-p105_105.xml">it should not be liable</a> in national courts – even to parties it admittedly harms. </p>
<p>It maintains this stance despite <a href="https://theintercept.com/2023/10/17/world-bank-whistleblower-bridge-international/">recent reports</a> of IFC complicity in covering up the sexual abuse of children to further its investment projects. </p>
<p>It appears beyond time for the 186 member governments that own the IFC to demand transparency, accountability and redress for harms done from the corporation and the private sector actors it funds. Others can also play a role. Governments that have perhaps naively relied on the World Bank halo should question the benefits they are told they can expect from IFC investments. The ratings agencies that classify IFC bonds as positive from an environmental, social, and governance perspective may want to question the bases on which such determinations are made.</p>
<p>At the same time, perhaps more credence can be given to recent <a href="https://www.un.org/en/desa/un-secretary-general-calls-radical-transformation-global-finan-cial-system-tackle-pressing">calls by the UN secretary general</a> to reform the global financial system to better support human security and human development. </p>
<p>This could include specialised intermediaries between the IFC and sensitive projects in difficult places. Independent and empowered local oversight appears necessary to ensure more inclusive and accountable forms of contextual analysis and risk mitigation planning, monitoring and evaluation of development impact, proactive conflict management, and accessible redress for harms done. This could <a href="https://issafrica.org/iss-today/conflict-environments-need-a-peacebuilding-approach-to-business-development">reduce violent conflict and open more developmental potential for private investment</a> in the developing world.</p><img src="https://counter.theconversation.com/content/217454/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This work is part of the project Peace Positive Private Sector Development in Africa (P3A), funded by the Research Council of Norway. Additional funding was received from the Peace Finance Initiative.</span></em></p>A single International Finance Corporation project, on average, causes 7.6 additional armed conflict events in the year after it is introduced.Brian Ganson, Professor and Head, Centre on Conflict & Collaboration, Stellenbosch UniversityAnne Spencer Jamison, Assistant Professor of International Economics, Government, and Business, Copenhagen Business SchoolWitold Jerzy Henisz, Vice Dean and Faculty Director, ESG Inititative; Deloitte & Touche Professor of Management, University of PennsylvaniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2171982023-11-10T11:14:18Z2023-11-10T11:14:18ZCOP28: a year on from climate change funding breakthrough, poor countries eye disappointment at Dubai summit<p>At the COP27 summit in Sharm El-Sheikh, Egypt, an agreement to establish a loss and damage fund was hailed as <a href="https://theconversation.com/cop27-one-big-breakthrough-but-ultimately-an-inadequate-response-to-the-climate-crisis-194056">a major breakthrough</a> on one of the trickiest topics in the UN climate change negotiations. In an otherwise <a href="https://theconversation.com/cop27-loss-and-damage-fund-a-historic-decision-amid-discouraging-results-195186">frustrating conference</a>, this decision in November 2022 acknowledged the help that poorer and low-emitting countries in particular need to deal with the consequences of climate change – and, tentatively, who ought to pay. </p>
<p>This following year has seen more extreme weather records broken. Torrential rains created flooding which swept away <a href="https://theconversation.com/libya-floods-the-drowning-of-derna-was-a-man-made-disaster-decades-in-the-making-213797">an entire city in Libya</a>, while wildfires razed swathes of Canada, Greece and the Hawaiian island of Maui. </p>
<p>As these events become routine worldwide, the case grows for an effective fund that can be set up quickly and help those most vulnerable to climate change. But after a year of talks, the fund has, so far, failed to materialise in the way that developing countries had hoped.</p>
<p>I’m writing a book on UN governance of loss and damage, and have been following the negotiations since 2013. Here’s what happened after the negotiators went home and what to watch out for when they return, this time at COP28 in Dubai.</p>
<h2>Big questions</h2>
<p>Many questions were raised and left unresolved in Sharm El-Sheikh. Among them: who will pay into this new fund? Where will it sit? Who will have power over it? And who will have access to the funding (and who won’t)?</p>
<p>A transitional committee with 14 developing country members and 10 developed country members was appointed by the UN to debate these questions after COP27. The committee has met regularly over the last year, but at its fourth meeting at the end of October – scheduled as the last session – important questions surrounding the fund, such as who should host and administer it, remained. Discussions broke down without an agreement.</p>
<p>In early November, less than a month before COP28, a hastily arranged fifth meeting presented committee members with a text cobbled together by the two co-chairs from South Africa and Finland as a take-it-or-leave-it agreement. Developing countries agreed to having the fund hosted by the World Bank for an interim period, despite reservations.</p>
<p>Developed countries also objected to the final text. The US wanted to add the adjective “voluntary” to any mention of contributions to the fund. Others argued that the pool of contributors to the fund should be widened to include some developing countries, such as Saudi Arabia, and also private sources of finance. These objections were noted but the text was adopted without them.</p>
<p>These recommendations must now be signed off at COP28, which begins on November 30. With almost 200 countries having to reach agreement on these arrangements and dissatisfaction widespread, the process isn’t likely to be straightforward.</p>
<h2>The world’s bank?</h2>
<p>Developing countries have been sceptical of the World Bank as a potential host of the fund for several reasons. </p>
<p>Many delegates worry about the bank’s reputation, including the dominance of developed country donors, its emphasis on providing loans rather than grants, and the lack of climate-savviness in the bank’s operations. These concerns are likely to reemerge in Dubai.</p>
<p>The US is the biggest shareholder in the World Bank and traditionally, the bank’s president has been a US citizen nominated by Washington. Small-island developing states (among the most vulnerable to climate change due to sea-level rise) have argued for moving the fund away from a donor-recipient model, with all their usual power imbalances, towards a partnership founded on a shared commitment to protecting the planet.</p>
<p>This will require partial or total reform of the World Bank – and <a href="https://carnegieendowment.org/2023/10/26/world-bank-eyes-overhaul-amid-climate-crisis-pub-90855">some argue</a> this is already happening under its new president. But hosting the fund within the bank would still give donor countries disproportionate influence, despite recommendations by the transitional committee that the fund’s governing board be composed of a majority of developing country members.</p>
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<img alt="A man walks past a building with 'World Bank Group' in tall letters on the exterior." src="https://images.theconversation.com/files/558613/original/file-20231109-25-823vex.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/558613/original/file-20231109-25-823vex.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=337&fit=crop&dpr=1 600w, https://images.theconversation.com/files/558613/original/file-20231109-25-823vex.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=337&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/558613/original/file-20231109-25-823vex.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=337&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/558613/original/file-20231109-25-823vex.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/558613/original/file-20231109-25-823vex.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/558613/original/file-20231109-25-823vex.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The World Bank is headquartered in Washington D.C.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/washington-dc-usa-december-11-2019-1606840090">The Bold Bureau/Shutterstock</a></span>
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<p>High overhead costs are another concern. One board member of another fund hosted by the World Bank has suggested that the administrative fees the bank charges are rising and absorbing a larger share of aid. This could mean that, for every US$100 billion offered to countries and communities reeling from disaster, the World Bank will <a href="https://www.climatechangenews.com/2023/11/03/avoid-our-mistake-dont-let-world-bank-host-loss-and-damage-fund/">keep $US1.5 billion</a>. This will be hard for an institution still <a href="https://www.theguardian.com/environment/2023/sep/12/world-bank-spent-billions-of-dollars-backing-fossil-fuels-in-2022-study-finds">funding</a> the climate-wrecking oil and gas industry to justify. </p>
<p>The types of finance made available by the fund will need to be at odds with the bank’s traditional mode of loan financing, by offering grants and other forms of highly concessional lending. Developing countries have consistently argued that loss and damage funding should not increase a developing country’s debt burden.</p>
<p>The agreed text says the loss and damage fund will “invite financial contributions”, with developed countries expected to “take the lead”. Developing countries want developed nations (as the largest historical emitters) to provide funding, but rich nations have pushed back against any notion that they have an obligation to pay. </p>
<p>Rather, while making all the right noises on climate finance, they may gain short-term kudos by simply <a href="https://www.lossanddamagecollaboration.org/pages/festival-of-pledges-for-loss-damage-are-they-new-and-additional-and-do-they-meet-the-needs-on-the-ground#:%7E:text=Crucially%2C%20this%20is%20not%20new%20money%2C%20but%20an%20allocation%20of,to%20adaptation%20and%20mitigation%20needs.">rebranding existing forms of climate finance</a> or development aid, rather than offering any new money.</p>
<h2>The compensation taboo</h2>
<p>One thing you’re unlikely to hear at COP28 is “compensation”. While newspaper editors love headlines about reparations, liability and compensation when reporting on loss and damage, and <a href="https://www.unep.org/news-and-stories/press-release/climate-litigation-more-doubles-five-years-now-key-tool-delivering">a rise in climate litigation</a> is making governments and polluting companies nervous, this language is still totally absent in discussion of the issue in the negotiations. </p>
<p>In fact, <a href="https://www.sciencedirect.com/science/article/pii/S0959378020307160">research has shown</a> that mentions of compensation in state submissions to the UN declined dramatically after the establishment of the mechanism on loss and damage in 2013. The fine print of the 2015 Paris Agreement noted that loss and damage was “<a href="https://unfccc.int/files/meetings/paris_nov_2015/application/pdf/cop_auv_template_4b_new__1.pdf">not a basis for liability or compensation</a>”.</p>
<p>I have noticed a taboo emerging around the term within the COP process. Instead, countries are increasingly opting for language such as “solidarity” as the basis for finance. These word choices show where power lies.</p>
<p>All of this is to sound a note of caution going into COP28. Major agreements on loss and damage have historically not lived up to their promises due to bureaucratic forum-shifting (moving topics to venues outside of the UN Framework Convention on Climate Change), delays, and under-resourcing. <a href="https://www.unep.org/about-un-environment-programme/funding-and-partnerships/adaptation-fund">The adaptation fund</a> was established in 2001 but only approved its first funding in 2010. </p>
<p>How is the urgent need for support among vulnerable communities and countries going to be met when the pace of progress within the climate change negotiations is glacial at best, and tends to be <a href="https://www.tandfonline.com/doi/pdf/10.1080/14693062.2022.2112935">particularly slow and unambitious</a> on loss and damage finance?</p>
<p>At COP28, making the loss and damage fund real is a litmus test for the legitimacy of the entire climate change negotiation regime.</p>
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<img alt="Imagine weekly climate newsletter" src="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><strong><em>Don’t have time to read about climate change as much as you’d like?</em></strong>
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<p class="fine-print"><em><span>Lisa Vanhala receives funding from the European Research Council. She also consults for and advises a number of philanthropic organisations (including the Baring Foundation), NGOs (including the Public Law Project) and other organisations (3IE). </span></em></p>Rich polluters have evaded any notion of compensating poor countries at the UN talks.Lisa Vanhala, Professor of Political Science, UCLLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2156662023-10-16T14:12:10Z2023-10-16T14:12:10ZThe World Bank and the IMF need to keep reforming to become fit for purpose<p>The World Bank and the International Monetary Fund are being challenged to make substantial reforms so that they become fit for purpose in the 21st century.</p>
<p>Some suggest that they cannot be sufficiently reformed and should be shut down. Others, including myself, contend the world needs effective international financial institutions. If they did not exist, we would have to create them. Consequently, we must try to make them more credible, legitimate, inclusive, responsible and effective. The challenge is doing so within the constraints of their founding treaties. </p>
<p>This article is based on my book <a href="https://global.oup.com/academic/product/the-law-of-international-financial-institutions-9780192862839?lang=en&cc=us">The Law of International Financial Institutions</a>. It provides some background on these institutions and discusses the problems they are confronting and their potential for reform. </p>
<h2>Some history</h2>
<p>Prior to 1944, countries fixed the value of their currencies in terms of gold. This system collapsed with tragic consequences in the inter-war years. </p>
<p>The purpose of the <a href="https://2001-2009.state.gov/r/pa/ho/time/wwii/98681.htm">1944 Bretton Woods conference</a> was to create a new international monetary order. It was an exclusive affair. Only 44 out of the then 99 officially recognised countries were represented. A large portion of humanity was living under colonial domination and didn’t take part in the negotiations.</p>
<p>Four characteristics of this new international order are noteworthy. </p>
<p>First, it created the first rules-based international monetary system. The participating states agreed that the IMF would oversee the new order. In return, both the IMF and World Bank offered their member states financing. The financing came with terms and conditions and the IMF and the World Bank could hold the states accountable for failing to comply with them. </p>
<p>Second, the member states accepted that the governance of the institutions would be based on weighted voting, with each member state receiving a vote that corresponded to its economic size and financial contribution. This effectively modified the principle of sovereign equality which is at the core of the international legal order. A state could be outvoted and forced to comply with policies that it opposed. </p>
<p>Third, the legal status and powers of these new institutions was only clarified over time. Most significantly, they were given immunity to mitigate the risk that a member state would use its authority to interfere with their operations in that state. Therefore, they cannot be sued in any court in the world. </p>
<p>Fourth, the treaties are silent on their environmental and social responsibilities. </p>
<h2>Evolution</h2>
<p>By the mid-1970s, the two institutions were operating in a very different world. Many states in Africa and Asia had become independent and had joined them. They had different needs and priorities from the original member states. However, because of their relative level of economic development, they lacked the votes to change policies and priorities. </p>
<p>Second, the system created at Bretton Woods <a href="https://www.imf.org/external/about/histend.htm#:%7E:text=of%20the%20dollar.-,End%20of%20Bretton%20Woods%20system,the%20dollar's%20convertibility%20into%20gold.">collapsed in 1973</a>. It was replaced by a system in which markets played a great role in determining the value of currencies and each state could decide for itself how to conduct its own monetary policy. </p>
<p>Third, concerns about the environmental and social impacts of economic activity were beginning to grow around the world. It resulted in controversies involving projects funded by the World Bank and programmes funded by the IMF. </p>
<p>Fifth, civil society organisations were becoming more important actors. They were concerned that the operations of these institutions were causing substantial harm to local communities and the environment. They began to campaign for the World Bank and IMF to become more transparent and accountable. </p>
<p>The two institutions have made some efforts to respond to these developments.</p>
<p><strong>Governance</strong>. The number of member states increased by over four times between 1946 and 2023. However, the size of their boards of executive directors has only doubled. This means that it is harder for many states to have their concerns about policies, procedures and operations raised at the board level. </p>
<p>Consequently, the institutions are likely to be less responsive to the concerns of their smaller and poorer member states than to their richer and more powerful member states.</p>
<p>This problem is exacerbated by the institutions’ declining financial capacity. When the IMF opened for business, its total resources were equivalent to 3% of a global GDP of about US$10 trillion (in 2011 dollars). Today, they are equivalent to about 1% of a global GDP of about <a href="https://ourworldindata.org/grapher/world-gdp-over-the-last-two-millennia">US$100 trillion</a>. </p>
<p><strong>Responsibility.</strong> The institutions have acknowledged their responsibility for the environmental and social impacts of their operations and that there are some human rights issues that are relevant to their operations. However, they have struggled to develop an effective and sustainable approach to these issues. </p>
<p>One reason is that there is no agreement on which standards they should use in addressing these issues. </p>
<p>A second reason is that understanding these issues requires them to do impact assessments and to consult with affected stakeholders. But both require them to interact with a broader range of stakeholders in their member states than was originally envisaged. It may also require them to engage with groups that are opposed to the projects or policies. </p>
<p>In response, the World Bank has developed its own operational policies and procedures for its staff. They also educate external actors about what they can expect from the bank in regard to environmental and social issues. This is not always acceptable to their member states.</p>
<p>The IMF has maintained that, because it focuses on macro-economic issues and policy based finance, it is difficult to establish causal links between its operations and their environmental and social impacts. But it has <a href="https://academic.oup.com/jiel/article/26/1/17/7003371">now acknowledged that these issues can be “macro-critical”</a> and that it needs to pay attention to them. It has not yet adequately explained how it will do this. </p>
<p><strong>Accountability.</strong> The expanding role and responsibilities of the World Bank and IMF raise complex issues. There is a risk that they will make mistakes that result in some stakeholders having to assume an unreasonably high share of the costs of these projects or policies. </p>
<p>In 1993, the World Bank created an independent accountability mechanism, <a href="https://www.inspectionpanel.org/">the Inspection Panel</a>. Despite its shortcomings, it was an important international legal development.</p>
<p>The IMF has not established its own independent accountability mechanism. It is one of the few international organisations that does not offer its external stakeholders any means for holding it accountable. </p>
<h2>What next?</h2>
<p>The World Bank and IMF need to continue evolving if they are to remain fit for purpose in the 21st century. They need to develop governance arrangements, operational policies based on international norms and standards, and accountability structures that respond adequately to the challenges of climate, poverty, inequality and discrimination. Their richer member states need to provide them with adequate resources to fulfil their mission.</p><img src="https://counter.theconversation.com/content/215666/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Danny Bradlow receives funding from the Open Society Foundation for a project on sovereign debt. He is a compliance officer with the Social and Environmental Compliance Unit of the United Nations Development Programme, UNDP's independent accountability mechanism. </span></em></p>The World Bank and IMF need to continue evolving if they are to remain fit for purpose in the 21st century.Danny Bradlow, Professor/Senior Research Fellow, Centre for Advancement of Scholarship, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2155142023-10-12T22:22:53Z2023-10-12T22:22:53ZGaza depends on UN and other global aid groups for food, medicine and basic services – Israel-Hamas war means nothing is getting in<figure><img src="https://images.theconversation.com/files/553573/original/file-20231012-19-v34aud.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Palestinian children play outside an UNRWA school following Israeli airstrikes on Oct. 12, 2023. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/palestinians-take-shelter-at-the-united-nations-relief-and-news-photo/1719617860?adppopup=true">Ashraf Amra/Anadolu via Getty Images</a></span></figcaption></figure><p>International aid groups <a href="https://www.msf.org/hospitals-are-overwhelmed-catastrophic-situation-gaza">are warning</a> that they cannot deliver food and other basic services to people in the Gaza Strip and that a <a href="https://www.theguardian.com/world/live/2023/oct/12/israel-hamas-war-live-updates-biden-hamas-attack-holocaust-gaza-displaced-palestine">“dire” humanitarian crisis</a> is set to worsen. </p>
<p>International aid groups provide food and other means of support to <a href="https://www.unrwa.org/where-we-work/gaza-strip">about 63% of people in Gaza</a>.</p>
<p><a href="https://www.haaretz.com/israel-news/2023-10-11/ty-article/.premium/gaza-power-plant-stops-operating-due-to-lack-of-fuel-palestinian-energy-authority-says/0000018b-1efe-d2fc-a59f-dfff86f70000">Israel</a> <a href="https://www.reuters.com/world/middle-east/israel-refuses-request-bring-food-medical-supplies-into-gaza-palestinian-plo-2023-10-10/">stopped allowing deliveries of food, fuel and other supplies</a> to Gaza’s 2.3 million residents on Oct. 10, 2023, and is <a href="https://apnews.com/article/israel-palestinians-gaza-hamas-airstrikes-cabinet-beb1fa2b9e4ede6cf4568dd6c86ff11a">reportedly preparing for a ground invasion</a>. </p>
<p>On Oct. 12, 2023, Israel <a href="https://www.theguardian.com/world/2023/oct/13/israel-hamas-war-latest-gaza-residents-told-move-ground-assault">warned 1.1 million Gaza residents</a> in the northern section of the enclave to leave for the southern region, in advance of a potential ground invasion.</p>
<p>I am a <a href="https://scholar.google.com/citations?user=kXfdkJwAAAAJ&hl=en">scholar of peace and conflict economics</a> and a former World Bank consultant, including during the <a href="https://www.unrwa.org/2014-gaza-conflict">2014 war</a> between Hamas and Israel.</p>
<p>International aid groups <a href="https://apnews.com/article/israel-gaza-hamas-war-74d8d8dc8dd26e84a189f72b65ec9428">now face the same problem</a> in Gaza that local businesses and residents have encountered for about 16 years: a blockade that <a href="https://www.nytimes.com/2023/10/10/world/middleeast/gaza-strip-israel-egypt.html">prevents civilians and items</a>, like medicine from easily moving into or out of the enclosed area, roughly 25 miles long. That 16-year blockade did not apply to the food and fuel that groups brought in to Gaza. </p>
