I was never a massive fan of the Mad Max film ‘Welcome to the Terrordown’. Its post-apocalyptic vision of the future was far too nihilistic for my liking – I like to think of myself as an optimistic person. However, it has one of the best theme songs for any movie.
“We don’t need another hero” by Tina Turner has come to mind several times over the past weeks as European figurehead of the IMF, Kristalina Georgieva, was criticised for her involvement in the Doing Business scandal, whilst receiving praise from several African finance ministers, Lord Nick Stern and many others.
Praise has come in particular for her support on an unprecedented IMF agreement to create $650bn worth of Special Drawing Rights (SDRs) and encouraging staff and shareholders to explore ideas for new climate change and vaccine finance trust funds. Georgieva has pitched these new funds as vehicles for rich countries to direct a proportion of the newly agreed SDRs to lend out to poorer countries.
Is this going to help?
The reason Tina Turner’s epic song is relevant, however, is because these funds are unnecessary heroes, especially when it comes to channelling SDRs to meet African interests.
First, when it comes to vaccines, the AU’s Africa envoy Strive Masiwiya has made it very clear that the inequitable vaccine challenges African countries have faced has been due to wealthier countries, rather than a lack of finance per se. Creating a new IMF vaccine fund to lend out SDRs will not solve this global coordination failure.
Second, for climate change there are already existing, cash-strapped climate funds. The Green Climate Fund (GCF) in particular, has been in place for over ten years and has a hard-won, equal developing and developed country decision-making structure. It also has the World Bank as an arms-length trustee, which means SDRs can also be channelled into it. However, since March 2020, it has only been able to disburse $8.8bn to African countries due to a lack of finance. The GCF – and its sister project, the Adaptation Fund, which also has the World Bank as trustee – would be a perfect existing vehicle for new SDRs.
The third reason new IMF trust funds are unnecessary heroes is that regional – not global – funds are vital, especially for Africa.
Every other region aside from Africa – from the Caribbean to Asia – has its own lender of last resort, their version of the IMF. There are plans for a new African Monetary Fund, but those plans have, to date, only received ratification by 12 African countries. Committing to channel SDRs to an AMF would quickly incentivise more countries to join. In the meantime, the AfDB is already approved to hold SDRs. Having faced constraints in its lending capacity before Covid-19 – the AfDB managed to approved projects close to $6bn worth since the start of the pandemic. It can do even more.
And last but not least, as Tina Turner observes, the real challenge is to change, not find a new hero. If anything, for Georgeiva to be a true hero, she needs to focus on not creating a new fund but on reforming the fund she is in.
When it comes to climate change, as development and climate experts Saleemul Huq and Simon Maxwell have argued, a key development challenge is to integrate and mainstreaming climate through the operations of a lender like the IMF, not separate out funding bids.
Furthermore, the Doing Business Index is not the only problematic output used by the IMF and drawn up by its sister, the World Bank. Georgieva has multiple internal candidates for reform, including Debt Sustainability Frameworks and governance indicators, all of which have huge – negative – impacts on ensuring sufficient, cheap finance is accessible to African countries. To be a hero, Georgieva should drive change of these existing instruments under her purview, while also tackling the IMF’s lack of diversity, which leads to various degrees of “group-think”.
Certainly, vaccines and climate change are essential problems for the world to tackle together, especially if we want to remain optimistic and avoid anything close to a Mad Max dystopian future. But we do not need new funds from the IMF to tackle them. We need Georgieva and others to realise that we do not need a hero or saviour to save us. We need them to push SDRs to be channelled into existing climate and regional funds and make sure the IMF changes for the better, so Africans can rely on it, rather than being left behind. Fewer heroes and more equality, please.
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