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While the world’s attention remains focused on the ongoing Israel-Gaza conflict, representatives from the IMF and World Bank are gathering in Marrakech this week to discuss the global financial architecture following the recent surge in inflation. Taking place in Africa for the first time in 50 years, these annual talks aim to address high levels of debt distress in the developing world, as well as climate change and poverty.
In this issue, we feature interviews with prominent figures in the development sector who share their thoughts on these complex financing challenges. Read on to hear from the President of the African Development Bank and the head of the world’s largest philanthropic institution. (Kenza Bryan)
US Politics Hindering Development Financing
The Bill & Melinda Gates Foundation, founded by Microsoft’s Bill Gates and Melinda French Gates, has provided over $70 billion in grant payments since its establishment in 2000. The foundation has supported developing countries in various crisis situations, including climate disasters, debt defaults, the pandemic, and violent conflicts, often working closely with the IMF and World Bank to distribute funds where they are most needed. However, according to CEO Mark Suzman, one of the foundation’s biggest challenges lies closer to home.
Suzman highlights that US politics is currently a major stumbling block in unlocking the resources necessary for developing countries to address climate change and fund development. The funding bill passed in September, which excluded a budget request to Congress for increased aid funds in Ukraine, as well as for international institutions like the World Bank and IMF, exemplifies this issue. As developing countries are urged to contribute more to development and climate finance, the US must ensure its financial commitment matches its rhetoric. While Washington has advocated for the World Bank’s balance sheet to be more efficient, such as by allowing shareholders to guarantee loans or invest in bonds, Suzman emphasizes the need for direct financing.
He specifically highlights the financing “cliff” of the International Development Association, the World Bank’s concessional lender, whose current financing cycle ends in June 2025. The impact of Covid-19 has further burdened the association’s financial capabilities. Suzman underlines the importance of addressing the debt distress faced by developing countries due to rising global interest rates, particularly in Ghana, Ethiopia, and Kenya. Concrete steps must be taken to tackle this issue, rather than relying solely on rhetorical commitments made during meetings like the one in Marrakech. There is hope that the Global Sovereign Debt Roundtable, taking place tomorrow, will help resolve the impasse on debt crises by bringing together debtor countries with major lenders. (Kenza Bryan)
Including Carbon Value in Africa’s GDP
The African Development Bank (AfDB) supports an ambitious proposal presented by African heads of state to include the value of natural assets in the calculation of gross domestic product (GDP). This initiative aims to reevaluate national wealth indicators and could have a significant impact. Akinwumi Adesina, the President of AfDB, endorses this idea and emphasizes the need to consider Africa’s natural capital as part of its wealth. The inclusion of rainforests, mangroves, and lakes in GDP calculations could potentially raise wealth indicators and lower debt-to-GDP ratios for individual countries, making it easier to secure financing.
Adesina highlights the immense value of the Congo Basin rainforest, which stores approximately three years’ worth of global greenhouse gas emissions. While the Amazon often receives attention, Adesina asserts that the Congo Basin is even larger in terms of carbon storage. Alongside discussions about creating a market for natural assets, the AfDB aims to raise more funds from the international community for direct investments. The Africa Adaptation Acceleration Program, focusing on food security, infrastructure, and youth employment, has secured $12.5 billion from the bank. They seek to raise an equal amount through various financial instruments like grants, loans, guarantees, and risk-sharing mechanisms.
Adesina also plans to address the IMF and World Bank meetings regarding the redirection of Special Drawing Rights (SDRs), an IMF reserve asset. He proposes a new issuance program for these assets to support climate and development goals. Adesina believes the maximum potential of these instruments must be harnessed. However, the bank must continue to demonstrate its trustworthiness in managing public funds. Discussions about transparency and accountability are ongoing at the board level.
When it comes to the upcoming COP28 climate summit, Adesina emphasizes that the focus should be on the poor in Africa and the small island states disproportionately affected by climate change. Although he refrains from criticizing COP28 President Sultan al-Jaber, CEO of the Abu Dhabi National Oil Company, Adesina acknowledges the importance of phasing out fossil fuels without emissions capture. Jaber has called for a slower timeline compared to the EU’s plans for fossil fuel phaseout. (Kenza Bryan)
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