<p>Now, it does.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/553552/original/file-20231012-15-m8bwdi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Three men walk past a dilapidated looking building and cars that have been partially destroyed and fallen into a crater in the ground." src="https://images.theconversation.com/files/553552/original/file-20231012-15-m8bwdi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/553552/original/file-20231012-15-m8bwdi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/553552/original/file-20231012-15-m8bwdi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/553552/original/file-20231012-15-m8bwdi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/553552/original/file-20231012-15-m8bwdi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/553552/original/file-20231012-15-m8bwdi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/553552/original/file-20231012-15-m8bwdi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Palestinian men walk past damaged cars and a crater in front of an UNRWA school in Gaza City on Oct. 9, 2023, following Israeli airstrikes.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/palestinian-men-carrying-bread-walk-past-damaged-cars-and-a-news-photo/1714770121?adppopup=true">Mahmud Hams/AFP via Getty Images</a></span>
</figcaption>
</figure>
<h2>Gaza’s blockade and economy</h2>
<p>Gaza is <a href="https://www.nbcnews.com/specials/gaza-strip-map-density-israel-hamas-conflict/index.html">about the size of Philadelphia</a> and requires trade with different businesses and countries in order to maintain and grow its economy.</p>
<p>But Gaza is heavily dependent on foreign aid.</p>
<p>This is partially the result of Israel setting up permanent <a href="https://www.lemonde.fr/en/international/article/2023/10/10/the-gaza-strip-blockade-explained-in-one-map_6162224_4.html">air, land and sea blockades</a> around Gaza in 2007, one year after <a href="https://www.theguardian.com/world/2023/oct/12/what-is-hamas-the-militant-group-that-rules-gaza">Hamas rose to political power</a>. Egypt, which borders Gaza on its southern end, also <a href="https://www.lemonde.fr/en/international/article/2023/10/11/rafah-border-crossing-a-barrage-of-israeli-fire-endangers-gaza-s-only-gateway-to-egypt_6165190_4.html">oversees one checkpoint</a> that specifically limits people coming and going. </p>
<p>While Israel has <a href="https://www.reuters.com/world/middle-east/gaza-strip-devastated-by-conflict-economic-blockade-2023-10-12/#:%7E:text=In%20August%2C%20Egypt%20allowed%2019%2C608,but%2088%25%20below%202000%20levels.">granted permits to about 17,000 Gaza</a> residents to enter and work in Israel, the <a href="https://www.aljazeera.com/news/2023/10/11/why-is-gaza-out-of-fuel-and-what#:%7E:text=The%20blockade%20has%20also%20meant,run%20generators%20is%20effectively%20impossible.">food, fuel and medical supplies</a> that people in Gaza use all first pass through Israel. </p>
<p>Israel controls two physical checkpoints along Gaza, which monitor both the entry and exit of people and trucks. Israel limits the kind and quantity of materials that pass into Gaza. And the blockades generally prohibit Gazans who do not have work permits or special clearance – for medical purposes, for example – from entering Israel.</p>
<p>Israel’s restrictions through the blockade intensified since Hamas’ <a href="https://apnews.com/article/israel-palestinians-gaza-hamas-rockets-airstrikes-tel-aviv-11fb98655c256d54ecb5329284fc37d2">surprise attack</a> on 20 Israeli towns and several military bases on Oct. 7, with Israel then announcing a broad blockade of <a href="https://apnews.com/article/israel-gaza-hamas-war-74d8d8dc8dd26e84a189f72b65ec9428">imports into Gaza</a>. This stopped all food, fuel and medical supplies from entering the region.</p>
<h2>Gaza’s isolation</h2>
<p>The Palestinian enclaves of West Bank and Gaza – which are generally lumped together in economic analyses – both have small economies that run a <a href="https://www.state.gov/reports/2023-investment-climate-statements/west-bank-and-gaza">massive deficit</a> of US$6.6 billion in losses each year, as the value of the imports they receive greatly outweighs the value of the items they produce and sell elsewhere.</p>
<p>More than <a href="https://databankfiles.worldbank.org/public/ddpext_download/poverty/33EF03BB-9722-4AE2-ABC7-AA2972D68AFE/Global_POVEQ_PSE.pdf">53% of Gaza residents</a> were considered below the poverty line in 2020, and about 77% of Gazan households <a href="https://www.reuters.com/world/middle-east/gaza-unrest-sends-message-about-economic-misery-under-israeli-blockade-2023-10-04/">receive some form of aid from the United Nations</a> and other groups, mostly in the form of cash or food. </p>
<p>Gaza’s weak economy is caused by a number of complex factors, but the largest is the <a href="https://www.elibrary.imf.org/view/journals/002/2023/327/article-A001-en.xml">blockade and the economic and trade isolation</a> it creates.</p>
<p>For the average Gazan, the blockade has several practical effects, including people’s ability to get food. About 64% of people in Gaza are considered <a href="https://www.aljazeera.com/features/2022/6/15/the-seven-border-crossings-of-gaza">food insecure</a>, meaning they do not have reliable access to sufficient amounts of food. </p>
<p>Food as a percentage of Gaza’s total imports has <a href="https://data.worldbank.org/indicator/TM.VAL.FOOD.ZS.UN?locations=PS">skyrocketed by 50%</a> since 2005, when Israel first imposed a temporary blockade. And the amount of food the West Bank and Gaza actually produce <a href="https://data.worldbank.org/indicator/AG.PRD.FOOD.XD?locations=PS">has tumbled by 30%</a> since then.</p>
<p>It is hard for Gaza to produce food within its own borders. One factor is that <a href="https://theconversation.com/gazas-food-system-has-been-stretched-to-breaking-point-by-israel-188556">Israeli airstrikes hit</a> Gaza’s only power generation plant and main sewage treatment plant in 2008 and again in 2018. These <a href="https://theconversation.com/gazas-food-system-has-been-stretched-to-breaking-point-by-israel-188556">attacks resulted in the spread of sewage waste</a> on land and in the water, destroying farmlands and food crops and threatening fish stocks in the ocean as well. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/553553/original/file-20231012-17-vsjxfq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A classroom is seen with desks turned upside down and glass on the floor." src="https://images.theconversation.com/files/553553/original/file-20231012-17-vsjxfq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/553553/original/file-20231012-17-vsjxfq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/553553/original/file-20231012-17-vsjxfq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/553553/original/file-20231012-17-vsjxfq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/553553/original/file-20231012-17-vsjxfq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/553553/original/file-20231012-17-vsjxfq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/553553/original/file-20231012-17-vsjxfq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">An UNRWA classroom in Gaza City was damaged in an Israeli airstrike on Oct. 8, 2023.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/october-2023-palestinian-territories-gaza-city-a-general-news-photo/1712424066?adppopup=true">Mohammed Talatene/picture alliance via Getty Images</a></span>
</figcaption>
</figure>
<h2>The UN’s big role in Gaza</h2>
<p>Gaza’s weak economy and isolation because of the blockade mean that it relies heavily on international aid organizations to provide basic services to residents. The biggest of these aid groups in Gaza is the United Nations Relief and Works Agency for Palestine Refugees in the Near East – also known as UNRWA. </p>
<p>Today, UNRWA is the <a href="https://www.crisisgroup.org/middle-east-north-africa/east-mediterranean-mena/israelpalestine/242-unrwas-reckoning-preserving-un-agency-serving-palestinian-refugees">second-largest employer</a> in Gaza, following Hamas. It provides the bulk of the education, food aid and health care services for people in Gaza, in addition to 3 million other people registered as Palestinian refugees who <a href="https://www.unrwa.org/palestine-refugees">live in Jordan, Lebanon, Syria, the West Bank</a> and other places. </p>
<p>Over time, UNRWA has evolved into a kind of parallel government, alongside Hamas, which Israel, the United States and other countries designate as <a href="https://www.state.gov/foreign-terrorist-organizations/">a terrorist organization</a>. </p>
<p>UNRWA funds and runs a network of <a href="https://www.unrwa.org/what-we-do/education">284 schools</a> in Gaza alone, employing over 9,000 local people as staff and educating over 294,000 children each year. </p>
<p>UNRWA runs 22 hospitals in Gaza that employ almost 1,000 health staff and has 3.3 million patient visits per year. </p>
<p>Its schools are converted into <a href="https://www.youtube.com/watch?v=rb2JBK91dWI">humanitarian shelters</a> in times of crisis, such as the current war. People can go there to get clean water, food, mattresses and blankets, showers and more. </p>
<p>The number of people in Gaza who are <a href="https://reliefweb.int/report/occupied-palestinian-territory/hostilities-gaza-strip-and-israel-flash-update-5">displaced from their homes</a> has quickly risen over the last few days, totaling over 330,000 on Oct. 12, 2023. Over two-thirds of these people are staying in UNRWA schools.</p>
<h2>A complicated US relationship</h2>
<p>The U.S. has historically been the <a href="https://www.unrwa.org/newsroom/news-releases/united-states-contributes-us-1537-million-unrwa-support-palestine-refugees#:%7E:text=In%202022%2C%20the%20United%20States,contribution%20of%20US%24%203.4%20million.">single-largest funder</a> of UNRWA, a U.N. agency that relies on <a href="https://www.unrwa.org/how-you-can-help/how-we-are-funded">governments to support</a> its work. The U.S. gave more than <a href="https://www.state.gov/u-s-support-for-the-palestinian-people/">$500 million to Palestinians</a> from April 2021 through March 2022, including more than $417 million that went to UNRWA. </p>
<p>U.S. support to UNRWA has fluctuated throughout different presidential administrations. </p>
<p>Total <a href="https://crsreports.congress.gov/product/pdf/RS/RS22967/59">U.S. aid to the West Bank and Gaza</a> peaked at $1 billion in 2009 – after Israel sealed off the territory. It reached $1 billion in annual contributions again in 2013, when former Secretary of State John Kerry helped <a href="https://www.nytimes.com/2013/07/20/world/middleeast/kerry-extends-stay-in-mideast-to-push-for-talks.html">restart peace talks</a> between Israel and Hamas.</p>
<p>In 2018, the <a href="https://nypost.com/2018/08/31/trump-cuts-funding-for-un-palestinian-refugee-agency/">Trump Administration cut</a> almost all of the money the U.S. typically gives to UNRWA, amounting to roughly 30% of the organization’s total budget. </p>
<p>Defenders of the policy change cited UNRWA-published textbooks that <a href="https://nypost.com/2023/10/10/biden-admin-funneled-730-million-to-un-group-despite-its-personnel-calling-for-violence-against-jews/">allegedly glorified jihad</a>. UNRWA, for its part, maintained that, as an outside organization, it can only use the <a href="https://www.unrwa.org/sites/default/files/demsytifying_unrwa_approach_to_curriculum2020.pdf">educational materials the country</a> it is working in wants.</p>
<p>The Biden administration <a href="https://www.bbc.com/news/world-middle-east-56665199">then restored funding</a> to UNRWA and other organizations helping Palestinians in 2021. </p>
<p>Some Republican politicians have said that UNRWA has “<a href="https://nypost.com/2021/06/05/unrwa-which-biden-is-funding-again-is-cozying-up-to-hamas-again/">cozied up</a>” to Hamas. And an internal UNRWA ethics committee has <a href="https://unwatch.org/unrwa-ethics-scandal-fact-sheet/#:%7E:text=The%20allegations%20against%20them%20include,toxic%20and%20dysfunctional%20work%20environment.">accused top staff at the agency</a> of “sexual misconduct, nepotism, retaliation … and other abuses of authority” that created a toxic work environment. </p>
<p>Meanwhile, since the war between Israel and Hamas <a href="https://www.aljazeera.com/news/2023/10/9/what-does-israels-declaration-of-war-mean-for-palestinians-in-gaza">began on Oct. 8,</a> more than <a href="https://www.cnn.com/middleeast/live-news/israel-news-hamas-war-10-12-23#h_7f195f98ace51da9a68fe237963389c7">1,500 Gazans</a> have been killed and more than 5,300 injured, while Hamas attacks have killed more than 1,300 people in Israel and injured about 3,200 others. </p>
<p>International aid groups and European Union officials <a href="https://www.theguardian.com/world/2023/oct/11/gaza-attacks-hamas-israel-war-us-holds-talks-on-safe-passage-civilians">have called for a humanitarian corridor</a> to be set up in Gaza – meaning a protected path specifically for civilians, aid workers and necessary basic items to pass through safely back and forth from Gaza to Israel and Egypt. So far, <a href="https://www.reuters.com/world/egypt-discussing-plans-provide-aid-gaza-under-limited-ceasefire-security-sources-2023-10-11/">there are no clear plans</a> for such a protected pathway.</p><img src="https://counter.theconversation.com/content/215514/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Topher L. McDougal has worked as a consultant for the World Bank on multiple occasions, one of which involved emergency housing assistance strategies in the Gaza Strip following the 2014 Gaza War. </span></em></p>Many people in Gaza are reliant on the United Nations and other international aid groups to meet their basic needs, like food and medical care. A scholar of peace and conflict economics explains why.Topher L. McDougal, Professor of Economic Development & Peacebuilding, University of San DiegoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2148882023-10-05T15:49:55Z2023-10-05T15:49:55ZCautious welcome: World Bank and IMF return to Africa, but questions remain<p>The annual meetings of the World Bank and International Monetary Fund (IMF) are due to take place in <a href="https://live.worldbank.org/annual-meetings-2023?cid=ECR_GA_worldbank_EN_EXTP_am23-search-conv-generic-pre&s_kwcid=AL!18468!3!673720862835!b!!g!!world%20bank%20events&gclid=CjwKCAjw9-6oBhBaEiwAHv1QvJim9KU7W8y-f0wdbi_qp2lTdzwetXtNA_etjJ1yC_89h6z8j_AjmhoCB88QAvD_BwE">Marrakech, Morocco, in mid-October</a>. The city and country are still reeling from a devastating earthquake <a href="https://www.reuters.com/article/tunisia-quake-idAFL1N3AW119">in early September</a>. </p>
<p>Hosting these meetings on the African continent for the first time in half a century under such circumstances carries immense symbolism, serving as a demonstration of resilience. </p>
<p>The two institutions are increasingly facing questions about their relevance in addressing current global challenges. One of their responses has been to commit to playing a more prominent role in the global climate response.</p>
<p>The call for reform of the IMF and World Bank is particularly urgent for Africa, where countries require increased access to public and private financing and debt relief. A transformed financial system is essential to support sustained growth that benefits everyone, and that bolsters climate resilience. </p>
<p>Unfortunately, many sources of finance, including those from the World Bank and IMF, don’t adequately cater for African nations’ specific needs. </p>
<p>To be effective, financial support for Africa must have several qualities: affordability, dependability, adequacy and sensitivity to the continent’s climate vulnerability. It must also be adaptable to address <a href="https://www.imf.org/en/News/Articles/2023/09/26/cf-how-to-avoid-a-debt-crisis-in-sub-saharan-africa#:%7E:text=The%20average%20debt%20ratio%20in,has%20also%20become%20much%20costlier.">the persistent debt crises</a> and liquidity challenges facing numerous African countries. </p>
<p>Several policy proposals have been put forward, some from African countries themselves. Some are set out in a <a href="https://africanclimatefoundation.org/news_and_analysis/priorities-for-an-equitable-reform-of-the-global-financial-system/">recent report</a> which I was involved with by the <a href="https://africanclimatefoundation.org/">African Climate Foundation</a> on reforming the global financial architecture. </p>
<p>The African Consultative Group and the African Caucus within the IMF and World Bank are voicing significant expectations about the outcomes from Marrakech. This reflects cautious optimism among Africans, grown weary of unfulfilled promises over the years. </p>
<p>The decisions made in Marrakech will be a litmus test of the willingness of the IMF and World Bank to reform.</p>
<h2>Africa is unfairly treated</h2>
<p>The African continent boasts promising opportunities for clean energy and is rich in mineral resources essential for the ecological transition. Yet funding often bypasses it, or focuses on exports rather than local economic transformation.</p>
<p>Imposing a uniform policy approach on African countries has only worsened crises, limiting their policy space. For instance, Africa is meant to go through lengthy and strict processes to justify why it needs resources to support certain green projects. This adherence to specific orthodox macroeconomic principles is less strict when applied to wealthier countries. But it’s inflexible for vulnerable African countries.</p>
<p>The <a href="https://africanclimatefoundation.org/">African Climate Foundation’s</a> recent <a href="https://africanclimatefoundation.org/news_and_analysis/priorities-for-an-equitable-reform-of-the-global-financial-system/">report</a> identified numerous flaws in funding, as well as the reasons why Africa suffers more than most to access liquidity. We found that:</p>
<ul>
<li><p>Much of the financing is directed towards mitigation efforts, such as increasing area of forests. There’s little attention to adaptation, which is a priority for the continent. Mitigation tends to be more profitable for financiers and lenders.</p></li>
<li><p>Rating agencies’ behaviour has elevated interest rates for <a href="https://www.brookings.edu/wp-content/uploads/2021/10/21.10.07_Perception-premiums.pdf">African countries</a>. This has forced most countries to substantiate their funding needs beyond reason, despite having the lowest default rates on infrastructure project debt worldwide. </p></li>
<li><p>Flows are being hindered by restrictive terms, commercialisation of climate finance, high interest rates, unmet climate finance commitments, unethical and speculative carbon markets, declining overseas development assistance and labelling of the same money as “climate finance”. </p></li>
</ul>
<h2>The reform agenda</h2>
<p>African countries have been actively engaged in the reform agenda. For example, the declaration from the <a href="https://www.un.org/africarenewal/magazine/september-2023/africa-climate-summit-nairobi-declaration-makes-strong-push-accelerated#:%7E:text=The%20Summit%20proposed%20a%20new,the%20COP%20processes%20by%202025.">African Climate Summit in Nairobi</a> set out to reshape the approach to climate investment on the continent and consolidate a unified African stance on climate finance on the road to COP28.</p>
<p>Several other proposals are also under consideration. These include:</p>
<ul>
<li><p>a comprehensive overhaul of the IMF’s quota system, with the potential inclusion of a third chair dedicated to Africa. IMF quotas reflects a country’s relative size in the global economy. They are used to determine the fund’s financial and governance structure. </p></li>
<li><p>a revaluation of the use of Special Drawing Rights (SDRs). SDRs are used by IMF member countries as part of their foreign exchange reserves. Given Africa’s marginal share, stakeholders are demanding that the IMF reallocate US$100 billion to ease liquidity pressures post COVID-19.</p></li>
<li><p>a critical examination of the current debt framework, which doesn’t align the goal of adapting to climate change with sustainable development.</p></li>
</ul>
<p>The IMF could take additional steps. These include:</p>
<ul>
<li><p>helping address debt by suspending surcharges. IMF surcharges are fees meant to discourage prolonged use of IMF funds. But this places an unfair burden on poor countries in need of resources. </p></li>
<li><p>streamlining access to new climate funds </p></li>
<li><p>ensuring that low-income funds such as the Poverty Reduction and Growth Trust have sufficient resources for lending.</p></li>
</ul>
<p>A sovereign debtors club – or similar partnerships – among debtor countries could also prove beneficial. Such a club helps to increase the bargaining position to get low-interest loans. </p>
<p>Meanwhile, the World Bank faces its own set of challenges. The bank should focus on providing cheaper financing and making more funds available as part of its quest to integrate sustainability, resilience and inclusivity in the <a href="https://documents1.worldbank.org/curated/en/099845101112322078/pdf/SECBOS0f51975e0e809b7605d7b690ebd20.pdf">Evolution Roadmap</a>.</p>
<p>It should also reevaluate its operating model, making it easier for African countries to access funds and giving them more say in fund allocation. The bank should explore innovative approaches to financial support and develop new financial instruments tailored to the real-time needs of borrowers, for instance, supporting smart agriculture. </p>
<p>The African Climate Foundation’s report shows that the global financial architecture diminishes Africa’s fiscal sovereignty and ability to pay for climate action itself.</p>
<p>In addition, the international tax system perpetuates historical power imbalances. It favours wealthy nations’ commercial interests and pushes Africa to the margins. Implementing more robust and transparent financial regulations is essential to increase the number of participants and instruments in the financial market. But this should be done through better rules that promote a variety of financial services and lower their cost. </p>
<p>Global legislation to safeguard the tax bases of African economies from tax incentives and legal loopholes used by multinational corporations could combat the outflow of capital from Africa through the international banking system. </p>
<p>On top of this the challenge of illicit financial flows has to be rethought as the responsibility of countries receiving such funds has been overlooked.</p><img src="https://counter.theconversation.com/content/214888/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carlos Lopes the Chair of the African Climate Foundation’s Advisory Council as well as its Chairman of the Board. He is also a board member of the World Resources Institute and Climate Works Foundation.</span></em></p>Many sources of finance, including those from the World Bank and IMF, don’t adequately cater for African nations’ specific needs.Carlos Lopes, Professor at the Nelson Mandela School of Public Governance, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2122002023-08-24T18:37:30Z2023-08-24T18:37:30ZBrics expansion: six more nations are set to join – what they’re buying into<p>One key outcome of the <a href="https://brics2023.gov.za/">15th Brics summit</a>, hosted by South Africa, is the decision to invite six more countries to join the group with effect from January 2024. They are Argentina, Ethiopia, Iran, Saudi Arabia, Egypt and the United Arab Emirates. All six had <a href="https://www.reuters.com/world/brics-meet-with-friends-seeking-closer-ties-amid-push-expand-bloc-2023-06-02/">applied</a> for membership. The enlargement will grow the association’s membership to 11, and increase its envisaged role as a geopolitical alternative to global institutions dominated by the west.</p>
<p>The five current member countries – Brazil, Russia, India, China and South Africa – have argued that their size, in economic and population terms, was not represented in the world’s institutions, particularly the World Bank and the International Monetary Fund (IMF). </p>
<p>The Brics five represent about <a href="https://unctad.org/publication/brics-investment-report">42%</a> of the world’s population and more than 23% of <a href="https://brics2023.gov.za/evolution-of-brics/">world GDP</a>. </p>
<p>The enlarged grouping will account for 46.5% of the world population. Using <a href="https://www.imf.org/external/datamapper/NGDPD@WEO/OEMDC/ADVEC/WEOWORLD/CHN">IMF GDP data</a>, we can deduce that it will account for about 30% of global GDP.</p>
<p>The disparate nature of the six new members is bound to spark debate about the real nature of Brics.</p>
<p>In his <a href="https://www.thepresidency.gov.za/speeches/address-president-cyril-ramaphosa-south-africa%27s-foreign-policy">welcoming remarks</a> at the summit (22-24 August), the host, South African president Cyril Ramaphosa, stated:</p>
