“The future is in jeopardy” if the International Monetary Fund and the World Bank are not immediately reformed, said Ghanaian Minister of Finance Ken Ofori-Atta.
Ofori-Atta gave his perspective on discussions around reforming Bretton Woods institutions at an event hosted by the Atlantic Council’s Africa Center and GeoEconomics Center. The event, which also included keynote remarks from Assistant US Treasury Secretary for International Markets Alexia Latortue and African Development Bank Special Envoy for Climate Amadou Hott, was part of the Council’s IMF and World Bank Spring Meetings dialogues.
Below are highlights from the event, which featured discussions moderated by Yinka Adegoke, editor at Semafor Africa, and a preview of an upcoming Atlantic Council report on recommendations for Bretton Woods reforms.
What Africa needs now
- “The world faces an increasing number of complex global challenges that cross boundaries and disproportionately affect poor people [and] lower income countries,” explained Latortue, adding that such a trend has spurred the creation of the US Treasury Department’s Multilateral Development Bank Evolution Initiative. This effort, under the leadership of Treasury Secretary Janet Yellen, has used the United States’ leadership position in these institutions to sustain calls for equitable reforms.
- Within the World Bank, progress towards such reforms is already underway, Latortue told the audience. In the fall, “shareholders at the World Bank issued a call… to begin a process to evolve the institutions focusing on the bank’s mission, its incentive structures, its operational approach and its financial capacity.” In the meantime, while these talks are ongoing, the United States also remains “steadfast in [its] support for [the International Development Association] for the world’s poorest countries,” she said.
- Africa is experiencing a “disheartening struggle” under crippling debt obligations to foreign lenders, particularly given the “multiple crises” that developing countries presently face, Ofori-Atta said, adding that the African continent’s economic distress has worsened, rather than improved. “An estimated 546 million people now live in poverty, almost 74 percent more than in the 1990s,” he said. Additionally, an “estimated thirty-three African countries have interest payments approaching or exceeding government spending on health and education.”
- “The world is capable of reacting quickly” and “the World Bank and other [multilateral developments banks] exist, in part, to solve this problem of eliminating poverty and shared prosperity,” the finance minister remarked. “However, they are failing to do so at the scale and speed that is required.”
- “Africa has too many challenges that urgently need funding and expertise,” Hott told the audience. To address the issues, and the compounding effects of “COVID-19, the [Russian] war, and inflation,” the continent should receive “[front-loaded] investments,” capacity-building assistance, and “massive additional liquidity into the system,” he said. The current system of “incremental investments… will not yield the double-digit economic growth that is need for many African nations.”
An urgent “paradigm shift” for Bretton Woods Institutions
- “It does not suffice to have simple funding financed by multilateral institutions,” said Otaviano Canuto, senior fellow at the Policy Center for the New South. Instead, funding “has to be done in a way that crowds in other forms of finance”: for example, financing from the private sector, he explained. This means these multilateral institutions should not just “[focus] on lending,” he said. They should also pursue “opportunities for providing guarantees [to the private sector] and being more risk prone.”
- “The question of speed… is absolutely important,” Anne-Laure Kiechel, chief executive officer and founder of Global Sovereign Advisory, told the audience. African countries need “concessional financing” and an urgent “reprofiling of [their] debt” because governments “cannot fund development” within the current lending system, she said.
- “If Africa is not going to be looked at,” Sanjeev Gupta—executive director for financial services at the African Finance Corporation—argued, “the Bretton Woods institutions almost don’t have relevance.” A “paradigm shift” is necessary to “stop looking at [the African continent] as a problem” and instead to look at it as a “solution,” he said, “be it on food security, energy security, access to critical minerals, new markets, or just managing the geopolitical risk.”
