Sitharaman urges IMF, World Bank to stick to core competencies, warns against long-term donor dependency | peppermint

New Delhi: Finance Minister Nirmala Sitharaman on Wednesday warned that the International Monetary Fund (IMF) and the World Bank (WB) should not move away from their core competencies as their decisions impact global monetary systems.

Speaking at a discussion on “The Bretton Woods Institutions at 80: Priorities for the Next Decade” organized on the sidelines of the 2024 annual meeting of the World Bank and the IMF in Washington, Sitharaman stressed that multilateral institutions like the IMF need to respond to issues beyond their own reach. One should avoid venturing into the areas. Main expertise.

“Your core business is what you have to focus on. I think that’s the most important thing because if you don’t pay attention to this, the global monetary system is going to be adversely affected,” she said.

Sitharaman stressed the need for careful assessment of financial assistance, noting that resources are limited and long-term, cautioning that concessional finance and donor support should not be indefinite, as this could undermine the intended short-term objectives.

“The assessment exercise that is going on at the World Bank (and the IMF) should be more transparent, I think, and consultative, and it should reflect the interests of all the countries that the Bretton Woods institutions are helping, ” Sitharaman added.

Sitharaman called for a change in thinking in the Bretton Woods institutions to meet the needs of the next decade.

“I think we need a road map for concrete reform-based steps, which should be initiated as we have started doing during India’s (G20) chairmanship after a lot of introspection, inclusion etc. ” Added.

The main focus of the 2023 Indian G20 presidency was to reform multilateral development banks (MDBs) to improve their contribution to global development financing.

An International Expert Group (IEG), chaired by economist and former bureaucrat NK Singh along with former US Treasury Secretary Lawrence Summers, released a two-part report on strengthening MDBs, suggesting various reforms.

Among other things, the first part of the Singh-Summers report suggests increasing MDBs’ annual spending to $3 trillion by 2030, including $1.8 trillion for additional climate action and achieving other Sustainable Development Goals (SDGs). This includes $1.2 trillion.

The second part of the report outlines the need for MDBs to mobilize $240 billion in private capital by shifting from risk avoidance to informed risk taking, in addition to introducing new lending instruments such as pooled portfolio guarantees and hybrid capital.

Following the release of the report in 2023, in a joint statement MDBs including the World Bank agreed on the need for transformational changes in operating models and financing capacities as suggested by the expert committee chaired by Singh and Summers.

“We talked about tripling the size of institutions’ lending by 2030. We talked about dramatic changes in the speed with which they reach conclusions and distribute resources. We talked about collaboration and engagement with the private sector “We talked about different levels of U.S. that were qualitatively and not just quantitatively different,” Summers, who was also part of the discussion, said.

He said, “The (Bretton Woods) institutions have to say and do things that capture the imagination of the world. There have been moments when they did that when they set the vision and put many, many billions of dollars behind change.”