<blockquote>
<p>Brics stands for solidarity and for progress. Brics stands for inclusivity and a more just, equitable order. Brics stands for sustainable development.</p>
</blockquote>
<p>The group has been remarkably consistent on these values and aspirations.</p>
<h2>Understanding the nature of Brics</h2>
<p>One of the first questions about Brics is often “what is it?”. This is telling. This question does not come up, for example, about the European Union or even the G20. </p>
<p>Brics is not an organisation (it has no headquarters, secretariat or treaty). But it does have a formal institution that is jointly owned – the <a href="https://www.ndb.int/">New Development Bank</a>. Confusion about Brics’ precise nature is understandable. </p>
<p>At various points it has referred to itself as a <a href="http://brics2022.mfa.gov.cn/eng/hywj/ODS/202203/t20220308_10649517.html">forum</a>, a <a href="http://www.brics.utoronto.ca/docs/210909-New-Delhi-Declaration.html">platform</a>, a <a href="http://www.brics.utoronto.ca/docs/130327-statement.html">mechanism</a>, a <a href="http://www.brics.utoronto.ca/docs/110414-leaders.html">partnership</a>, or a <a href="http://www.brics.utoronto.ca/docs/150709-ufa-declaration_en.html">strategic partnership</a>, to name a few. Others have called it an <a href="https://www.researchgate.net/publication/373113580_The_BRICS_and_Africa's_Strategic_Interests">alliance</a> or a bloc. It is neither. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/south-africas-role-as-host-of-the-brics-summit-is-fraught-with-dangers-a-guide-to-who-is-in-the-group-and-why-it-exists-206898">South Africa's role as host of the BRICS summit is fraught with dangers. A guide to who is in the group, and why it exists</a>
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<p>In international relations, both terms are strictly defined. The term “<a href="https://scientiamilitaria.journals.ac.za/pub/article/view/390/425">alliance</a>” refers to a mutual defence pact and implies military cooperation. A “<a href="https://www.jstor.org/stable/40209394">bloc</a>” refers to ideological consistency (political bloc) or a free trade agreement (trade bloc). Brics has none of these characteristics. </p>
<p>The members also disagree on some key issues. China and Russia are noncommittal (at best) on the aspirations of India, Brazil and South Africa to become members of the UN Security Council. Their declarations have over the years <a href="https://www.fmprc.gov.cn/eng/wjdt_665385/2649_665393/202206/t20220623_10709037.html">reiterated</a> the same phrase:</p>
<blockquote>
<p>China and Russia understand and support the aspirations of India, Brazil and South Africa to play a greater role in the United Nations. </p>
</blockquote>
<p>This shows there is some serious disagreement within the group. </p>
<p>As a political scientist interested in global politics, I have <a href="https://link.springer.com/book/10.1007/978-3-030-62765-2">written about Brics</a> and its potential for changing the status quo. With hindsight, I can assert that certain principles have informed it since its establishment and <a href="http://www.brics.utoronto.ca/docs/090616-leaders.html#:%7E:text=We%20call%20upon%20all%20parties,the%20WTO's%20Doha%20Development%20Agenda.">first summit</a> in 2009. In my view, at a material level, the 15 years of summit declarations point to four fundamental values:</p>
<ul>
<li><p>mutual development</p></li>
<li><p>multilateralism</p></li>
<li><p>global governance reform</p></li>
<li><p>solidarity.</p></li>
</ul>
<p>The association self-reportedly seeks secure sustainable development for itself and the global south, to safeguard and advance multilateralism, to institute reform for the goal of representative institutions, and to achieve solidarity among members.</p>
<h2>Economic development</h2>
<p>Economics comes first in the group; at its root, it is a collective of emerging economies eager to sustain and improve their economic trajectory. Their insistence on reform is, after all, based on their perceived disproportionate under-representation in global financial institutions.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/chinas-africa-strategy-is-shifting-from-extraction-to-investment-driven-from-the-industry-rich-hunan-region-209044">China’s Africa strategy is shifting from extraction to investment – driven from the industry-rich Hunan region</a>
</strong>
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<p>The group’s first, and so far only, notable establishment is the <a href="https://www.ndb.int/">New Development Bank</a>, primarily to finance infrastructure development. There’s also a contingent reserve that members can draw from in emergencies. It is <a href="https://saiia.org.za/research/the-brics-new-development-bank-and-contingent-reserve-arrangement-at-a-glance/''">valued at US$100 billion</a>. </p>
<h2>Multilateralism</h2>
<p>The second value refers to the group’s concern about the use of entities outside the UN to pursue global objectives. Most notable is the use of the North Atlantic Treaty Organisation (<a href="https://www.nato.int/nato-welcome/">Nato</a>) to invade <a href="https://www.cfr.org/timeline/us-war-afghanistan">Afghanistan</a> in 2001 following the <a href="https://www.911memorial.org/911-faqs">9/11</a> attacks in the US, and the invasion of Iraq in 2003 by the US and the UK, circumventing the UN Security Council. </p>
<p>Russian president Vladimir Putin expressed <a href="http://en.kremlin.ru/events/president/transcripts/24034">this concern in his speech</a> to the 2007 Munich Conference on Security:</p>
<blockquote>
<p>The use of force can only be considered legitimate if the decision is sanctioned by the UN. And we do not need to substitute NATO or the EU for the UN. </p>
</blockquote>
<h2>Global governance reform</h2>
<p>Thirdly, the Brics countries have long pushed for leaders of global institutions to be elected in a transparent and democratic way. For example, the president of the World Bank has <a href="https://fortune.com/2019/01/11/next-world-bank-president-jim-yong-kim/">always been an American</a>, and the managing director of the IMF <a href="https://foreignpolicy.com/2011/05/18/why-is-the-imf-chief-always-a-european/">a European</a>. The World Bank has <a href="https://www.worldbank.org/en/about/leadership#:%7E:text=The%20World%20Bank%20is%20like,policymakers%20at%20the%20World%20Bank.">189 member states</a> and the <a href="https://www.imf.org/en/About/Factsheets/IMF-at-a-Glance">IMF 190</a>.</p>
<p>The idea of the New Development Bank was not to substitute the World Bank but to “<a href="http://www.brics.utoronto.ca/docs/140715-leaders.html">supplement</a>” existing international financial institutions. Brics still envisions a World Bank in which its members have voting rights proportional to their economic weight, and with staff drawn from across the world in a geographically balanced way. </p>
<h2>Solidarity</h2>
<p>Finally, the members have articulated solidarity with one another in a number of declarations, beginning in 2010. It comes down to mutual assistance in times of humanitarian disasters, respecting one another’s sovereignty and territorial integrity. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/when-two-elephants-fight-how-the-global-south-uses-non-alignment-to-avoid-great-power-rivalries-199418">When two elephants fight: how the global south uses non-alignment to avoid great power rivalries</a>
</strong>
</em>
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<p>In light of criticism and sanctions plans against <a href="https://www.aljazeera.com/economy/2023/3/29/us-sanctions-chinese-firms-over-alleged-abuses-of-uyghurs">China</a>, for its alleged suppression of the Uyghur-Muslim population, and <a href="https://ofac.treasury.gov/sanctions-programs-and-country-information/ukraine-russia-related-sanctions">Russia</a>, for invading Ukraine, solidarity has come to mean silence or nonalignment. </p>
<h2>A blank slate</h2>
<p>Brics is a nebulous entity. This has proved beneficial for member countries hosting Brics summits. They get to set the agenda and use it for their ends – without upsetting the consensus. One common pattern has been the use of summits to set overarching themes that are favourable to the host country’s domestic policy and regional leadership or foreign policy stance.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/africa-is-being-courted-by-china-russia-and-the-us-why-the-continent-shouldnt-pick-sides-210516">Africa is being courted by China, Russia and the US. Why the continent shouldn't pick sides</a>
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<p>Thus, for example, all Brics summits hosted by South Africa foregrounded Africa in their names: “Brics and Africa: Partnership for mutually accelerated growth, sustainable development and inclusive multilateralism” <a href="https://brics2023.gov.za/theme-and-priorities/">in 2023</a>. Brazil and Russia have inserted issues that are important to their region, and often invited leaders of neighbouring countries to retreats.</p>
<p>This shows how much clout they enjoy, as they get to funnel access to a now-renowned association that is simultaneously well established but also evades easy definition. With the addition of the six new members, such evasiveness is set to only continue.</p><img src="https://counter.theconversation.com/content/212200/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bhaso Ndzendze does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The disparate nature of the six prospective members is bound to spark debate about the real nature of Brics.Bhaso Ndzendze, Associate Professor (International Relations), University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2116302023-08-16T15:14:31Z2023-08-16T15:14:31ZWorld Bank freezes loans to Uganda because of anti-gay laws. But it doesn’t mean it’s becoming a human rights watchdog<figure><img src="https://images.theconversation.com/files/542973/original/file-20230816-29-oadrz5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A gay pride rally in Entebbe, Uganda in 2014 before a tough anti-homosexuality law was passed.</span> <span class="attribution"><span class="source">ISAAC KASAMANI/AFP via Getty Images</span></span></figcaption></figure><iframe id="noa-web-audio-player" style="border: none" src="https://embed-player.newsoveraudio.com/v4?key=x84olp&id=https://theconversation.com/world-bank-freezes-loans-to-uganda-because-of-anti-gay-laws-but-it-doesnt-mean-its-becoming-a-human-rights-watchdog-211630&bgColor=F5F5F5&color=D8352A&playColor=D8352A" width="100%" height="110px"></iframe>
<p>Many people may be tempted to view the World Bank’s <a href="https://www.worldbank.org/en/news/statement/2023/05/31/world-bank-group-on-uganda">recent announcement</a> that it will freeze new loans to Uganda because of the country’s <a href="https://theconversation.com/ugandas-new-anti-lgbtq-law-could-lead-to-death-penalty-for-same-sex-offences-202376">vicious anti-LGBTIQ+ law</a> as a harbinger of the Bank taking a more progressive approach to human rights issues. </p>
<p>While the announcement is welcome, based on my many years studying the Bank and on my research for <a href="https://global.oup.com/academic/product/the-law-of-international-financial-institutions-9780192862822?cc=us&lang=en&">my forthcoming book</a>, The Law of the International Financial Institutions, I think there are good reasons to be cautious about its significance. </p>
<p>The <a href="https://www.worldbank.org/en/what-we-do">World Bank</a>, which has been operating for over 75 years, has 189 member states as shareholders. It funds development projects and programmes in member states that have <a href="https://www.worldbank.org/en/country/mic/overview#:%7E:text=The%20world's%20Middle%20Income%20Countries,%244%2C046%20and%20%2412%2C535%20(2021).">annual per capita incomes below about US$12,535</a>. The member states elect a Board of Executive Directors that oversees the Bank’s operations and approves all its loans. </p>
<p>The Bank’s <a href="https://www.worldbank.org/en/about/articles-of-agreement/ibrd-articles-of-agreement">Articles of Agreement</a> stipulate that it cannot base its decisions on political grounds. The articles state that the Bank <a href="https://www.worldbank.org/en/about/articles-of-agreement/ibrd-articles-of-agreement/article-IV">“shall not interfere in the political affairs”</a> of its member states. Nor should its decisions be influenced by the <a href="https://www.worldbank.org/en/about/articles-of-agreement/ibrd-articles-of-agreement/article-IV">“political character”</a> of these states.</p>
<p>Moreover, the Bank is instructed that it should only pay attention <a href="https://www.worldbank.org/en/about/articles-of-agreement/ibrd-articles-of-agreement/article-III">“to considerations of economy and efficiency”.</a> And that it should not be affected by <a href="https://www.worldbank.org/en/about/articles-of-agreement/ibrd-articles-of-agreement/article-III">“political or other non-economic influences or considerations.” </a></p>
<p>The articles don’t define these key terms. They also don’t identify the criteria the Bank should consider when deciding if a particular issue should be excluded from consideration because it is “political” rather than “economic”. </p>
<p>This means that this decision is within the exclusive discretion of the Bank’s decision makers. </p>
<h2>Division of labour</h2>
<p>The Articles were drafted and agreed in 1944. At the time, the division of responsibilities between those who made the “political” decisions and those who made the “economic” ones seemed relatively clear. It was assumed that each Bank member state, as an exercise of its sovereignty, would decide for itself how to deal with the social, environmental, and cultural impacts and consequences of the particular transaction for which it was seeking the Bank’s support.</p>
<p>The Bank, on the other hand, would take the state’s decisions on these issues as given. It would merely consider if the particular loan request was technically sound and economically and financially feasible. </p>
<p>This division of responsibility, of course, was unrealistic. The Bank’s Board of Executive Directors must approve each loan. They represent its member states. It is inevitable that officials elected or appointed by – and ultimately accountable to states – will pay close attention to the political implications of their decisions. And that these considerations may trump the technical merits of the transaction. </p>
<p>Thus, inevitably, political considerations, including human rights, have always been, at least implicitly, a factor in Bank operations. </p>
<p>The futility of the Bank’s attempt to exclude political, including human rights, considerations from its operations can be seen at two levels. Firstly, at the level of the Bank’s relations with its member states. Secondly, at the level of individual transactions. </p>
<p>A good example of the Bank’s failed efforts to exclude political factors at the country level was its decision in the 1960s to lend to Portugal and South Africa to fund the construction of the Cahora Basa dam in Mozambique. The Bank decided to make this <a href="https://www.jstor.org/stable/2706106">loan despite a UN General Assembly effort</a> to impose sanctions on these countries because of their colonial and apartheid policies. </p>
<p>Many African states, supported by a majority of UN member countries, argued that the loan should have been denied. Their case was that the policies of the borrowers violated the human rights of their subjects. They were also a threat to regional peace and security. </p>
<p>The Bank’s General Counsel defended the decision on the basis of the political prohibition in the Bank’s articles and on the technical merits of the project.</p>
<p>Despite its ostensible non-political position, the Bank did not make any further loans to South Africa until it became a democratic state.</p>
<p>At the individual transaction level, the Bank funds projects and programmes that have profound social and environmental impacts. Consequently, it is forced to pay attention to some of the political, including human rights, implications of these projects and programmes. </p>
<p>For example, if it finances a road or a renewable energy project, the project will require land. The current occupants of the land may need to be moved to make way for the project. </p>
<p>Alternatively, the project may have social and environmental effects that hurt people. It could, for example, affect the surrounding community’s ability to grow food, or place the community at higher risk of accidents or exposes more young girls and women to the risk of <a href="https://www.inspectionpanel.org/panel-cases/transport-sector-development-project-additional-financing">gender-based violence</a>.</p>
<p>If the affected community belong to minority groups in the country, with their own language, culture, and geographic attachments, they may qualify as indigenous people under international law and the Bank’s policies. In this case, the project may require their <a href="https://www.un.org/development/desa/indigenouspeoples/wp-content/uploads/sites/19/2018/11/UNDRIP_E_web.pdf">free, prior informed consent</a>. </p>
<p>However, there are disagreements among states and between the Bank and some of its member states about which communities qualify as indigenous and what is required to ensure that their rights are respected. </p>
<p>For example, some states and Bank stakeholders contend that it is enough to seek the consent of the community’s leadership. But others maintain that the consent can only be established if particular vulnerable groups within the communities, such as women, youth, LGBTIQ+, or disabled people, are given specific opportunities to express their consent.</p>
<p>Some states may argue that giving such attention to these vulnerable groups is inconsistent with local practices and customs and that the Bank, pursuant to its own Articles, should not be interfering with these internal “political” matters. </p>
<p>In all these cases, the Bank has to exercise judgement. This means, for example, that in the Uganda case the Bank could decide that it should not extend any new credit to Uganda because of its new anti-LGBTQI+ legislation. </p>
<p>However, it is also easy to see that in another context the Bank – or its Board of Executive Directors – may conclude that on balance it is better to continue lending to the particular country despite serious human rights issues. Or to a particular project because the perceived benefits outweigh the costs. </p>
<p>The challenge, of course, is ensuring that the Bank is making these decisions on a principled and predictable basis. And not according to its own whims and political preferences. And that it can be held accountable for the way in which it makes the decisions.</p><img src="https://counter.theconversation.com/content/211630/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Danny Bradlow receives funding from the Open Society Foundation for a project unconnected to this article. He is also a Compliance Officer in the Social and Environmental Compliance Unit (SECU) at the UN Development Programme.</span></em></p>The challenge is to ensure that the bank is making decisions on a principled and predictable basis.Danny Bradlow, Professor/Senior Research Fellow, Centre for Advancement of Scholarship, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2100062023-08-01T12:25:30Z2023-08-01T12:25:30ZRate hikes may have slowed inflation in the US – but they have also heightened the risk of financial crises for lower-income nations<figure><img src="https://images.theconversation.com/files/540041/original/file-20230730-23-hvvs98.jpg?ixlib=rb-1.1.0&rect=28%2C63%2C4690%2C3077&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Sri Lanka is among the countries facing the risk of debt distress.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.co.uk/detail/news-photo/street-vendor-sells-prawns-and-sea-food-at-her-kiosk-at-the-news-photo/1248858886?adppopup=true">Ishara S. Kodikara/AFP via Getty Images</a></span></figcaption></figure><p>The campaign to fight U.S. inflation by upping <a href="https://www.npr.org/2023/07/26/1190093285/fed-federal-reserve-interest-rates-borrowing-inflation">interest rates</a> has been going on for a year and a half – and its impacts are being <a href="https://apnews.com/article/covid-health-business-international-monetary-fund-sri-lanka-ab562cd9e16592e40ec8c6d842c74b7a">felt around the world</a>.</p>
<p>On July 26, 2023, the Federal Reserve announced <a href="https://www.cnn.com/2023/07/26/economy/fed-july-interest-rate-decision-final/index.html">another quarter-point hike</a>. That means U.S. rates have now gone up 5.25 percentage points over the past 18 months. While inflation is now coming down in the U.S., the aggressive monetary policy may also be having significant longer-term impact on countries across the world, especially in developing countries. And that isn’t good.</p>
<p>I <a href="https://polisci.msu.edu/people/directory/bodea-cristina.html">study how economic phenomena</a> such as banking crises, periods of high inflation and soaring rates affect countries around the world and believe this prolonged period of higher U.S. interest rates has increased the risk of economic and social instability, especially in lower-income nations.</p>
<h2>Ripples around the world</h2>
<p>Monetary policy decisions in the U.S., such as raising interest rates, have a ripple effect in low-income countries – not least because of the central role of the dollar in the global economy. Many emerging economies <a href="https://www.reuters.com/breakingviews/global-markets-breakingviews-2023-02-28/">rely on the dollar for trade, and most borrow</a> in the U.S. dollar – all at rates influenced by the Federal Reserve. And when U.S. interest rates go up, many countries – and especially <a href="https://african.business/2023/05/african-banker/interest-rates-hikes-exact-high-price-in-africa">developing ones – tend to follow suit</a>.</p>
<p>This is largely out of concern for <a href="https://www.imf.org/en/Blogs/Articles/2022/10/14/how-countries-should-respond-to-the-strong-dollar">currency depreciation</a>. Raising U.S. interest rates has the effect of making American government and corporate bonds look more attractive to investors. The result is footloose foreign capital <a href="https://theconversation.com/three-reasons-why-the-us-federal-reserve-bank-holds-the-world-in-its-hands-190936">flows out of emerging markets</a> that are deemed riskier. This <a href="https://apnews.com/article/covid-health-business-world-bank-international-monetary-fund-71aa7e9c225e973ec16a962fe6d53773">pushes down the currencies</a> of those nations and prompts governments in lower-income nations to <a href="https://african.business/2023/05/african-banker/interest-rates-hikes-exact-high-price-in-africa">scramble to mirror</a> U.S. Federal Reserve policy. The problem is, many of these countries already have high interest rates, and further hikes limit how much governments can lend to expand their own economies – heightening the risk of recession.</p>
<p>Then there is the impact that raising rates in the U.S. has had on countries with large debts. When rates were lower, a lot of lower-income nations took on <a href="https://www.aljazeera.com/features/2023/7/4/is-a-global-debt-bomb-about-to-explode">high levels of international debt</a> to offset the financial impact of the COVID-19 pandemic and then later the effect of higher prices caused by war in Ukraine. But the <a href="https://www.theguardian.com/business/2022/oct/02/high-interest-rates-paid-by-poorer-nations-spark-fears-of-global-debt-crisis">rising cost of borrowing</a> makes it more difficult for governments to cover repayments that are coming due now. This condition, called “<a href="https://www.imf.org/en/Publications/fandd/issues/2020/09/what-is-debt-sustainability-basics">debt distress</a>,” is affecting an increasing number of countries. Writing in May 2023, when he was still president of the World Bank, David Malpass estimated that <a href="https://www.wsj.com/articles/the-world-economy-needs-to-get-its-growth-back-group-of-seven-developing-countries-debt-financing-yield-curve-private-sector-innovation-4113e720">some 60% of lower-income countries</a> are in or high risk of entering debt distress.</p>
<figure class="align-center ">
<img alt="A man hold aloft a crate of fish." src="https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/540292/original/file-20230731-247744-e58okb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Mozambique is among the countries facing extra financial stress.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.co.uk/detail/news-photo/fisherman-balances-a-crate-of-fishes-on-his-head-on-news-photo/1230026981?adppopup=true">Alfredo Zuniga/AFP via Getty Images)</a></span>