- Carmen Magarinos—director for development cooperation in Africa and Asia at the Spanish Ministry of Foreign Affairs—spoke from a European perspective, noting that Africa is a “top priority” for European partners. In particular, she emphasized the importance of looking ahead and addressing the question about how global financial pressures will impact future generations. Working “with the young people… and giving [them] the space they need to build their future” is paramount, she said.
- Carlos Lopes, chairman of the board at the African Climate Foundation, remarked that “instruments that have been put together [to deal] with the debt stressed countries… have achieved very little.” He added that changes are necessary to ensure that the continent receives equal treatment in areas such as risk evaluation, “liquidity access,” and how aid is allocated during an “exogenous shock” that Africa did not contribute to, he said. A “flexible” rule book is necessary that allows “for certain types of intervention that deal with emergency situations.”
Alexandra Gorman is a young global professional at the Africa Center.
Original Event Text
As part of its annual dialogue series—held each year during the IMF and World Bank Spring Meetings—the Africa Center is convening high-profile experts on Friday, April 14, 2023 at 08:30 a.m. EST | 12:30 p.m. GMT to discuss African perspectives on the reform of Bretton Woods.
This year, the Spring Meetings will focus on reshaping development for a new era, which will include discussions on reforms that could help the Bretton Woods monetary institutions better address development needs on the African continent. But the current Bretton Woods organizations are not equipped to handle today’s gravest issues—ranging from the climate crisis to global conflicts and beyond. And because of the way this system is set up, it can’t adapt on its own to address the needs of a changing world.
While talks about reforming the system are underway—as US Treasury Secretary Janet Yellen told the Atlantic Council last year—the efforts themselves have stagnated due to a lack of actionable policy options and uncertainty about what changes are necessary and viable. With the convening of this event, the Africa Center seeks to present a clearer vision of the continent’s development needs and to outline reforms that could best address today’s most critical issues.
This event will also serve as a preface for an upcoming policy report to be launched at the IMF and World Bank Annual Meetings taking place in Marrakesh in October. Thanks to Makalou Modibo and Amin Mohseni-Cheraghlou’s expertise, the Africa Center, in collaboration with the Atlantic Council’s Geoeconomics Center and in partnership with the Policy Center for the New South, will present an action plan for reforming the Bretton Woods Institutions, inspired by African perspectives.
This event is part of the Atlantic Council’s IMF-World Bank Spring Meetings event series that convenes Finance Ministers and Central Bank Governors from around the world to discuss the challenges and opportunities facing the global economy in 2023. Learn more about our programming during the week here and our Bretton Woods 2.0 Project.
Josh Lipsky, Senior Director, GeoEconomics Center, Atlantic Council
Alexia Latortue, Assistant Secretary for International Trade and Development, US Department of the Treasury
Ken Ofori-Atta, Minister of Finance, Republic of Ghana
Presentation of the Coordinator’s work, “African Perspectives on Bretton Woods and Urgency of Reforms”
Modibo M. Makalou, Economist affiliated with the Africa Center, Atlantic Council
Amin Moheseni-Cheraghlou, Macroeconomist, GeoEconomics Center, Atlantic Council
Amadou Hott, Special Envoy for the Alliance for Green Infrastructure in Africa and Former Senegalese Minister of Economy
Otaviano Canuto, Senior Fellow, Policy Center for the New South
Donald Kaberuka, Former President of the African Development Bank Group, Chair of the Board of the Global Fund
Anne-Laure Kiechel, Founder and CEO, Global Sovereign Advisory
Dr. Carlos Lopes, Chairman of the Board and Chair of the Advisory Council, African Climate Foundation
Carmen Magariños, Director for Development Cooperation in Africa and Asia, Ministry of Foreign Affairs, European Union and Cooperation, Kingdom of Spain
The Africa Center works to promote dynamic geopolitical partnerships with African states and to redirect US and European policy priorities toward strengthening security and bolstering economic growth and prosperity on the continent.
At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.
Follow the conversation on Twitter with @ACGeoEcon and @ACAfricaCenter using #FutureofEcon