Several countries have run into financial problems in recent years. Rising interest rates drove up their borrowing costs and, at the same time, prices for things like food and fuel rose last year, mainly due to the war in Ukraine. Countries such as Zambia, Sri Lanka, Ghana and Ethiopia would therefore benefit from their creditors canceling part of the debt. But China does not want that, unless the World Bank also no longer claims part of its loans. That institution argues that this cannot be the case because it would then lose the ability to respond to crises. The United States supports the World Bank, which China sees as an extension of American power in the world.
In the system agreed in 1944 in the American Bretton Woods, the IMF and the World Bank are always at the forefront of loan repayments. They act as a lender of last resort, i.e. if no other party wants to give more money to a country. In addition, they rely on their good credit status to be able to borrow money cheaply themselves so that they can borrow it again below the market interest rate.
Outgoing World Bank president David Malpass thinks progress has been made at the G20 meeting in Bengaluru, India. Malpass talks about good conversations about monetary policy and how to tackle the permanent flight of capital from developing countries. “We can build on areas we do agree on and see what else we can do.” According to the American, the spring meetings of the IMF and the World Bank in April are a good time to continue the talks.
The G20 is an important forum for international economic cooperation. The group consists of 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom , the United States, and the European Union. G20 members represent about 85% of global GDP, more than 75% of world trade and about two-thirds of the world’s population.