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<p>More broadly, any attempt to slow down growth to lower inflation in the U.S. – which is the intended aim of raising interest rates – will have a knock-on effect on the economies of smaller nations. As borrowing costs in the U.S. increase, businesses and consumers will find themselves with less cheap money for all goods – domestic or international. Meanwhile, any fears that the Fed has pulled on the brakes too quickly and is risking recession will suppress consumer spending further.</p>
<h2>The risk of spillover</h2>
<p>This isn’t just theory – history has shown that in practice it is true.</p>
<p>When then-Fed Chair <a href="https://theconversation.com/paul-volcker-helped-shape-an-independent-federal-reserve-a-vital-legacy-thats-under-threat-128660">Paul Volcker</a> fought domestic inflation in the late 1970s and early 1980s, he did so with aggressive interest rate hikes that pushed up the cost of borrowing around the world. It contributed to <a href="https://www.bloomberg.com/view/articles/2019-12-10/paul-volcker-death-he-left-a-complicated-legacy-in-latin-america?in_source=embedded-checkout-banner&sref=Hjm5biAW">debt crises for 16 Latin American countries</a> and led to what became known in the region as the “lost decade” – a period of economic stagnation and soaring poverty.</p>
<p>The current rate increases are not of the same order as those of the early 1980s, when rates <a href="https://www.bankrate.com/banking/federal-reserve/history-of-federal-funds-rate/">rose to nearly 20%</a>. But rates are high enough to prompt fears among economists. The World Bank’s most recent <a href="https://openknowledge.worldbank.org/server/api/core/bitstreams/6e892b75-2594-4901-a036-46d0dec1e753/content">Global Economic Prospects</a> report included a whole section on the spillover from U.S. interest rates to developing nations. It noted: “The rapid rise in interest rates in the United States poses a significant challenge to [emerging markets and developing economies],” adding that the result was “higher likelihood” of financial crises among vulnerable economies.</p>
<h2>Widening the wealth gap</h2>
<p>Research <a href="https://doi.org/10.1016/j.worlddev.2021.105635">I conducted with others</a> suggests that the kind of financial crises hinted at by the World Bank – currency depreciation and debt distress – can rip the social fabric of developing countries by increasing poverty and income inequality.</p>
<p>Income inequality is at an all-time high – both within individual countries and between the richer and developing countries. The 2022 <a href="https://wir2022.wid.world/">World Inequality Report</a> notes that, currently, the richest 10% of individuals globally take home 52% of all global income, while the poorest half of the global population receives a mere 8.5%. And such a wealth gap is deeply corrosive for societies: Inequality of income and wealth has been shown to both <a href="https://doi.org/10.1017/S0043887109990074">harm democracy</a> and <a href="https://www.journals.uchicago.edu/doi/abs/10.1017/S0022381613001229">reduce popular support for democratic institutions</a>. It has also been linked to <a href="https://doi.org/10.1177/0022343313503179">political violence</a> and <a href="https://www.jstor.org/stable/4145353">corruption</a>.</p>
<p>Financial crises – such as the kind that higher interest rates in the U.S. may spark – increase the chance of economic slowdowns or even recessions. Worryingly, the World Bank has warned that developing nations face a “<a href="https://www.worldbank.org/en/news/press-release/2023/01/10/global-economic-prospects">multi-year period of slow growth</a>” that will only increase rates of poverty. And history has shown that the impact of such economic conditions fall hardest on lower-skilled low-income people.</p>
<p>These effects are <a href="https://www.investopedia.com/terms/a/austerity.asp">compounded by government policies</a>, such as cuts in spending and government services, which, again, disproportionately hit the less well-off. And if a country is struggling to pay back sovereign debt as a result of higher global interest rates, then it also has less cash to help its poorest citizens.</p>
<p>So in a very real sense, a period of higher interest rates in the U.S. can have a detrimental effect on the economic, political and social well-being of developing nations.</p>
<p>There is a caveat, however. With inflation in the U.S. slowing, further interest rate increases may be limited. It could be the case that regardless of whether Fed policy has threaded the needle of slowing the U.S. economy but not by too much, it has nonetheless sown the seeds of more potentially severe economic – and social – woes in poorer nations.</p><img src="https://counter.theconversation.com/content/210006/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Cristina Bodea does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Almost two-thirds of low-income countries are at risk of debt distress – in part because of higher borrowing costs. And that isn’t the only problem.Cristina Bodea, Professor of Political Science, Michigan State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2082452023-06-21T15:11:19Z2023-06-21T15:11:19ZParis hosts summit to secure debt relief and climate cash for developing countries<figure><img src="https://images.theconversation.com/files/533214/original/file-20230621-14551-utzvta.jpeg?ixlib=rb-1.1.0&rect=2%2C0%2C1914%2C1302&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The rise in extreme weather events dent into developing countries' budget and raise their debt interest rates.</span> <span class="attribution"><a class="source" href="https://www.pexels.com/photo/various-currencies-from-several-different-countries-4695995/">Pexels/Karthikeyan Perumal</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>On 22 and 23 June, Paris is hosting a summit for a “New Global Financing Pact” at the Palais Brogniart. Heads of state, international organisations and representatives of civil society will be gathering to discuss ways to boost solidarity toward the Global South. The aim is also to contribute to the international agenda on <a href="https://theconversation.com/us/topics/climate-finance-23005">development and climate financing</a>, a few months after the UN climate summit, COP27, left a mixed record.</p>
<p>The summit comes at a time when the budgetary margins and debt sustainability in a number of countries have been undermined by a succession of crises: pandemics, Russia’s war on Ukraine, inflation, rising global interest rates, etc. Yet the need for funds that promote low-carbon development, as well as adaptation to increasing climate disruption, is as pressing as ever. Many developing countries are having to reckon with an ever-growing number of natural hazards, at a time of acute socio-economic vulnerability.</p>
<p>However, the financial situations of developing countries vary: some, such as Sri Lanka, Ghana and Suriname, already have unsustainable public debt that needs to be restructured. Others can still access cash without compromising their sustainability, such as Egypt.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/532883/original/file-20230620-23-veiebv.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Photo of the Palais Brogniart, in Paris" src="https://images.theconversation.com/files/532883/original/file-20230620-23-veiebv.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/532883/original/file-20230620-23-veiebv.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/532883/original/file-20230620-23-veiebv.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/532883/original/file-20230620-23-veiebv.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/532883/original/file-20230620-23-veiebv.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/532883/original/file-20230620-23-veiebv.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/532883/original/file-20230620-23-veiebv.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Paris’ Palais Brogniart is hosting the summit for a ‘New Global Financing Pact’ on 22 and 23 June 2023.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Ancienne_Bourse_%C3%A0_Paris.JPG">Wikimedia</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<p>A <a href="https://www.imf.org/en/Publications/WP/Issues/2022/08/11/Debt-for-Climate-Swaps-Analysis-Design-and-Implementation-522184">study</a> carried out by the International Monetary Fund (IMF) in 2022 on 128 low- and middle-income countries revealed a strong correlation between exposure to climate risks and limited budgetary capacity. The climate crisis and the budget crisis have a habit of feeding each other: coping with a crisis puts a strain on public finances, and new funding is needed to adapt to climate change. Taking on more debt also means taking on more debt at higher costs. Developing countries are therefore in danger of entering into a <a href="https://wedocs.unep.org/handle/20.500.11822/26007;jsessionid=B66C42EF4406FCFDC228C1BB61EBE218">vicious circle</a>.</p>
<h2>Increasingly complex debt restructuring</h2>
<p>On top of ad hoc restructuring for countries facing particular constraints, several debt restructuring or suspension initiatives were launched in 2000 in response to more widespread debt situations. The <a href="https://www.imf.org/en/About/Factsheets/Sheets/2023/Debt-relief-under-the-heavily-indebted-poor-countries-initiative-HIPC">Heavily Indebted Poor Countries</a> (HIPC) initiative, established in 1996 by the IMF and World Bank, and the 2005 <a href="https://www.imf.org/external/np/exr/mdri/eng/index.htm">Multilateral Debt Relief Initiative</a> (MDRI) are notable examples. Broadly speaking, these schemes aim to cancel a share of public debt in return for a commitment that the sums released will go toward beneficiaries’ development goals, in areas such as health, education and poverty reduction.</p>
<p>During the Covid-19 pandemic, the G20 countries also adopted the <a href="https://www.worldbank.org/en/topic/debt/brief/debt-service-suspension-initiative-qas">Debt Suspension Initiative</a> (DSI), which sets out to suspend the debt repayments of 73 of the world’s poorest countries.</p>
<p>At the origin of the HIPC initiative and the DSI was the <a href="https://clubdeparis.org/en/communications/page/who-are-the-members-of-the-paris-club">Paris Club</a> (CDP). Composed of 22 bilateral creditors, mainly from developed countries, the informal group worked with the IMF and World Bank to establish rules to renegotiate the external public debt of over-indebted countries. However, CDP creditors are no longer the most important players, dwarfed by “new”, non-member bilateral creditors, such as China and India.</p>
<p>Beyond budgetary capacity, it is developing countries’ <a href="https://www.afd.fr/fr/ressources/pays-emergents-et-en-developpement-letau-se-resserre">public debt structure that has gradually changed</a>. By doubling over the last decade, the debts of developing countries have also opened up to new creditors from the private sector and emerging countries such as China, India, Russia, Turkey and the countries of the Middle East. The restructuring process has thus become even more complex.</p>
<p>In response to this new international context, the G20 countries have set up a <a href="https://www.imf.org/en/Blogs/Articles/2021/12/02/blog120221the-g20-common-framework-for-debt-treatments-must-be-stepped-up">“Common Framework for Debt Treatment”</a>, enabling countries eligible for the DSI to request a restructuring of their debt in case of persistent financing deficits. This new body paves the way for better coordination between bilateral creditors who are members and non-members of the CDP.</p>
<p>However, the global framework for debt restructuring has so far had little impact on climate issues, with climate investment often an afterthought.</p>
<h2>Vulnerable countries in demand</h2>
<p>Innovative financial instruments for combining finance and climate change are on the rise. Debt-for-climate swaps (such as <a href="https://www.imf.org/en/Blogs/Articles/2022/12/14/swapping-debt-for-climate-or-nature-pledges-can-help-fund-resilience"><em>Debt for Climate Swap</em></a> have been back in the spotlight in recent years, focusing not only on the fight against global heating, but also on protecting nature. The idea is that the government of the debtor country undertakes to spend the equivalent of the cancelled debt on projects to fight climate change, under conditions agreed between the creditors and the debtor country. A growing number of research groups, civil society groups and, to a lesser extent, international institutions, are advocating similar solutions to combat both climate change and rising public debt.</p>
<p>Recent global shocks have led to a certain consensus that the international financial system may no longer be equipped to handle current global challenges. Many are unimpressed by efforts to finance the decarbonisation of the economy and climate adaptation. As a result, several countries called for <a href="https://www.eurodad.org/un_general_assembly_2021_debt_highlights">reform of this financial architecture</a> at the UN General Assembly in 2021, in particular by asking for debt restructuring to be linked to climate objectives.</p>
<p>This call was echoed at COP26 in Glasgow in November 2021, notably by the <a href="https://drgr.org/statement/v20/">V20 countries</a> (<em>vulnerable twenty group</em>). Now comprising <a href="https://www.v-20.org/members">58 nations</a>, the group accounts for 5% of global greenhouse gas emissions, and yet are at the receiving end of climate change. They have called for large-scale debt relief.</p>
<p>The prime minister of Barbados has also presented the <a href="https://www.foreign.gov.bb/the-2022-barbados-agenda/">Bridgetown Agenda for Reform of the Global Financial Architecture</a>, with a view to directing global funds toward low-carbon, climate-resilient development, in a way that would also tackle developing countries’ sovereign debt.</p>
<h2>Even more complexity?</h2>
<p>The richest countries have also proposed ideas. At the end of the <a href="https://live.worldbank.org/annual-meetings-2022">76th annual meetings of the World Bank and IMF</a> in October 2022, the G7, joined by Australia, the Netherlands and Switzerland, set out its proposals for reforming the World Bank.</p>
<p>Much indicates 2023 will be a year of reform for development finance, with many events slated to reflect on these issues.</p>
<p>Calls for reform of the global framework have been around since the globalisation of financial markets, however – no single institution is responsible for global financial movements. Institutions, both international (IMF, World Bank, World Trade Organisation, etc.) and regional (OECD, European Commission, Bank for International Settlements, etc.), are numerous, while the private sector is expanding.</p>
<p>Beyond the debate over the role these institutions should play and whether or not it is useful to introduce international standards and controls, it would be wise to bear in mind that any new development finance initiative will remain vulnerable to changes in the international financial architecture, which is forever subject to negotiation and regulation. The challenge is also to ensure that the introduction of new instruments does not add yet more complexity to the management of developing countries’ debts.</p><img src="https://counter.theconversation.com/content/208245/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Les auteurs ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur organisme de recherche.</span></em></p>This week’s summit for a “New Global Financing Pact” will look to secure some much-needed climate cash for developing countries, while ensuring their debt remains manageable.Emmanuelle Mansart-Monat, Économiste risque pays, Agence française de développement (AFD)Djedjiga Kachenoura, Coordinatrice du projet de recherche sur la finance et le climat, Agence française de développement (AFD)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2068982023-06-02T11:31:51Z2023-06-02T11:31:51ZSouth Africa’s role as host of the BRICS summit is fraught with dangers. A guide to who is in the group, and why it exists<figure><img src="https://images.theconversation.com/files/529635/original/file-20230601-21-wls2oa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Chinese President Xi Jinping hosted the 14th BRICS Summit via video link in Beijing. South African President Cyril Ramaphosa, Brazilian President Jair Bolsonaro, Russian President Vladimir Putin and Indian Prime Minister Narendra Modi attended the summit. </span> <span class="attribution"><span class="source">Li Tao/Xinhua via Getty Images</span></span></figcaption></figure><p><em>South Africa will <a href="https://www.dirco.gov.za/blog/2023/04/21/south-africa-to-host-brics-deputy-ministers-and-special-envoys-on-the-middle-east-and-north-africa/">host the BRICS summit in August 2023</a>. The event could offer the country an opportunity to exercise leadership in the BRICS’ efforts to reform the arrangements for global economic governance and in supporting sustainable and inclusive development in Africa and the Global South. However, the opportunity has morphed into an international challenge because Russia’s President Vladimir Putin, who has been <a href="https://www.theguardian.com/world/2023/mar/17/vladimir-putin-arrest-warrant-ukraine-war-crimes">indicted by the International Criminal Court</a>, has <a href="https://www.reuters.com/world/kremlin-says-russia-will-take-part-brics-summit-proper-level-2023-05-30/">indicated</a> that he will attend. South Africa could face the wrath of its BRICS partners if it fulfils its international obligation and arrests him. On the other hand, if it does not arrest him, it could face sanctions from those countries that want to see Putin tried for war crimes.</em> </p>
<p><em>Hosting the 2023 BRICS summit is therefore fraught with dangers. The international environment is complicated, dynamic and unpredictable. South Africa can avoid embarrassment and capitalise on the opportunities presented by the summit only if it is able to skilfully manoeuvre in these choppy waters.</em> </p>
<p><em>Trying to understand South Africa’s dilemma raises a number of questions: Who are the BRICS? What has the grouping achieved?</em> </p>
<hr>
<h2>Who are the BRICS?</h2>
<p>In 2001, the global investment bank Goldman Sachs stated that it expected Brazil, Russia, India and China to become leading actors in the global economy. It collectively named the four countries <a href="https://www.goldmansachs.com/our-firm/history/moments/2001-brics.html">“BRICs”</a>. </p>
<p>These countries decided that Goldman Sachs had a point and that they could enhance their global influence if they cooperated. They first met at a ministerial level in <a href="http://infobrics.org/page/history-of-brics/">2006</a> and at a leaders’ summit in <a href="http://infobrics.org/page/history-of-brics/">2009</a>. <a href="https://www.reuters.com/article/us-bric-safrica-idUSTRE6BN1DZ20101224">In 2010</a> they invited South Africa to join the group. The group became known as “BRICS”. </p>
<p><a href="https://unacademy.com/content/upsc/study-material/international-relations/brics-objectives-and-history/">A primary objective of the group </a> is to reform global economic governance so that it is more responsive to the concerns and interests of the Global South. For example, the BRICS have called for <a href="https://foreignpolicy.com/2023/04/24/brics-currency-end-dollar-dominance-united-states-russia-china/">a new global currency</a> that can challenge the dominant role of the US dollar in the international monetary system. It has also pushed for a greater voice – and more votes – for developing countries in key international economic organisations like the IMF and the World Bank.</p>
<p>The group has also sought, through groups like its <a href="https://sabricsbusinesscouncil.co.za/event/participate-in-the-business-activities-during-brics-summit-august-2023/">business forum</a>, to promote greater economic cooperation between the participating countries.</p>
<h2>What has the BRICS grouping achieved?</h2>
<p>The BRICS record of achievements is mixed. </p>
<p>In 2016, the group established two new international economic entities. </p>
<p>The first was the <a href="https://www.ndb.int/">New Development Bank</a>. They contend that it is a “new” multilateral development bank which offers its members an alternative to institutions like the World Bank. It claims that its governance is fairer than the World Bank because its five original members all have <a href="https://www.ndb.int/about-ndb/shareholding/">equal votes</a>. At the World Bank, shares (and therefore votes) are unevenly distributed among member states. </p>
<p>The development bank also strives to provide financing more quickly than the World Bank, and in a way that is more respectful of the laws in its member states. </p>
<p>However, to date, the New Development Bank has been <a href="https://theconversation.com/how-brics-new-development-bank-can-improve-transparency-and-accountability-186265">less transparent and accountable</a> than other multilateral development banks.</p>
<p>It has <a href="https://www.ndb.int/projects/">provided US$32.8 billion</a> to 96 projects in the 5 BRICS countries and it has begun looking to expand the scope of its operations. </p>
<p>Since 2021 it has approved membership for <a href="https://www.ndb.int/about-ndb/shareholding/">Bangladesh, Egypt, United Arab Emirates and Uruguay</a>. It is expected to add new members in the coming years. </p>
<p>The second new entity was the <a href="https://www.aspireias.com/upsc-study-notes/Contingent-Reserve-Arrangement-CRA-BRICS">Contingent Reserve Arrangement</a>. This established a series of swap arrangements between the BRICS central banks. These arrangements allow each central bank, when its country is facing a balance of payments crisis, to exchange its local currency for hard currencies, like the US dollar, with its counterparts in the BRICS. </p>
<p>Pursuant to the terms of the arrangement, a central bank can only draw on a fraction of the available financing without also having to enter into a financing arrangement with the IMF. Thus, the conditions that are attached to the IMF’s finances also become applicable to the funds made available through the Contingent Reserve Arrangement. </p>
<p>To date, no BRICS central bank has used the arrangement. </p>
<p><a href="http://www.brics.utoronto.ca/">According to their communiques</a>, the BRICS leaders have agreed to create other entities, such as a vaccine centre and a new credit rating agency. However, they have not yet implemented these agreements. </p>
<p>They have not been successful either in reforming the existing institutions and arrangements for global economic governance, such as the IMF. One reason for this failure is the strong opposition to reform from states, primarily those in Europe, which currently have dominant voices in the IMF and would lose them in the case of true reform. </p>
<p>But another important reason is that the BRICS are not unified in their demands for reform. For example, while Brazil, India and South Africa support reforming the UN Security Council to include more permanent members and to eliminate the veto power of the existing permanent members, China and Russia, as sitting permanent members, don’t. </p>
<p>Similarly, not all the other BRICS have supported South Africa’s call for a third African seat on the IMF’s board of directors. </p>
<h2>Are there any downsides to BRICS membership?</h2>
<p>The global political and economic situation has changed dramatically since 2010. These changes have created both opportunities and challenges for the BRICS. </p>
<p>One opportunity arises from the fact that <a href="https://www.japantimes.co.jp/news/2023/05/25/world/politics-diplomacy-world/brics-expansion-emerging-economies-join/">approximately 19 countries</a> in the Global South, including Argentina, Cuba, Iran and Saudi Arabia, have expressed an interest in joining the BRICS. It is expected that the BRICS will consider the issue of membership at their upcoming August 2023 summit. </p>
<p>Another opportunity arises from the growing interest around the world in having an alternative currency to the US dollar as the basis for the international financial system. The BRICS have been <a href="https://foreignpolicy.com/2023/04/24/brics-currency-end-dollar-dominance-united-states-russia-china/">vocal supporters of de-dollarisation</a>. However, given the complex economic and political relations between the BRICS member states, there is considerable scepticism about the feasibility of the BRICS developing a new global currency in the near term.</p>
<p>The primary challenges facing the BRICS arise from geopolitics. The war in Ukraine has created tensions within the BRICS. The participating states have been <a href="https://saiia.org.za/research/a-global-rebalance/">forced to balance their respect </a>for such international law principles as self-determination, sovereignty and peaceful resolution of disputes with their friendly relations with Russia. In addition, the BRICS cannot escape the fallout from the growing economic and security tensions <a href="https://www.economist.com/china/2023/04/27/chinas-latest-attempt-to-rally-the-world-against-western-values?gclid=CjwKCAjwpuajBhBpEiwA_ZtfhdEfPP2nUUq4vCYYTp3gK6av_gR71ro86sVIZKvEduRkmt7u6iwQ_xoCc7EQAvD_BwE&gclsrc=aw.ds">between China and the west</a>, particularly the US. </p>
<p>Both these issues complicate the efforts of the other BRICS to maintain their formal non-aligned position. They also exacerbate existing tensions within the BRICS. The most important example of this is the <a href="https://www.chathamhouse.org/2023/03/india-china-relations-quad-answer?__cf_chl_tk=8WwBOhRRpvovxPXN3HILt.MUbGy_.LyODow70NcSHds-1685690745-0-gaNycGzNDfs">complex and tense relationship</a> between India and China. In recent years, they have had military skirmishes in disputed border areas. In addition, India has imposed economic constraints on Chinese companies operating in India. The two countries <a href="https://www.wsj.com/articles/china-india-kick-out-nearly-all-of-each-others-journalists-as-rivalry-escalates-75d51c42">have refused to renew the visas of journalists</a> from each country so that now there are almost no journalists from Chinese publications in India and vice versa.</p>
<h2>What hangs on the summit?</h2>
<p>South Africa faces another opportunity that is fraught with danger when it hosts the G20 in 2025. The G20, which brings together the 20 leading economic powers in the world, has called itself <a href="https://www.cigionline.org/articles/premier-forum-making-g20-permanent/">the “premier forum” </a>for global economic governance. South Africa is currently the only permanent African member of the G20 and 2025 will be the first time the group is hosted by an African country. </p>
<p>Planning for this G20 event must begin soon because in 2024 South Africa will join India, the current G20 host, and Brazil, <a href="https://unacademy.com/content/upsc/study-material/international-relations/india-joins-g20-troika/">the 2024 G20 host in the troika</a> that manages the G20 process. If the country does not plan carefully and effectively for this G20 event, South Africa risks emerging with a diminished reputation and its credibility shredded.</p><img src="https://counter.theconversation.com/content/206898/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Danny Bradlow receives funding from the Open Society Foundation for a project unconnected to this article. He is also a Compliance Officer in the Social and Environmental Compliance Unit (SECU) at the UN Development Programme.</span></em></p>Geopolitics is forcing BRICS countries to balance respect for international law, self-determination, sovereignty and peaceful resolution of disputes with their friendly relations with Russia.Danny Bradlow, Professor/Senior Research Fellow, Centre for Advancement of Scholarship, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2057042023-05-25T12:34:11Z2023-05-25T12:34:11ZImproving how the IMF does business could help billions of people worldwide — by giving governments money to spend on public goods and increasing accountability. Podcast<figure><img src="https://images.theconversation.com/files/526826/original/file-20230517-23266-2g9fwb.jpg?ixlib=rb-1.1.0&rect=258%2C64%2C8368%2C5678&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">People march with a banner that reads in Spanish 'Stop the adjustment, out with the IMF,' in Buenos Aires, Argentina on May 9, 2023.</span> <span class="attribution"><span class="source">(AP Photo/Victor R. Caivano)</span></span></figcaption></figure><p>In countries across the Global South, the launch of IMF programs often <a href="https://theconversation.com/when-the-imf-comes-to-town-why-they-visit-and-what-to-watch-out-for-188302">sparks considerable concern</a>. This is because of the IMF’s reputation: during the 1980s, many nations in Africa, Asia and Latin America turned to the IMF seeking loans to mitigate economic challenges. <a href="https://theconversation.com/imf-says-it-cares-about-inequality-but-will-it-change-its-ways-120105">These loans were accompanied by stringent conditions</a>, and countries faced pressure to reduce public subsidies and social spending, downsize the public sector workforce, and increase taxes.</p>
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<p>Originally <a href="https://www.imf.org/external/about/histcoop.htm">founded after the second world war</a>, the IMF aimed to provide a framework for countries to cooperate in managing their exchange rates and to facilitate international trade. Since then, it has evolved to provide financial assistance and support to countries facing economic crises and emergencies worldwide. Member countries contribute a certain amount of money to the IMF based on their economic size, and in turn, they are able to access loans as a means of aid. </p>
<p>During the recent COVID-19 pandemic, <a href="https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker">the IMF extended loans to over 80 countries</a>. Presently, <a href="https://www.imf.org/external/np/fin/tad/balmov2.aspx?type=TOTAL">more than 90 countries remain indebted</a> to the IMF, with such loans being accompanied by policy conditions.</p>
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Read more:
<a href="https://theconversation.com/when-the-imf-comes-to-town-why-they-visit-and-what-to-watch-out-for-188302">When the IMF comes to town: why they visit and what to watch out for</a>
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<p>In this episode of <em>The Conversation Weekly</em>, we speak with two researchers about the impact of IMF loans on recipient countries and why countries continue to rely on IMF loans. We also discuss potential alternatives to this system.</p>
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<a href="https://images.theconversation.com/files/526561/original/file-20230516-11526-ru0y3p.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4031%2C3024&q=45&auto=format&w=1000&fit=clip"><img alt="a plaque on a building showing the IMF logo and the text INTERNATIONAL MONETARY FUND" src="https://images.theconversation.com/files/526561/original/file-20230516-11526-ru0y3p.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4031%2C3024&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/526561/original/file-20230516-11526-ru0y3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/526561/original/file-20230516-11526-ru0y3p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/526561/original/file-20230516-11526-ru0y3p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/526561/original/file-20230516-11526-ru0y3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/526561/original/file-20230516-11526-ru0y3p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/526561/original/file-20230516-11526-ru0y3p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The International Monetary Fund has 190 member countries.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
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<h2>Ongoing impact of colonialism</h2>
<p><a href="https://www.chr.up.ac.za/centre-staff/daniel-bradlow">Danny Bradlow</a>, a professor of international development law and African economic relations and senior fellow at the University of Pretoria in South Africa, highlights the harmful effects of IMF-imposed austerity measures. </p>
<p>The ongoing impact of colonialism means many countries in the Global South “were in a very dire situation to begin with,” Bradlow explains. “The IMF said if you follow our policy prescriptions, things will turn around and you’ll do much better.” </p>
<p>The measures imposed by the IMF limited access to healthcare and education for poorer people. Throughout the 1980s, the IMF pressured country after country — in what’s often known as <a href="https://theconversation.com/imf-says-it-cares-about-inequality-but-will-it-change-its-ways-120105">Structural Adjustment Programs</a> — with lasting damage on economies and populations.</p>
<p>The policy measures dictated by the IMF also had detrimental environmental consequences. To encourage economic growth, many countries were pressured to shift “from producing food to producing agricultural products that you could sell on the global markets,” Bradlow says. “Often that meant you were using more environmentally damaging fertilizers, or you were doing extractive mining projects that were environmentally damaging. In some cases it was logging, so countries would tear down forests.”</p>
<h2>Prolonged debt and austerity</h2>
<p><a href="https://profiles.uonbi.ac.ke/attiya/">Attiya Waris</a> is associate professor of fiscal law and policy at the University of Nairobi in Kenya, and an <a href="https://www.ohchr.org/en/special-procedures/ie-foreign-debt/attiya-waris">expert on foreign debt and international financial obligations</a> and their implications for human rights.</p>
<p>As part of her work, Waris sheds light on the experiences of Argentina and Pakistan. Both countries have received multiple loans since the 1950s to address economic challenges such as inflation, currency devaluation, and external debt crises. <a href="https://www.imf.org/en/Countries/ARG">Argentina currently holds the highest outstanding debt</a> of US$46 billion, <a href="https://www.imf.org/en/Countries/PAK">while Pakistan ranks fifth</a> with US$7.4 billion.</p>
<p>“Pakistan is one of 14 countries across the world that has a loan with the IMF that has a surcharge on it. A surcharge means that if you are paying a 1% interest rate and you default on your payments, then you’ll be paying 3%. So you’re being penalized for being unable to pay,” Waris explains. This in turn increases the likelihood of prolonged debt and austerity.</p>
<p>But for Waris, one of the biggest problems is that the contracts around IMF loans are extremely opaque, meaning it’s difficult to hold the institution to account or even evaluate what impact it has beyond the austerity measures.</p>
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<a href="https://images.theconversation.com/files/526827/original/file-20230517-25100-qe6olr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="a woman draped in a black, yellow and red — the colours of the Ugandan flag — shouts at a protest" src="https://images.theconversation.com/files/526827/original/file-20230517-25100-qe6olr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/526827/original/file-20230517-25100-qe6olr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/526827/original/file-20230517-25100-qe6olr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/526827/original/file-20230517-25100-qe6olr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/526827/original/file-20230517-25100-qe6olr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/526827/original/file-20230517-25100-qe6olr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/526827/original/file-20230517-25100-qe6olr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Demonstrators with the ‘People Power Movement,’ protesting the Ugandan government, join protests outside of the IMF and World Bank Spring Meetings on April 14, 2023, in Washington.</span>
<span class="attribution"><span class="source">(AP Photo/Mariam Zuhaib)</span></span>
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<p>“This is problematic because there can be no societal oversight over what a group of human beings in their country are deciding to take on, on their behalf,” she says. “Representative, democratic or otherwise, people need to know what their governments are doing on their behalf.”</p>
<p>For Bradlow there are signs for positive change. <a href="https://doi.org/10.1093/jiel/jgac064">A recent research paper shows</a> that the IMF acknowledges some of the devastating impacts it has had on countries. In the paper, it identifies areas of enhanced focus, including climate change, gender, inequality, and social protection. However, while the IMF has adapted its focus and policies to address some of the negative consequences, it remains uncertain how it will achieve these goals.</p>
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Read more:
<a href="https://theconversation.com/government-debt-wont-necessarily-burden-future-generations-but-austerity-will-194658">Government debt won't necessarily burden future generations – but austerity will</a>
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<p>The Conversation has reached out to the International Monetary Fund for comment regarding the issues covered in this episode and is awaiting response.</p>
<p>Listen to the full episode of <em>The Conversation Weekly</em> to learn more about the impact of IMF loans on recipient nations, the potential benefits of allocating funds for public services in the Global South, and the importance of implementing accountability mechanisms within the IMF.</p>
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<p>This episode was written and produced by Mend Mariwany, who is also the executive producer of <em>The Conversation Weekly</em>. Eloise Stevens does our sound design, and our theme music is by Neeta Sarl.</p>
<p>You can find us on Twitter <a href="https://twitter.com/TC_Audio">@TC_Audio</a>, on Instagram at <a href="https://www.instagram.com/theconversationdotcom/">theconversationdotcom</a> or <a href="mailto:podcast@theconversation.com">via email</a>. You can also subscribe to The Conversation’s <a href="https://theconversation.com/newsletter">free daily email here</a>.</p>
<p>Listen to “The Conversation Weekly” via any of the apps listed above, download it directly via our <a href="https://feeds.acast.com/public/shows/60087127b9687759d637bade">RSS feed</a> or find out <a href="https://theconversation.com/how-to-listen-to-the-conversations-podcasts-154131">how else to listen here</a>.</p><img src="https://counter.theconversation.com/content/205704/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Attiya Waris does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p><p class="fine-print"><em><span>Danny Bradlow receives funding from South Africa’s National Research Foundation. He does not work for, consult or own shares from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The conditions placed on countries borrowing money from the International Monetary Fund have further disadvantaged these countries economically.Mend Mariwany, Producer, The Conversation Weekly, The Conversation Weekly PodcastNehal El-Hadi, Science + Technology Editor & Co-Host of The Conversation Weekly Podcast, The ConversationLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2044102023-04-25T16:55:08Z2023-04-25T16:55:08ZGlobal economic uncertainty means oil prices – and your fuel bill – will continue to surprise this year<figure><img src="https://images.theconversation.com/files/522655/original/file-20230424-26-do499z.jpg?ixlib=rb-1.1.0&rect=242%2C148%2C8501%2C4244&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Oil price uncertainty.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/future-oil-concept-drum-question-mark-1691774782">Holmes Su/Shutterstock</a></span></figcaption></figure><p>Oil prices have confounded expectations in the first quarter of 2023. Brent – a major global benchmark – hit <a href="https://www.reuters.com/business/energy/oil-steadies-investors-take-stock-banking-crisis-2023-03-17/">a low of US$72 (£58) a barrel on March 17</a>, while the world’s other main benchmark, WTI, dropped to less than US$66 a barrel. This is a far cry from the nearly US$114 and US$103 a barrel, respectively, reached on <a href="https://www.reuters.com/business/energy/oil-futures-open-higher-iea-supply-warning-2022-03-17/">the same day a year before</a> following the invasion of Ukraine by Russia, a major oil producer. </p>
<p>These unexpectedly low prices remain even as the war in Ukraine continues with no clear end in sight. Other developments have also failed to boost prices as expected. China, the world’s largest importer of crude oil, <a href="https://theconversation.com/chinese-economic-growth-may-never-recover-from-covid-heres-why-195872">abandoned its zero-COVID policy in December 2022</a>, creating <a href="https://oilprice.com/Energy/Crude-Oil/From-Zero-Covid-To-Energy-Demand-Explosion-The-Impact-Of-Chinas-Reopening.html">expectations that Chinese oil demand would quickly return</a> with a vengeance, propelling prices higher. A couple of months before this, OPEC+ (the cartel of certain oil-producing nations) had announced a <a href="https://www.reuters.com/business/energy/opec-heads-deep-supply-cuts-clash-with-us-2022-10-04/">production cut of 2 million barrels a day</a> (mb/d) – roughly 2% of world supply and the largest cut since 2020. </p>
<p><a href="https://www.reuters.com/business/energy/sarabia-other-opec-producers-announce-voluntary-oil-output-cuts-2023-04-02/">A surprise announcement of 1.1 mb/d of cuts</a> by OPEC+ on April 2 did boost prices. On top of a 0.5 mb/d decrease <a href="https://www.reuters.com/business/energy/russia-cut-oil-output-by-500000-bpd-march-2023-02-10/">announced by Russia in February</a>, this has brought the group’s cuts to 1.6 mb/d. And by mid-April Brent reached US$86 and WTI US$83 per barrel. </p>
<p>But oil has now <a href="https://www.reuters.com/markets/commodities/oil-prices-slide-uncertainty-over-global-economic-outlook-rate-hikes-2023-04-24/">started to retreat again</a>, an unexpected development during a war involving a major oil exporter, and at a time when a giant consumer like China is reopening after three years of economic isolation.</p>
<p>This shows that oil price forecasts continue to be unreliable. The economic outlook and Chinese consumption growth are key to demand expectations, while Russia is the wild card in terms of supply. Until uncertainty around these three factors dissipates, global oil markets will not have a clear direction.</p>
<p><strong>Oil price movements:</strong></p>
<h2>Economic outlook</h2>
<p>Oil demand is closely linked to economic growth because a slowing economy shrinks income, leading people to curtail expenditure and travel less, and slowing down manufacturing that uses oil. Various economic forecasts have recently highlighted the major challenges facing the global economy, but widely prevailing uncertainty seems to top the list. </p>
<p>In its <a href="https://www.imf.org/en/Publications/WEO/Issues/2023/04/11/world-economic-outlook-april-2023">April 2023 World Economic Outlook</a>, the International Monetary Fund (IMF) emphasised a high level of uncertainty “amid financial sector turmoil, high inflation, ongoing effects of Russia’s invasion of Ukraine, and three years of COVID”. </p>
<p>The <a href="https://www.worldbank.org/en/news/press-release/2023/03/27/global-economy-s-speed-limit-set-to-fall-to-three-decade-low">World Bank has also warned</a> that “a lost decade could be in the making for the global economy” as “nearly all the economic forces that powered progress and prosperity over the last three decades are fading”. </p>
<p>April’s <a href="https://momr.opec.org/pdf-download/">OPEC+ Monthly Oil Market Report</a> kept its forecast for economic growth and oil demand largely unchanged from previous reports, but said: “The global economy will continue to navigate through challenges including high inflation, higher interest rates particularly in the Eurozone and the US, and high debt levels in many regions.” It stated that “these uncertainties surrounding current oil market dynamics” were behind its decision to cut production.</p>
<h2>The China factor</h2>
<p>China is the world’s <a href="https://www.statista.com/statistics/271622/countries-with-the-highest-oil-consumption-in-2012/">second-largest oil consumer</a> and the <a href="https://www.investopedia.com/insights/worlds-top-economies/">second-largest economy</a> after the US. So all eyes have been on its oil demand since the country ended the nearly three-year zero-COVID policy that severely restricted its peoples’ mobility and economic activity. </p>
<p>Today, it is the main bullish factor in many global economic forecasts. The IMF’s managing director <a href="https://www.chinadaily.com.cn/a/202304/14/WS64396987a310b6054facdc05.html">recently said</a>:</p>
<blockquote>
<p>China this year is going to contribute about one-third of global [economic] growth. We calculated that 1% more growth in China translates into 0.3% more growth for the economies that are connected to China. </p>
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<p>The <a href="https://www.iea.org/reports/oil-market-report-april-2023">IEA believes China</a> will account for half of the global increase in oil demand this year. <a href="https://www.goldmansachs.com/insights/pages/chinas-reopening-is-poised-to-boost-global-growth.html">Goldman Sachs expects</a> China’s oil demand growth to boost Brent by roughly US$15 per barrel.</p>
<p>However, such enthusiasm is not universally shared. A <a href="https://www.cnbc.com/2023/04/07/chinas-economic-recovery-is-taking-longer-than-expected-citi-says.html">Citibank report</a> says China’s post-COVID recovery seems slower than expected. Being an export-driven economy, the Asian powerhouse is exposed to the health of the rest of the world. A weakening global economy will reduce demand for Chinese exports, with negative repercussions on its economy and therefore oil demand.</p>
<p>Similarly, <a href="http://www.stats.gov.cn/english/PressRelease/202303/t20230315_1937167.html">China’s National Bureau of Statistics</a> said “the external environment is even more complex, inadequate demand remains prominent and the foundation for economic recovery is not solid yet”. Or, as the Saudi energy minister reportedly said when asked about an oil demand rebound recently: “<a href="https://www.reuters.com/article/us-global-oil-opec-saudi-idUSKBN2AX23F">I’ll believe it when I see it</a>.” </p>
<h2>Russia: not done yet</h2>
<p>As a major oil producer and exporter, Russia also has a massive influence on global oil markets. Despite sanctions since the beginning of the war in Ukraine (and following the annexation of Crimea in 2014), Russia continues to be the world’s <a href="https://www.iea.org/reports/russian-supplies-to-global-energy-markets/oil-market-and-russian-supply-2">third-largest oil producer</a> after the US and Saudi Arabia.</p>
<p>When Russia invaded Ukraine, oil prices spiked due to fears of a loss of Russian supply. <a href="https://www.iea.org/reports/oil-market-report-march-2022">The IEA warned</a> the resulting 3 mb/d loss (around one-third of Russia’s total and almost 3% of world production) could produce “the biggest supply crisis in decades”. Analysts from investment bank <a href="https://www.bloomberg.com/news/articles/2022-07-01/jpmorgan-sees-stratospheric-380-oil-on-worst-case-russian-cut?sref=DF2XabZQ">JP Morgan said</a> Russia could cut up to 5 mb/d of production driving global oil prices to a “stratospheric” US$380 per barrel. </p>
<p>Such gloomy scenarios did not materialise. Russian oil continued to flow but <a href="https://www.reuters.com/business/energy/russian-sanctions-shift-oil-price-making-power-asia-europe-2023-03-14/">changed direction from Europe to Asia</a>, helping to ease price pressure for consumers everywhere. And Russia’s cuts in retaliation for sanctions have so far been smaller than expected. Of course, it could cut more, especially if this would put more economic pressure on the west and affect support for Ukraine. </p>
<p>This cocktail of uncertainties should encourage a more cautious stance when it comes to predicting oil prices, this year at least. Some analysts <a href="https://www.reuters.com/business/energy/barclays-cuts-2023-oil-price-forecasts-resilient-russian-output-2023-03-08/#:%7E:text=The%20bank%20cut%20its%20average,year%20and%20WTI%20%2492%2Fb.">have already reduced their 2023 price forecasts</a>, with estimates varying between US$81 and US$100 a barrel. </p>
<p>Expect more revisions. As <a href="https://www.aeaweb.org/articles?id=10.1257/jep.30.1.139">one study</a> that tracked the evolution of oil prices over four decades said: “all price expectations are subject to error”.</p><img src="https://counter.theconversation.com/content/204410/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carole Nakhle does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Alongside the global economic outlook, Russian supply and Chinese demand are contributing to ‘a cocktail of uncertainty’ for oil prices.Carole Nakhle, Energy Economist, University of SurreyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2025482023-04-13T13:25:53Z2023-04-13T13:25:53ZEthiopia was feted for expanding education rights for refugees, then politics got in the way<figure><img src="https://images.theconversation.com/files/519555/original/file-20230405-16-9d67ka.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Learners in a school for about 5,000 children in Nguenyyiel Refugee Camp in Ethiopia’s Gambela region in 2019.
</span> <span class="attribution"><span class="source">Peter Kneffel/picture alliance via Getty Images</span></span></figcaption></figure><p>Ethiopia is <a href="https://www.unhcr.org/62a9d1494/global-trends-report-2021#page=19">one of the largest refugee-hosting countries</a> in the world. It hosts more than <a href="https://www.unhcr.org/ethiopia.html#:%7E:text=Ethiopia%20hosts%20over%20823%2C000%20refugees,Addis%20Ababa%20as%20urban%20refugees">800,000 refugees and asylum seekers</a>. For decades, refugees were sheltered primarily in <a href="https://reporting.unhcr.org/sites/default/files/UNHCR%20Fact%20Sheet%20Ethiopia-December%202020.pdf#page=1">26 camps</a> managed by a domestic agency, the Refugee and Returnee Service. Most still are. </p>
<p>In early 2019, however, the Ethiopian government won global <a href="https://www.reuters.com/article/us-ethiopia-refugees-rights-idUSKCN1PB2QH">praise</a> for enacting a law that gave close to a million refugees the <a href="https://www.ilo.org/dyn/natlex/docs/ELECTRONIC/109317/135566/F-1190510897/ETH109317.pdf">right to work and live</a> outside camps. It was hailed as “<a href="https://news.un.org/en/story/2019/01/1030812">one of the most progressive</a>” refugee laws in Africa. For individual refugees and families, it promised better economic opportunities and the potential to become citizens. </p>
<p>Close to <a href="https://www.unhcr.org/ethiopia.html#:%7E:text=47%25%20of%20the%20refugees%20are,different%20parts%20of%20the%20country">60%</a> of the refugees are children under 18. As part of these government reforms, more than <a href="https://www.unicef.org/media/102026/file/Improving%20access%20to%20quality%20education%20for%20refugee%20learners%20(Ethiopia).pdf">400,000 school-age children</a> in camps were to be <a href="https://documents1.worldbank.org/curated/en/988591562865883889/pdf/Education-for-Resilience-Exploring-the-experience-of-refugee-students-in-three-communities-in-Ethiopia.pdf#page=16">integrated</a> into the national education system. Refugee education at the primary level was <a href="https://www.rckkenya.org/ethiopia-news-agency-ethiopia-working-to-improve-refugees-access-to-education/">previously organised</a> separately from the national education system. Such schools have historically relied on unpredictable humanitarian resources, are often <a href="https://documents1.worldbank.org/curated/en/988591562865883889/pdf/Education-for-Resilience-Exploring-the-experience-of-refugee-students-in-three-communities-in-Ethiopia.pdf%20#page=8">overcrowded</a> and are more likely to be staffed by unqualified teachers. </p>
<p>The goal of integration, outlined in Ethiopia’s <a href="https://reliefweb.int/report/ethiopia/briefing-note-comprehensive-refugee-response-framework-crrf-ethiopia-july-2018">National Comprehensive Refugee Response Strategy</a>, was to improve and sustain the quality of education for refugees in hosting areas. Refugee camp schools would get the same government grants as national schools and have more qualified teachers. Integration would also bring additional development assistance into Ethiopia’s education sector from the World Bank’s <a href="https://www.worldbank.org/en/news/factsheet/2022/10/28/10-things-to-know-about-the-window-for-host-communities-and-refugees">special financing window</a> for host communities and refugees. </p>
<p>The new system was expected to improve teaching, learning and financial support for refugee schools. It would also bring them into the Ethiopian national system. </p>
<p>In <a href="https://academic.oup.com/jrs/advance-article-abstract/doi/10.1093/jrs/fead001/7069231?redirectedFrom=fulltext">our research</a>, from late 2018 through early 2022, we examined the role of domestic governance and interests in shaping the refugee education reforms. We reviewed archival and emerging policy documents to understand the background and to track progress. We also conducted more than 40 interviews with government officials from the refugee agency, education officials at the regional and national level, and the finance ministry. Additionally, we interviewed representatives of humanitarian and development organisations involved in the design or implementation of the reforms.</p>
<p>We found that the implementation had become mired in turf wars between the national refugee agency and the education ministry. The expected benefits were largely unrealised, most certainly for the school-going refugee children. </p>
<p>The policy lesson here is that bureaucratic structures and interests can make or break well-meaning reforms. The actors involved may enable reforms when they stand to benefit directly. But they can also stand in the way when they feel threatened.</p>
<h2>What we found</h2>
<p>We conducted most our interviews in 2019, which was the most active period of reform development. COVID-19 and the conflict in Tigray slowed progress towards refugee integration. But the overall goals had already been narrowed.</p>
<p>The education ministry was going to assume full responsibility for refugee education. Instead, it was left to manage only certain academic components. Its role was limited to periodic school inspection (sometimes barred by the refugee agency), supply of textbooks and teacher guides, administering national examinations, and publishing statistics. </p>
<p>The refugee agency kept control over the management and financing of refugee education. It controlled the education funds from humanitarian partners, the management of teachers, access to schools in the camps and oversight of education in camps.</p>
<p>The <a href="https://www.developmentaid.org/organizations/view/176190/administration-for-refugee-returnee-affairs-arra">refugee agency</a> has historically provided refugee services in a camp-based system under different names since the 1960s. As a semi-autonomous entity since 1988, it managed funding from humanitarian actors <a href="https://cdn.odi.org/media/documents/Refugee_and_host_communities_in_Ethiopia_20182019_integrated_national_study.pdf#page=16">without oversight</a> from the central government. </p>
<p>In our interviews, officials from the refugee agency described the additional funding available through the <a href="https://documents1.worldbank.org/curated/en/621921621908287797/pdf/Ethiopia-General-Education-Quality-Improvement-Program-for-Equity-for-Refugee-Integration-Additional-Financing.pdf">World Bank</a> as an opportunity to grow the agency’s own resource base and to reduce its reliance on the UN High Commissioner for Refugees. It expected to get greater power and jurisdiction from integration. This vision was at odds with how donor partners and national government actors saw integrated service provision. </p>
<p>The central government decided to shift responsibility for refugee education to the <a href="https://documents1.worldbank.org/curated/en/621921621908287797/pdf/Ethiopia-General-Education-Quality-Improvement-Program-for-Equity-for-Refugee-Integration-Additional-Financing.pdf#page=35">ministry of education</a>. This included the large budget item of the salaries of teachers working in schools in refugee camps. Resources that previously flowed through the agency were to be managed by the finance ministry. </p>
<p>Territorial battles ensued. The refugee agency refused to allow camp schools to establish national bank accounts to receive the same per pupil grants as national schools. That step would have given camp schools more to spend on teaching, learning and the needs of students. But it would shift resources away from the refugee agency. The agency’s resources would be monitored by the finance ministry for the first time. </p>
<p>A loss of autonomy and resources challenged the interests of an agency fighting to hold on to power. </p>
<h2>The compromise</h2>
<p>In interviews, education officials and donor partners described efforts to come to an agreement with the refugee agency over roles and responsibilities. But the agency repeatedly stalled negotiations. We established through interviews and observation that refugee agency actors resisted change by barring some government officials and donor partners from accessing refugee camps, avoiding central government forums, and blocking camp-based schools from opening bank accounts to receive school grants.</p>
<p>A final memorandum was signed in April 2019. In this document, earlier proposals to integrate the camp-based primary education system were replaced with a vague promise to “harmonise” it with the national system. The choice to use the term “harmonise” instead of “integrate” allows separate systems to continue and allows the refugee agency to hold on to much of its power. </p>
<p>The agency maintained jurisdiction over many aspects of refugee education and continued to run education programmes in camps. Refugee children largely remained in <a href="https://documents1.worldbank.org/curated/en/988591562865883889/pdf/Education-for-Resilience-Exploring-the-experience-of-refugee-students-in-three-communities-in-Ethiopia.pdf#page=8">overcrowded</a> primary schools. Such institutions are <a href="https://documents1.worldbank.org/curated/en/988591562865883889/pdf/Education-for-Resilience-Exploring-the-experience-of-refugee-students-in-three-communities-in-Ethiopia.pdf#page=9">poorly provided</a> with textbooks, libraries, science laboratories and sanitary facilities, and they keep refugees in separate parallel systems. </p>
<p>The refugee agency succeeded in narrowing the scope of integration goals largely because the central government didn’t have hierarchical authority to force it to comply with reforms. Changing this formal governance arrangement would be costly, and the central government has limited interest in doing it to achieve refugee integration. </p>
<p>It’s been four years since the memorandum was signed. Progress towards integration at the primary level remains <a href="https://reliefweb.int/report/ethiopia/crisis-sensitive-educational-planning-refugees-and-host-communities-lessons-ethiopia">slow</a>. The parallel system remains largely intact.</p><img src="https://counter.theconversation.com/content/202548/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Ethiopia’s unmet refugee education reforms highlight the ways in which bureaucratic structures and interests can shape policy.Shelby Carvalho, Doctoral Candidate; Faculty Instructor, Harvard UniversityAlebachew Kemisso Haybano, Assistant Professor and a faculty in the Center for Comparative Education and Policy Studies, Addis Ababa UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2029002023-03-30T12:27:44Z2023-03-30T12:27:44ZCan this former CEO fix the World Bank and solve the world’s climate finance and debt crises as the institution’s next president?<figure><img src="https://images.theconversation.com/files/518289/original/file-20230329-28-7q3t3y.jpg?ixlib=rb-1.1.0&rect=0%2C21%2C4848%2C3193&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Ajay Banga is expected to become the next World Bank president.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/candidate-to-head-the-world-bank-ajay-banga-gestures-as-he-news-photo/1247854109">Issouf Sanogo/AFP via Getty Images</a></span></figcaption></figure><p>Over the past two years, a drumbeat of calls for reforming the World Bank has pushed its way onto the front pages of major newspapers and the agenda of heads of state.</p>
<p>Many low- and middle-income countries – the population the World Bank is tasked with helping – are falling deeper into debt and facing growing costs as the impacts of climate change increase in severity. A chorus of critics accuse the World Bank of <a href="https://www.bmz.de/en/news/press-releases/schulze-world-bank-annual-meetings-2022-125264">failing to evolve</a> to <a href="https://home.treasury.gov/news/press-releases/jy1258">meet the crises</a>.</p>
<p>The job of leading that reform now falls to <a href="https://www.washingtonpost.com/climate-environment/2023/02/23/biden-world-bank-nomination/">Ajay Banga</a>, an Indian American businessman and former CEO of Mastercard who was nominated by President Joe Biden to replace resigning World Bank President <a href="https://www.nytimes.com/2023/02/15/climate/david-malpass-world-bank.html">David Malpass</a>. </p>
<p>Banga, <a href="https://www.worldbank.org/en/news/press-release/2023/03/30/closing-of-nominations-for-world-bank-group-president">the only candidate</a> for the job, <a href="https://www.worldbank.org/en/news/press-release/2023/05/03/ajay-banga-selected-14th-president-of-the-world-bank">was confirmed</a> by the World Bank’s <a href="https://www.worldbank.org/en/about/leadership/directors">executive directors</a> on May 3, 2023. His five-year term as president begins on June 2. </p>
<figure class="align-center ">
<img alt="Ajay Banga, wearing a traditional Sikh turban and business suit, gestures as he speaks in front of a photo of workers picking vegetables." src="https://images.theconversation.com/files/518305/original/file-20230329-16-80inab.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/518305/original/file-20230329-16-80inab.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/518305/original/file-20230329-16-80inab.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/518305/original/file-20230329-16-80inab.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/518305/original/file-20230329-16-80inab.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/518305/original/file-20230329-16-80inab.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/518305/original/file-20230329-16-80inab.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Ajay Banga is a former Mastercard CEO, past chair of the International Chamber of Commerce and an American. The U.S. is the largest World Bank shareholder, and the institution’s president has historically been American.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/candidate-to-head-the-world-bank-ajay-banga-speaks-during-news-photo/1247898595">Tony Karumba/AFP via Getty Images</a></span>
</figcaption>
</figure>
<p>There is no shortage of advice for what Banga and the World Bank need to do.</p>
<p>The <a href="https://www.cfr.org/backgrounder/what-does-g20-do">G-20</a> recently <a href="https://www.dt.mef.gov.it/en/attivita_istituzionali/rapporti_finanziari_internazionali/banche_sviluppo/revisione_indipendente/">issued a report</a> urging the World Bank and the other multilateral development banks to loosen their lending restrictions to get more money flowing to countries in need. A commission led by economists <a href="https://www.lse.ac.uk/granthaminstitute/publication/finance-for-climate-action-scaling-up-investment-for-climate-and-development/">Nicholas Stern and Vera Songwe</a> called for a rapid, sustained investment push that prioritizes transitioning to cleaner energy, achieving the <a href="https://sdgs.un.org/goals">U.N. sustainable development goals</a> and meeting the needs of increasingly vulnerable countries. </p>
<p>African ministers of finance will soon come out with their own “to do” list for the World Bank, and India’s minister of finance just pulled together <a href="https://www.devdiscourse.com/article/business/2368216-india-has-been-talking-about-how-multilateral-institutions-need-reform-sitharaman">an expert group</a> to consider World Bank reform.</p>
<p>Banga will walk into the job with these and many other to-do lists. Yet he will inherit a corporate culture that makes the World Bank Group <a href="https://documents1.worldbank.org/curated/en/099845101112322078/pdf/SECBOS0f51975e0e809b7605d7b690ebd20.pdf">too inwardly focused</a> and <a href="https://www.csis.org/analysis/us-treasury-secretary-janet-l-yellen-addresses-evolution-development-finance-csis">too slow to respond</a>.</p>
<p>I have <a href="https://fletcher.tufts.edu/people/staff/rachel-kyte">worked for the World Bank Group</a> and with it from the outside. I see four key roles – four “C’s” – that Banga will need to master from the outset. From his <a href="https://www.washingtonpost.com/climate-environment/2023/02/23/biden-world-bank-nomination/">track record</a> and his reputation for deep thoughtfulness, I am confident that he can.</p>
<h2>1) Act as a CEO and get the entire World Bank Group house in order.</h2>
<p>The World Bank Group <a href="https://www.worldbank.org/en/who-we-are">is a conglomerate</a> with four balance sheets, three cultures and four executive boards, plus a dispute resolution arm.</p>
<p>Lending to low- and middle-income countries is just part of its role. The World Bank Group also <a href="https://www.worldbank.org/en/who-we-are/ibrd">provides technical assistance</a> across all areas of economic development and invests in and provides <a href="https://www.miga.org/">risk insurance</a> to <a href="https://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/about+ifc_new">encourage companies to invest</a> in projects and places they might otherwise consider too risky. Its ability to mobilize private-sector finance and stretch every dollar is crucial for meeting the world’s development and climate adaptation and mitigation needs.</p>
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<figcaption><span class="caption">How the World Bank operates.</span></figcaption>
</figure>
<p>Banga will need to set clear goals for each part of the World Bank Group and get them working more effectively to help the world achieve its goals.</p>
<h2>2) Assume the mantle of collaborator in chief to take on the debt and climate crises.</h2>
<p>Many of the World Bank Group’s <a href="https://www.worldbank.org/en/about/annual-report/our-work">client countries</a> are facing both mounting debt and rising costs from climate change. </p>
<p>The high <a href="https://developmentfinance.un.org/fsdr2022">cost of borrowing</a> can hamper developing countries’ ability to invest in needed infrastructure to grow and protect their economies, and they fear being locked out of global trade as the United States’ green subsidies in the <a href="https://theconversation.com/big-new-incentives-for-clean-energy-arent-enough-the-inflation-reduction-act-was-just-the-first-step-now-the-hard-work-begins-188693">Inflation Reduction Act</a> and Europe’s border carbon tax may make it <a href="https://theconversation.com/as-us-eu-trade-tensions-rise-conflicting-carbon-tariffs-could-undermine-climate-efforts-198072">more difficult for them to compete</a>.</p>
<p>The <a href="https://gisbarbados.gov.bb/download/the-2022-barbados-agenda/">solutions</a> to cascading problems like these cannot be managed by one institution. However, the current multilateral development bank system – the World Bank Group and the <a href="https://www.cgdev.org/publication/regional-development-banks-abcs-ifis-brief">regional development banks</a> – is disjointed at best <a href="https://www.adb.org/sites/default/files/publication/156240/adbi-wp385.pdf">and competitive</a> at worst.</p>
<p><iframe id="xbAni" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/xbAni/7/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>In the past, the leaders of the development banks, the International Monetary Fund and the World Trade Organization have cooperated, more or less, depending on crises and personalities, and can move fast when they need to.</p>
<p>During the global financial crisis of 2008 and 2009, for example, the then-heads of the World Bank and the WTO hurried to <a href="https://www.wto.org/english/res_e/reser_e/ersd200916_e.pdf">develop trade finance facilities</a> to support banks in developing countries as capital fled to the U.S. and Europe. It took intense diplomacy to push wealthy countries and institutions to get money out the door <a href="https://www.reuters.com/article/financial-trade/update-2-global-trade-finance-gap-widens-as-recession-bites-idUSLI4771620090318">to shore up businesses and trade</a>. Success was measured not in months but in days.</p>
<p>The new president of the World Bank will need to support more radical collaboration among development financial institutions, including pooling capital and talent, to help respond quickly to countries’ needs.</p>
<p>It won’t be easy. Institutional rivalries run deep. But with <a href="https://www.reuters.com/business/us-expects-bidens-nominee-ajay-banga-be-elected-world-bank-chief-2023-03-29">budgets tight</a>, there is growing clarity that there is no choice – <a href="https://theconversation.com/how-putins-war-and-small-islands-are-accelerating-the-global-shift-to-clean-energy-and-what-to-watch-for-in-2023-196925">the capital that is already in the system</a> is the closest at hand and can be deployed to better effect if the institutions are willing to adapt.</p>
<h2>3) Be a convener.</h2>
<p>Overhauling how international finance works will require everyone to be on board – development banks, central banks, regulators, investment banks, pension funds, insurance companies and private equity.</p>
<p>Banga and <a href="https://www.imf.org/en/About">International Monetary Fund</a> Managing Director <a href="https://commission.europa.eu/persons/kristalina-georgieva_en">Kristalina Georgieva</a> can settle institutional differences and present a coordinated face to private investors and the <a href="https://clubdeparis.org/en/communications/page/permanent-members">major lending countries</a>, including China – which has emerged as <a href="https://www.devex.com/news/china-is-owed-37-of-poor-countries-debt-payments-in-2022-world-bank-102463">the biggest holder</a> of developing country debt – to speed up support to struggling countries.</p>
<p>On other issues, such as <a href="https://www.iucn.org/our-work/nature-based-solutions">nature-based solutions to climate change</a>, building resilience and economic inclusion, the World Bank Group can bring its significant resources and skills, including data analysis, to global conversations that it has been painfully absent from for the past four years.</p>
<h2>4) Be a champion for the most vulnerable.</h2>
<p>The world’s most vulnerable people are the World Bank Group’s ultimate beneficiaries. For those living on the front line of biodiversity loss and climate impacts, such as extreme heat, drought and flooding, the current international financial system is proving inadequate.</p>
<p>The World Bank Group’s management incentives are still too oriented to lending approved by the board, not the outcomes of that lending, advice and assistance.</p>
<p>Throughout its history, World Bank leaders have been able to make <a href="https://www.wto.org/english/res_e/reser_e/ersd200916_e.pdf">rapid changes</a> to better help vulnerable countries when they stay close to the needs of their ultimate beneficiaries and the goals that the world has set.</p>
<p>The next president faces turbulent times. Banga’s careful listening on his campaign tour signals that he <a href="https://www.ft.com/content/7f1046cc-10fe-4a29-a92b-f0955761477b">understands the complexity</a>. It’s an extraordinary moment in the <a href="https://www.cfr.org/backgrounder/world-bank-groups-role-global-development">history of the institution</a>, with sky-high expectations of what one leader needs to do.</p>
<p><em>This article, originally published March 30, 2023, has been updated with Banga’s approval to become World Bank president.</em></p><img src="https://counter.theconversation.com/content/202900/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rachel Kyte served in several roles at the World Bank Group from 2000 to 2015.</span></em></p>It’s a crucial time for the World Bank, with growing calls for reform and sky-high expectations of what one leader needs to do. A former World Bank official explains the challenges ahead.Rachel Kyte, Dean of the Fletcher School, Tufts UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2022702023-03-24T09:35:26Z2023-03-24T09:35:26ZThe World Bank used to cause untold harm – but 30 years ago it started reforming. What went right<figure><img src="https://images.theconversation.com/files/516958/original/file-20230322-1702-1ribfs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Photo by Celal Gunes/Anadolu Agency via Getty Images</span></span></figcaption></figure><p>Development projects can have profound impacts on their societies. There are many benefits that flow from building new roads and power plants, and from modernising agricultural practices. But they can also have permanent negative consequences. </p>
<p>For example, communities may be involuntarily relocated to make way for roads or power plants. These projects can change the way natural resources are used in a particular area, making it difficult or impossible for communities to continue their traditional agricultural practices. The job opportunities that they create can challenge traditional values and ways of living.</p>
<p>Historically, many of these projects have been owned or sponsored by governments, eager to bring the benefits of modernisation to their citizens. They have often been funded by multilateral institutions like the World Bank, <a href="https://www.worldbank.org/en/archive/history/exhibits/Bretton-Woods-and-the-Birth-of-the-World-Bank">which was established </a> in 1944 to fund the reconstruction and development of its member states. </p>
<p>These institutions were not unaware of the environmental and social impacts of the projects they funded. However, they maintained that each state had to decide for itself how it wished to manage these impacts. They would argue that they were merely the funders, and so should defer to the government on how to manage them. It would be an affront to the state’s sovereignty for them to interfere with the government’s decisions on these aspects of the project.</p>
<p>The World Bank’s confidence in its ability to avoid responsibility for its project related decisions and actions was bolstered by the fact that it was <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2963050">immune from being sued in any national court</a>.</p>
<p>The result was that the bank supported some projects that were environmentally and socially damaging. As a result, during the 1980s the World Bank was <a href="https://brucemrich.com/book/mortgaging-the-earth-the-world-bank-environmental-impoverishment-and-the-crisis-of-development">the target of sustained protests by affected communities and their allies</a> around the world.</p>
<p>To its credit, 30 years ago the bank, following an international campaign in which this author participated, recognised that its position was untenable. In <a href="https://www.inspectionpanel.org/sites/ip-ms8.extcc.com/files/documents/Resolution1993.pdf">1993 it established</a> the world’s first citizen driven independent accountability mechanism, the <a href="https://www.inspectionpanel.org/">World Bank Inspection Panel</a>.</p>
<p>This article argues that the panel’s 30th anniversary is a moment to celebrate its accomplishments. The panel has significant limitations. Nevertheless, its impact on development and the international development financing institutions has been profound. </p>
<h2>Accomplishments</h2>
<p>The three-member panel is independent of the World Bank’s management. It receives and investigates complaints from communities who allege that they have been harmed or threatened with harm because of the World Bank’s failure to comply with its own policies and procedures in funding a particular project. In other words, the panel’s focus is exclusively on the conduct and decisions of the Bank’s staff and management. </p>
<p>It sends its findings to the bank’s board. In cases of noncompliance, the bank’s management is expected to submit an action plan to the board that explains how it will correct the noncompliance and its consequences. Both the report and the action plan are made public.</p>
<p>Since it was established, the panel’s investigations have resulted in some relief for affected communities. For example, 70,000 people, previously ignored by the World Bank, received compensation for their losses <a href="https://www.inspectionpanel.org/panel-cases/jamuna-new-multipurpose-bridge-project">in a bridge project in Bangladesh</a>. In the <a href="https://www.inspectionpanel.org/panel-cases/transitional-support-economic-recovery-credit-and-emergency-economic-and-social">Democratic Republic of Congo</a>, a forestry project was revised to provide greater protection to indigenous communities who had not been adequately consulted about the project.</p>
<p>The panel has also succeeded in establishing the principle that international financial organisations must be accountable for their own actions to the communities whose lives are affected by the projects and policies they finance.</p>
<p>Since its establishment, over 25 multilateral and national development banks and institutions <a href="https://accountabilityconsole.com/iams/">have established</a> their own independent accountability mechanisms. In total, these mechanisms have received <a href="https://accountabilityconsole.com/complaints/">1,634 complaints</a>, of which about 330 have been from 27 countries in Africa. Forty-five of the African cases have resulted in findings on compliance or noncompliance. </p>
<p>All findings of noncompliance have led to management action plans intended to correct the noncompliance.</p>
<p>The reports of these mechanisms are used both by their own institutions to improve their performance in development projects and to reduce the risk that they repeat old mistakes. They can also help ensure that they are held accountable when they do repeat these mistakes.</p>
<p>Many of these mechanisms now offer dispute resolution services in addition to compliance reviews. Many of them now also publish reports documenting the lessons they have learned about specific aspects of development projects.</p>
<p>It is important to note that many of the issues that arise in these cases also arise in private sector projects. This means that the reports provide guidance and help develop good practice standards for all development projects. They are also used to develop best practice in regard to the human rights and environmental responsibilities of business.</p>
<h2>Challenges</h2>
<p>To be sure, independent accountability mechanisms face significant challenges. </p>
<p>The first is that bringing cases to the mechanisms is not simple. Many of the successful cases have required communities to obtain the assistance of technical experts. This means that the cases that are brought come from communities that have access to sophisticated NGOs and advisers rather than because they are the most urgent cases.</p>
<p>Second, they cannot make binding decisions or determine that the communities should be given a remedy. There have been cases in which those who have been harmed by the action of the banks have been compensated. But this is not the norm. In fact, there is only one case in Africa in which a panel investigation led to victims receiving monetary compensation. The panel’s report <a href="https://www.inspectionpanel.org/panel-cases/transport-sector-development-project-additional-financing">in a case in Uganda</a> resulted in the World Bank developing a new policy on gender-based violence and establishing a trust fund to compensate, and support the girls and women who were the victims of this violence. </p>
<p>Designing and funding remedies that can be used in all similarly situated cases is politically and technically complicated. But it is not acceptable that those who have been harmed by the Bank’s own failures do not receive an effective remedy that compensates them for their loss.</p>
<p>Third, the bravery required to bring complaints to these mechanisms must be noted. They require the complainants to go to an international forum in opposition to their own governments or powerful interests in their own countries who support the projects the banks are funding. It is therefore inevitable that in some cases, the supporters of the project will retaliate against the complainants. This suggests that the mechanisms and the banks have a responsibility to take action to protect the complainants. </p>
<p>To their credit, the banks and the mechanisms have foreseen this problem and do allow for confidential complaints. But the procedures that seek to protect the complainants from reprisals have not always been fully effective.</p>
<p>It is now standard practice for multilateral financing institutions like the World Bank to have an independent citizen driven accountability mechanism that focuses exclusively on the responsibilities of the institution. The only exception to this general rule is the International Monetary Fund.</p>
<p>The mechanisms have also demonstrated that they can evolve and adapt to new challenges. While their limitations have also become clear, we should celebrate the Inspection Panel’s <a href="https://www.inspectionpanel.org/node/4966">30th anniversary</a>.</p><img src="https://counter.theconversation.com/content/202270/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Danny Bradlow receives funding from the Open Society Initiative for Southern Africa (OSISA) for an unrelated project. He is a Compliance Officer in the Social and Environmental Compliance Unit (SECU), the independent accountability mechanism for UNDP. He has also conducted invesitgations for the independent accountability mechanisms at the African Development Bank and the European Bank for Reconstruction and Development and has been a consultant to the World Bank on independent accountability issues.</span></em></p>Thirty years ago the World Bank recognised that its position was untenable. It put in place mechanisms to make the bank more accountable to ordinary people.Danny Bradlow, Professor/Senior Research Fellow, Centre for Advancement of Scholarship, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1987962023-02-17T11:59:30Z2023-02-17T11:59:30ZAfrica’s agribusiness sector should drive the continent’s economic development: Five reasons why<figure><img src="https://images.theconversation.com/files/508061/original/file-20230203-24-k9czvf.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Agriculture is still largely manual in a several parts of the continent.</span> <span class="attribution"><span class="source">Patrick Sheperd/CIFOR</span></span></figcaption></figure><p>Africa’s agriculture sector <a href="https://www.fao.org/3/bo092e/bo092e.pdf">accounts</a> for about 35% of the continent’s gross domestic product, and provides the <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/16624/769900WP0SDS0A00Box374393B00PUBLIC0.pdf">livelihood of more than 50%</a> of the continent’s population. These shares are more than double those of the world average and much higher than those of any other emerging region. </p>
<p>Dependence on agriculture has declined in other emerging regions. For example in Southeast Asia, <a href="https://www.imf.org/-/media/Files/Publications/Books/2022/English/SAPTRG.ashx">agriculture’s share of GDP</a> dropped from 30-35% in 1970 to 10-15% in 2019. In Africa it has remained unchanged for decades, according to <a href="https://data.worldbank.org/indicator/NV.AGR.TOTL.ZS">World Bank data</a>.
At the same time, Africa’s agriculture sector is the world’s least developed, with the lowest levels of labour and land productivity. Value added per worker in agriculture is about a quarter of the world’s average and less than a fifth of China’s. </p>
<p>The sector is dominated by smallholders, producing mainly for their own consumption. They operate well below minimum efficient scale and scope. <a href="https://www.aeaweb.org/articles?id=10.1257/jep.36.1.33">Average farm size</a> in Sub-Saharan Africa is 1.3 hectares, compared with 22 hectares in Central America, 51 hectares in South America and 186 hectares in North America, according to International Fund for Agricultural Development <a href="https://www.aeaweb.org/articles?id=10.1257/jep.36.1.33">data</a>. </p>
<p>Average farm machinery use in Africa is the <a href="https://www.fao.org/3/i0219e/i0219e00.pdf">lowest in the world</a> and has increased only very slightly since the 1960s.</p>
<p>Against this backdrop, the development of the agribusiness sector holds enormous potential to foster Africa’s economic development. For this to happen, the productivity of Africa’s agribusiness must rise. </p>
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Read more:
<a href="https://theconversation.com/science-has-the-power-to-boost-farming-in-africa-but-a-lot-has-to-change-78489">Science has the power to boost farming in Africa. But a lot has to change</a>
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<p>My <a href="https://rdcu.be/c07eD">research</a> on Africa’s economic prospects has led me to believe that agribusiness offers African countries the most promising path for development and a shift towards higher value-added activities. This is the first step towards economic development. </p>
<p>There are five reasons why agribusiness should drive Africa’s economic development. </p>
<h2>Why agriculture should be the focus</h2>
<p>Firstly, <a href="https://www.britannica.com/place/Africa">Africa</a> has abundant land. Agribusiness might be its foremost source of comparative advantage. Africa’s <a href="https://www.scientificamerican.com/article/africa-dwarfs-china-europe-and-the-u-s/">land size</a> is larger than China, India, the US and most of Europe combined. More than half is arable land, suitable for crop growing. The weather in different parts of Africa provides perfect conditions for the growth of various crops. </p>
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<a href="https://theconversation.com/africas-youth-and-abundant-arable-land-are-a-potential-winning-combination-48855">Africa's youth and abundant arable land are a potential winning combination</a>
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<p>Secondly, agriculture has huge potential for adding value, and Africa has comparative advantages in this sector. Also, most African countries export commodities and raw materials and import finished goods. Ghana, for example, exports cocoa and imports high value-added chocolate; Kenya exports tea leaves and imports expensive branded tea. Nigeria and Angola have some of the world’s largest oil resources, but lack refining capacity and depend on imports for their energy consumption. </p>
<p>Africa’s dependence on imports for its consumption is the <a href="https://www.imf.org/en/Blogs/Articles/2022/09/26/africa-food-prices-are-soaring-amid-high-import-reliance">highest in the world</a> as a share of its GDP. The development of agribusiness is fundamental for Africa’s ability to ensure food security. </p>
<p>Upgrading to activities that add more value in agriculture often requires less advanced technology than in manufacturing industries. Compare the technology of producing spare parts for the automobile industry with that needed to produce tea bags. </p>
<p>Thirdly, agribusiness is attractive because there are ready markets for its output. Africa has vast local markets for food. Agribusiness producers can sell much of their output in local markets. This enables local farming operations to grow and become more sophisticated in a less competitive environment before expanding internationally. Regional integration via the <a href="https://au.int/en/treaties/agreement-establishing-african-continental-free-trade-area">African Continental Free Trade Agreement</a> greatly increases these opportunities.</p>
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Read more:
<a href="https://theconversation.com/kenya-and-south-africa-are-working-to-address-trade-barriers-where-to-start-194310">Kenya and South Africa are working to address trade barriers: where to start</a>
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<p>In export markets, Africa’s agribusiness products are likely to benefit from the continent’s reputation for high-quality natural resources. Ghana’s cocoa is considered as some of the world’s best, as are Kenya’s tea and coffee. </p>
<p>Fourth, African countries need to develop their agricultural sector also because they are unlikely to follow the traditional development paths. Many other emerging markets developed through industrialisation and export-driven manufacturing. Growth led by manufacturing needs infrastructure; Africa’s infrastructure is poor. This growth model is also threatened by automation and robotics that replace labour, and by growing protectionism in the world’s major markets. </p>
<p>With a few exceptions, such as Ethiopia and Morocco, most African countries have failed to establish a significant manufacturing sector, despite political efforts. A <a href="https://www.tandfonline.com/doi/full/10.1080/07900627.2020.1739512">study</a> showed that most African people who leave agriculture turn to low-skill, low-productivity services rather than to manufacturing. In 2022, manufacturing employment accounted for slightly over 10% of sub-Saharan Africa employment, the smallest share of any emerging region according to <a href="https://data.worldbank.org/indicator/SL.IND.EMPL.ZS">World Bank data</a>. Nor did the flow of low-wage manufacturing jobs out of China trigger the development of Africa’s manufacturing sector. </p>
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Read more:
<a href="https://theconversation.com/chinese-imports-could-undermine-ethiopian-manufacturing-leaving-women-workers-worst-off-195730">Chinese imports could undermine Ethiopian manufacturing - leaving women workers worst off</a>
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<p>Yet another reason to pay more attention to Africa’s agribusiness is that it is at the forefront of environmental challenges and global warming. Drastic changes in rainfall and weather patterns change what can grow where, and increase the importance of efficiency of land use. It is important to understand the consequences of these changes so that they can be managed effectively. </p>
<p>Africa’s agribusiness must develop in order for the continent to develop economically. Its strengths and weaknesses make agribusiness the most significant sector to drive its overall economic development. Policy makers, educators and researchers should take note. Done right, the economic gains of developing Africa’s agribusiness will be enormous.</p><img src="https://counter.theconversation.com/content/198796/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lilac Nachum does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Average farm machinery use in Africa is among the lowest in the world.Lilac Nachum, Visiting Professor at Strathmore Business School ;Professor of International Business, City University New York, City University of New YorkLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1979332023-02-14T13:43:23Z2023-02-14T13:43:23ZAl-Shabaab attacks in Somalia affect communities as far as 900km away – aid agencies need to take note<figure><img src="https://images.theconversation.com/files/506619/original/file-20230126-12-jm23rr.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A soldier stands guard at a makeshift camp in Somalia's Baidoa, a southwestern town frequently attacked by Al-Shabaab militants.
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Policymakers tend to assume that the effects of conflict are felt only where violence occurs. As a result, humanitarian aid, protection efforts or asylum policies largely focus on conflict-hit areas. </p>
<p>The <a href="https://www.who.int/">World Health Organisation</a>, for instance, provides emergency medical supplies in areas directly affected by violence. The <a href="https://www.unhcr.org/en-us/6328ce824.pdf">UN Refugee Agency</a> ties protection status to residing in areas hit by conflict. </p>
<p>Our <a href="https://docs.iza.org/dp15761.pdf">recent study</a> finds, however, that conflict negatively affects food security, nutrition, health and education outcomes of families living hundreds of kilometres away from the epicentre of violence. </p>
<p>This underscores the need to broaden policy responses to conflict and consider its ripple effects. </p>
<p>Our research in Somalia examined how the impact of violent conflict spread to distant locations. We looked specifically at conflict that affected Somalia’s food logistics network, which gets food to far-flung markets.</p>
<p>We focused on Somalia because of its high number of terror incidents arising from the government’s war with <a href="https://theconversation.com/what-drives-al-shabaab-in-somalia-foreign-forces-out-sharia-law-in-and-overthrow-the-government-191366">Al-Shabaab</a>, a militant group that has terrorised the country’s southern region for about 15 years.</p>
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<a href="https://theconversation.com/al-shabaab-is-just-a-symptom-of-somalias-tragedy-the-causes-are-still-in-place-197554">Al-Shabaab is just a symptom of Somalia’s tragedy – the causes are still in place</a>
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<p>We used data from the <a href="https://www.fao.org/home/en">Food and Agricultural Organisation</a>, which tracks food prices. Our results show that terrorist attacks that hit food transportation networks increased food prices in markets located up to 900km away (a 17-hour drive) from where the violence occurs. </p>
<p>In response to these terrorist attacks and resulting price increases, households in far-flung areas adjusted their eating patterns. They also reduced their non-food spending, primarily on health and education. </p>
<p>Yet, the responses to violent incidents by donor and aid agencies, as well as domestic policymakers, hardly take such ripple effects into consideration. </p>
<h2>Tracking conflict</h2>
<p>To track these ripple effects, we focused on the distribution of maize, a staple food eaten throughout Somalia. We got the geo-coordinates of maize growing areas, tracked how maize was transported by road to markets, and mapped the Al-Shabaab terrorist attacks that occurred along these transport routes. </p>
<p>This helped us map the impact of conflict on maize prices and the ripple effects on household welfare. </p>
<p><a href="https://fews.net/">The Famine Early Warning Systems Network</a> provides maps showing the exact routes taken by Somali drivers who are transporting maize. We drew a corridor of five kilometres around these roads and counted the number of violent incidents occurring each month between 2001 and 2018. The <a href="https://www.fao.org/home/en">Food and Agricultural Organisation</a> provided us with monthly maize price information for 10 markets across Somalia. </p>
<p>We combined this data with <a href="https://microdata.worldbank.org/index.php/catalog/3181">World Bank surveys</a> that recorded food consumption, eating patterns, and the health and education of Somali families. </p>
<h2>Our findings</h2>
<p>We <a href="https://docs.iza.org/dp15761.pdf">found that</a> conflict along transportation roads increased maize prices substantially, even in markets located hundreds of kilometres away. This finding is in line with studies on the impact of conflict on supply chain networks elsewhere in the world, such as in the <a href="https://theconversation.com/russia-ukraine-crisis-highlights-africas-need-to-diversify-its-wheat-sources-181173">Russia-Ukraine war</a>.</p>
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Read more:
<a href="https://theconversation.com/russia-ukraine-conflict-is-driving-up-wheat-prices-this-could-fuel-instability-in-sudan-180878">Russia-Ukraine conflict is driving up wheat prices: this could fuel instability in Sudan</a>
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<p>During the height of the Al-Shabaab insurgency in Somalia (between 2016 and 2018), violent incidents occurring very close to transportation roads alone increased maize prices by around 11% over sustained periods of time.</p>
<p>During these times, we found violence en route had around half as large an impact on maize prices as rainfall, which the World Bank has highlighted as one of the most important <a href="https://openknowledge.worldbank.org/handle/10986/27379">determinants of food prices</a>. </p>
<p>We also scrutinised satellite images of nightlights emitted on transportation roads. We found that conflict along transit roads dimmed the light emitted on these roads several hundreds of kilometres away. This decrease in road traffic underscores a reduction in the quantity of maize transported along roads from growing areas to markets.</p>
<p>Looking at family welfare, we found that households reported having to adjust their eating patterns due to food price shocks. Families substituted the more expensive maize with sorghum. Still, we found that lower food security decreased the nourishment available to households.</p>
<p>Considering child outcomes, we found that far-away conflict along transit routes increased the incidence of diseases, such as gastroenteritis, malaria and typhoid. This is in line with <a href="https://gdc.unicef.org/resource/relationship-between-childhood-malnutrition-infectious-diseases">well-known links</a> between malnutrition and infectious diseases. </p>
<p>Finally, we also found a decrease in the school enrolment of children. Violent incidents along maize transportation routes reduced the probability of children joining primary and middle school hundreds of kilometres away. This is likely to be related to the economic effects of food price rises. This makes schooling less affordable and increases the incentives for child labour. </p>
<h2>Way forward</h2>
<p><a href="https://docs.iza.org/dp15761.pdf">Our study</a> has wide-ranging policy implications. </p>
<p>The ripple effects of violence have important welfare costs. The negative effects of conflict on human capital – particularly nutrition, health and education – are larger than commonly assumed. We estimate that these ripples add around 30% to the cost of locally occurring conflict. </p>
<p>Our findings also have important implications for the regional targeting of policies. </p>
<p>Humanitarian interventions or refugee policies most commonly focus on those locations where conflict occurs. The World Food Programme, for instance, provides nutritional assistance in areas around Mogadishu, in the south-west of Somalia where most conflict is concentrated. </p>
<p>Similarly, when evaluating asylum eligibility, the <a href="https://www.unhcr.org/en-us/6328ce824.pdf">UN Refugee Agency</a> highlights the south-west of Somalia as the area where individuals are at risk of serious harm. </p>
<p>By contrast, our results provide evidence that individuals can be affected by conflict even if it occurs far away. For instance, the city of Galkayo (700km from Mogadishu) is part of the north-eastern Puntland state. It isn’t covered by either the World Food Programme or the UN’s refugee policies. Yet conflict in the south-west increases food prices, decreases food security and erodes human capital in Galkayo. </p>
<p>This long reach of violence highlights the need to consider extending humanitarian aid, protection efforts or asylum status eligibility to areas further away from conflict epicentres.</p><img src="https://counter.theconversation.com/content/197933/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The negative effects of conflict on human capital – particularly nutrition, health and education – are larger than commonly thought.Marco Alfano, Lecturer, Lancaster UniversityThomas Cornelissen, Professor of Economics, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1990102023-02-08T14:28:18Z2023-02-08T14:28:18ZKenya’s president wants taxes to replace foreign debt – seven ways to get there<figure><img src="https://images.theconversation.com/files/507825/original/file-20230202-21-1mdptm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There are fears that Kenya's debt has been funding mostly government salaries.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/kenyas-cabinet-secretary-for-national-treasury-henry-rotich-news-photo/974392922?phrase=national%20treasury%20kenya&adppopup=true">Yasuyoshi Chiba/AFP via Getty Images</a></span></figcaption></figure><p>In the run-up to Kenya’s 2022 polls, <a href="https://www.youtube.com/watch?v=THIygUIpS9w">economic issues</a>, particularly public debt and joblessness, took centre stage. The Kenya Kwanza team led by William Ruto suggested that Kenya had over-borrowed, a habit they pledged to stop. Ruto’s rivals <a href="https://www.businessdailyafrica.com/bd/economy/uhuru-defends-jubilee-s-sh6-7-trillion-debt-spree-3835802">defended</a> the debt, insisting investment in infrastructure would spur economic growth. </p>
<p>Kenya’s <a href="https://www.treasury.go.ke/wp-content/uploads/2023/02/Medium-Term-Debt-Management-Strategy-2023.pdf#page=24">nominal debt</a> stood at KSh9.14 trillion or US$74.1 billion by the end of December 2022. That accounted for 67% of the GDP. More than half of the debt, 51% (US$37.87 billion) was owed to foreign entities. A debt limit of no more than 64% of the national GDP is <a href="https://documents1.worldbank.org/curated/en/509771468337915456/pdf/WPS5391.pdf">recommended</a> for developing countries such as Kenya.</p>
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<a href="https://theconversation.com/kenya-has-breached-its-public-debt-ceiling-how-it-got-there-and-what-that-means-190006">Kenya has breached its public debt ceiling – how it got there and what that means</a>
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<p>Global institutions like the <a href="https://www.bloomberg.com/news/articles/2022-12-19/imf-approves-447-million-for-kenya-to-address-debt-reforms?leadSource=uverify%20wall">International Monetary Fund</a> and the World Bank are concerned about Kenya’s debt sustainability. </p>
<p>Aside from the sheer amount being borrowed, there are fears that the debt has been funding <a href="https://nation.africa/kenya/business/state-uses-sh162bn-loan-illegally-on-salaries-utilities-3950530">recurrent expenditure</a>, mostly government salaries. It’s true, though, that big projects like the <a href="https://theconversation.com/mombasa-port-how-kenyas-auditor-general-misread-chinas-standard-gauge-railway-contracts-182610">standard gauge railway</a> and the <a href="https://theconversation.com/nairobis-new-expressway-may-ease-traffic-woes-but-mostly-for-the-wealthy-170164">expressway</a> have been partly funded by debt.</p>
<p>Debt politics has further been fuelled by the <a href="https://www.lowyinstitute.org/the-interpreter/belt-road-colonialism-chinese-characteristics">narrative</a> that by saddling Africa with debt, China is able to call the shots on trade, investment and even geopolitical issues. </p>
<p>Ruto is now in power and seems determined to reduce public debt. The government still has to rely on domestic and <a href="https://www.reuters.com/world/africa/imf-approves-disbursement-44739-million-%20kenya-2022-12-20/">foreign</a> borrowing, but Ruto wants to reduce it. He intends to do that by <a href="https://www.africanews.com/2022/09/30/kenya-president-ruto-wants-to-reform-tax-system-to-reduce-inequality//">collecting more taxes</a> and using <a href="https://www.standardmedia.co.ke/business/article/2001460511/ruto-talks-tough-on-debt-eyes-pensioners-savings-to-fund-projects">national savings</a> to pay for what the country needs. </p>
<p>The Kenya Revenue Authority has been given new <a href="https://nation.africa/kenya/business/president-ruto-s-tax-targets-leave-kra-in-a-pot-4077264">revenue targets</a> – US$10 billion more to raise in one year, an almost 50% increase. It is expected to double current collections in five years to US$48 billion by 2027, an election year.</p>
<p>The targets seem too ambitious under the current socio-economic circumstances. In trying to achieve the target, the formal sector is likely to be the hardest hit as its revenues are public and hard to hide. Higher taxes could depress demand too, leading to lower tax revenues and job losses. </p>
<h2>What should be done</h2>
<p>But increased tax collections could benefit everyone if the taxes are put to good use. Here are seven ways Ruto’s government can raise tax collection and cut reliance on foreign debt:</p>
<ul>
<li><p><strong>Focus on economic growth</strong> – Tax is charged on income or profit. To meet the target, Ruto should focus on accelerating economic growth. That is how former president Mwai Kibaki – who raised GDP growth to 7% – managed to <a href="https://www.standardmedia.co.ke/business/article/2000049257/president-kibaki-s-economic-legacy">triple</a> tax revenues, from US$2 billion in 2002 to US$6 billion by 2011. </p>
<p>Of late, economic growth has been lower than expected, and is <a href="https://www.afdb.org/en/countries-east-africa-kenya/kenya-economic-outlook">projected</a> to slow from 5.9% in 2022 to 5.7% in 2023. </p>
<p>The economy grows when we invest or consume more. Ruto should make Kenya a more investment-friendly country by looking at business regulations and laws.
Higher taxes eat into investors’ profits and could discourage investment. Kenyan entrepreneurs should be able to start businesses without worrying about the taxman <a href="https://www.businessdailyafrica.com/bd/corporate/companies/kra-in-fresh-bid-to-shut-down-keroche-breweries-3885398">closing</a> their premises. </p>
<p>What encourages economic growth is offering quality goods and services that are globally competitive. The economy should reward innovators and those who go the extra mile. Providing services like roads, sewers, power and security will attract investors. Giving citizens confidence creates demand and economic growth. </p>
<p>Once the economy grows, tax revenue grows, whether it’s value added tax or income tax. So, before setting a tax revenue target, Kenya should start with an economic growth target like the 10% rate envisaged in Kibaki’s <a href="https://vision2030.go.ke/">Vision 2030</a>. </p></li>
<li><p><strong>Choose optimal tax rates</strong> – The government should pick tax rates that yield maximum tax revenue. <a href="https://economictimes.indiatimes.com/wealth/tax/here-is-everything-you-want-to-know-about-laffer-curve-and-tax/tomorrowmakersshow/51098997.cms">Theory</a> has it that high tax rates can produce lower tax revenues. High tax rates could lead to inflation as entrepreneurs load the extra charge onto prices. That could lead to lower demand for goods and services, and depress tax revenues.</p></li>
<li><p><strong>Share the burden</strong> – Have more people pay taxes. That includes the informal sector. If citizens can see how taxes are working for them, they will be <a href="https://theconversation.com/uganda-study-shows-text-messages-can-boost-tax-compliance-heres-what-worked-177522">encouraged</a> to pay. </p></li>
<li><p><strong>Eliminate tax exemptions</strong> – There is no need for tax exemptions for investors or firms just because they can lobby the government. Progressive tax rates (high rates for top earners and low ones for smaller incomes) can do all the magic. </p></li>
<li><p><strong>Address corruption</strong> – About a third of Kenya’s budget is lost through <a href="https://www.reuters.com/article/us-kenya-corruption-idUSKCN0WC1H8">corruption</a>, and former president Uhuru Kenyatta <a href="https://www.citizen.digital/news/president-kenyatta-says-over-ksh-2-billion-is-stolen-from-govt-daily-4563455">alluded</a> to this. </p></li>
<li><p><strong>Boost national savings</strong> – Higher savings would reduce interest rates on treasury bonds and bills. Since banks and other institutions would be awash with cash, the government would not need to raise rates to attract investment in government paper. Savings would make credit available to the private sector too, leading to lower interest rates and more borrowing, which is an economic stimulus. The national savings level for <a href="https://www.the-star.co.ke/business/kenya/2021-07-25-kenyans-saving-culture-poorest-in-east-africa--survey/">Kenya</a> is currently low. The government should craft a <a href="https://ifs.org.uk/articles/how-can-policymakers-raise-household-saving">policy</a> to help boost savings among households.</p></li>
<li><p><strong>Cede roles to philanthropy</strong> – Many services being provided by the government could be ceded to philanthropists. Examples include mission hospitals and schools. That would reduce the need for tax revenues. The government should come up with an incentive framework for philanthropists. Additionally, some services currently offered by the government can be offered through the private sector more cheaply and efficiently. </p></li>
</ul>
<p>Collecting more tax should be coupled with prudent government spending. That has political implications; it could lead to <a href="https://www.businessdailyafrica.com/bd/economy/sh300bn-budget-cuts-await-css-3967308">job losses</a> in the public sector, but create efficiency – which is good for the economy in the long run.</p>
<p><em>Since the article was first published, data on Kenya’s debt statistics in the second paragraph has been updated.</em></p><img src="https://counter.theconversation.com/content/199010/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>XN Iraki does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>William Ruto is determined to reduce public debt by collecting more taxes to pay for what the country needs.XN Iraki, Associate Professor, Faculty of Business and Management Sciences, University of NairobiLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1984582023-01-30T14:27:27Z2023-01-30T14:27:27ZKampala, Kigali and Addis Ababa are changing fast: new book follows their distinct paths<figure><img src="https://images.theconversation.com/files/506296/original/file-20230125-22-fk3erh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Kampala is one of the three Eastern African cities that transformed with little historical precedence</span> <span class="attribution"><span class="source">GettyImages</span></span></figcaption></figure><p>Kampala, the Ugandan capital where I live, is naturally the city I have studied and worked on the most as an urban economist. Yet even with this background, reading <a href="https://www.sheffield.ac.uk/usp/people/academic-staff/tom-goodfellow">Tom Goodfellow’s</a> recently published book, <a href="https://academic.oup.com/book/44624">Politics and the Urban Frontier: Transformation and Divergence in Late Urbanizing East Africa</a>, I learned astonishing new facts about Kampala. </p>
<p>I also learnt a great deal about the urbanisation processes of two other major East African cities – Addis Ababa, the capital of Ethiopia, and Kigali, the capital of Rwanda. </p>
<p>Goodfellow is <a href="https://theconversation.com/profiles/tom-goodfellow-119040">professor of urban studies and international development</a> at the University of Sheffield. His research focuses on the political economy of urban development and change in Africa. He has also worked with universities across Africa.</p>
<p>In this review I provide a glimpse of the comparative analytical journey Goodfellow takes across these three cities. I also make the case that anyone interested in East Africa’s dynamic urbanisation process should have this book as a core part of their reading list. </p>
<h2>Three cities</h2>
<p>At the start of the 2000s, Addis Ababa, Kampala and Kigali were some of the least urbanised cities in the region. And, for different reasons, they didn’t command much attention from national policy makers. </p>
<p>Fast forward to 2023, and all three cities are undergoing an urban transformation that has little historical precedence in terms of speed or scale. They have become, for differing reasons, central to national, regional and in some senses even global, policy making. </p>
<p>Based simply on this fact, the cities are unique. </p>
<p>The histories that shaped them include their colonial pasts, or resistance to it in the case of Ethiopia, their struggles for independence and post independence political and economic policies. </p>
<p>Take the varied approaches that Ethiopia, Rwanda, and Uganda adopted to the World Bank’s structural adjustment programmes in the 1980s and 1990s. The Bank’s misguided neoliberal approach continues to have lingering after-effects on each of them. This is particularly true when it comes to the composition of their urban economies. In particular, the increased privatisation promoted by the programmes led to cuts in formal employment opportunities in the public sector as well industry, pushing people into informality. </p>
<p>Another consequence was the sharp decline in public service provision, particularly in urban areas.</p>
<p>They have also been influenced by external economic forces. East Africa, as a global latecomer to the urbanisation process, is urbanising at a time when globalisation has resulted in significant flows of capital. For example, East Africa as a region receives one of the <a href="https://repository.hanyang.ac.kr/bitstream/20.500.11754/114286/1/Official%20Development%20Assistance%20and%20Economic%20Growth%20in%20East%20African%20Countries.pdf">largest shares of development assistance</a>. It is also a central focus for China’s Belt and Road Strategy. </p>
<p>As Goodfellow illustrates, these forces of globalisation are continuously reshaping East Africa’s cities in terms of the infrastructure investments that are currently taking place. Influence can also be seen in the new patterns of commerce, employment and entrepreneurialism within them.</p>
<h2>A granular comparison</h2>
<p>Goodfellow’s most formidable achievement in the book is that he has been able to draw clear comparisons between three very different cities. At the same time he hasn’t lost critical details that have shaped each one of their unique and complex systems. </p>
<p>To do this, he employs a comparative framework with four dimensions. They are:</p>
<ul>
<li><p>each city’s urban planning vision, including major infrastructure projects, which has affected political outcomes </p></li>
<li><p>changing patterns of urban property development (propertyscapes) and how these interacted with and have been shaped by the underlying institutions</p></li>
<li><p>the diverse and powerful forces of the urban marketplace, generically termed “the informal sector”, as centres of urban working lives and livelihoods</p></li>
<li><p>the forms political mobilisation has taken in each of these contexts and how these have been institutionalised and therefore generally resisted change.</p></li>
</ul>
<p>Throughout Goodfellow’s book he keeps drawing on the theme of infrastructure creating property value, while property, shaped by several prevailing forces, creates the demand and need for infrastructure.</p>
<p>For example, he illustrates how the affordable housing crisis has played out in each city. There are differences of course, which can clearly be seen in Addis Ababa’s immense public condominium construction project compared to Kampala’s near lack of government engagement in the housing space.</p>
<p>But there are also similarities. For example, across all three cities construction costs are substantial and much of the housing finance being provided is coming from the domestic and diaspora elites. This partially reflects constraints across the banking systems in the three countries. </p>
<p>A further similarity is the prevalence of expensive international aid worker housing resulting from substantial inflows of development assistance. This has skewed property markets in all three cities to an oversupply of high-end properties. The extent of this is huge. For example, the average rent for someone working in the diplomatic corps or an international institution in Kigali is usually upwards of US$4,000 a month. In contrast the annual GDP per capita of Rwanda is currently about <a href="https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=RW">US$822</a>. </p>
<h2>New and dynamic forms of urbanism</h2>
<p>Over the past years all three cities have been experimenting with new forms of urban visioning. This has shaped, and been shaped by, property, infrastructure and the underlying state-society relations in highly contested political spaces. </p>
<p>Perhaps this is most aptly illustrated by the Kigali Urban Master Plan that was developed by <a href="https://surbanajurong.com/sector/kigali-city-master-plan/">Singaporean firm Surbana Jurong</a>. The plan aspires to transform Kigali into a type of Singapore of Africa – essentially proposing to replace the existing city with something entirely new. </p>
<p>In Addis Ababa, the vision is epitomised by a major infrastructure investment, namely the light rail train system. A Chinese company constructed the rail system at a cost of <a href="http://www.china.org.cn/business/2019-04/25/content_74720232.htm">US$475 million for 34km</a>. This was an expensive undertaking that has reorganised the economic form of the city.</p>
<p>Similar spatial disruption has occurred in Kampala through the Chinese constructed expressway that connects it to the airport in Entebbe. This is now the <a href="https://www.thevaluechainng.com/the-most-expensive-road-in-the-world-is-located-in-east-africa/">most expensive road per kilometre in the world</a>. </p>
<h2>The devil is in the complex details</h2>
<p>Goodfellow’s book is a must-read for those who are working in policy or project development within any of these cities. </p>
<p>It manages to show why attempting to supplant models from urban development elsewhere, including “best practices”, will not work. Rather we need to understand local contexts and complex systems.</p>
<p>The imperative for this is clear: East Africa is one of the fastest urbanising regions in the world, but it’s still in the early phases of this process. There’s a major opportunity to get the region’s cities right.</p><img src="https://counter.theconversation.com/content/198458/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Astrid R.N. Haas does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>East Africa is one of the fastest urbanising regions in the world, but it’s still in the early phases. There’s a big opportunity to get the region’s cities right.Astrid R.N. Haas, Fellow, Infrastructure Institute, School of Cities, University of TorontoLicensed as Creative Commons – attribution, no derivatives.