Next week, from September 18 to 26, 193 leaders from around the world will attend the annual United Nations General Assembly. The main focus of the gathering will be to discuss the growing consensus on the need to establish a “Global Green Bank”. The meeting follows the first Africa Climate Summit in Nairobi, Kenya, where President William Ruto called for “a fair playing field for our countries to access the investment needed to unlock the potential and turn it into opportunities”. Had called. In June, at the Paris summit, Kenyan President Ruto called for the creation of a global Green Bank, separate from the World Bank and the International Monetary Fund (IMF), to tackle the climate crisis. This call to action is in response to the lack of clear climate urgency during the Paris summit. Ruto argues that the interests of wealthy countries influence traditional multilateral lenders and are inadequate to tackle climate change. He proposes a non-aligned bank funded by global green taxes and levies, such as on financial transactions, fossil fuels, shipping and aviation. This new mechanism could generate between $1.5 trillion and $2 trillion annually. While some leaders, including French President Emmanuel Macron, have shown little interest, Ruto claims the entire African continent supports the idea, and China supports Kenya’s stance.
Ruto is scheduled to meet Chinese President Xi Jinping later this year to discuss climate change and other issues. Ruto stresses the need for a new bank to prevent developing countries from accumulating excessive debt while pursuing emissions reductions and the energy transition. He suggests that the IMF and World Bank should be reformed to allocate $500 billion annually to refinance high-cost debt held by developed countries.
The IMF and the World Bank are two major institutions that have significant influence in facilitating economic stability and development. Both institutions have distinct advantages and disadvantages, and opinions regarding their efficacy can vary widely. Additionally, China has emerged as a major player in supporting the development efforts of other countries in the Global South. As the Global South faces the disproportionate impacts of climate change, leaders of developing countries need to understand the pressure to access financing and support, including the IMF and the World Bank, as well as the complexities associated with China’s growing It is important to understand. Role in supporting developing countries. As long as the Global South is excluded from the core of international power structures, it will continue to exert pressure on financial powers such as the IMF and the World Bank in the pursuit of meaningful reform.
The International Monetary Fund (IMF), the cornerstone of the global financial system, plays an important role as a crisis management tool by providing critical financial assistance to countries facing balance of payments challenges. The impact of IMF initiatives is evident in projects such as enhancing public financial management in Mali, effectively contributing to economic stabilization amid a period of uncertainty. Beyond its financial support, the IMF provides economic policy advice and technical expertise to its member countries, thereby enhancing their governance and economic administration efficiency.
However, one notable drawback of the IMF is the issue of conditionality. While IMF loans provide significant financial assistance, they often come with stringent conditions that recipient countries must adhere to. This may lead to social and political unrest as these conditions may not always correspond to the specific circumstances of the country. Furthermore, critics argue that the IMF promotes policies that may increase inequality and social tensions, thereby undermining the institution’s development goals. The power dynamics within the IMF, which are heavily tilted toward developed countries, have raised concerns about unequal influence in decision making, potentially harming developing countries.
The World Bank, another major player in global development, provides vital development financing to countries aiming to reduce poverty, enhance infrastructure, and promote economic growth. In addition, the World Bank serves as a repository of expertise, knowledge, and research that assists nations in formulating and implementing effective development policies. Its emphasis on poverty alleviation and sustainable development is in line with the broader global development agenda, contributing to the achievement of the International Goals. The World Bank’s commitment to global partnerships with governments, international organizations, and NGOs further enhances its impact in addressing development challenges.
However, some World Bank-funded projects have faced scrutiny for their effectiveness, with concerns raised about their impact on local communities and the environment. Additionally, loans provided by the World Bank, although intended to support development, may inadvertently contribute to the debt burden of recipient countries if not carefully managed.
China has emerged as an important alternative power in supporting developing countries. This support includes bilateral aid, investments and loans extended by China to facilitate infrastructure initiatives, trade activities and overall economic development. China’s ambitious Belt and Road Initiative (BRI) seeks to increase connectivity and trade between countries by funding critical infrastructure projects. The establishment of institutions such as the Asian Infrastructure Investment Bank (AIIB) demonstrates China’s commitment to financing infrastructure and development projects. China’s growing trade relations contribute to economic growth and employment opportunities in developing countries. Recently, there has been an emphasis on the Global South, which explains why Chinese President Xi decided not to attend the G20 meeting. Beijing’s surprise decision to send its ceremonial vice president instead of Chinese Foreign Minister Wang Yi to attend the UN General Assembly also reflects this. China’s future strategic focus will be to use its resources to build an alternative world order.
The role of the IMF, the World Bank, and China in supporting developing countries is complex and multifaceted. Each institution offers different benefits while suffering from some drawbacks. As global economic dynamics evolve, it is important to engage in ongoing discussions and evaluation of these institutions and their approaches to ensure that development efforts are effective, sustainable and sustainable for countries around the world, particularly Respond to the diverse needs of countries in the Global South. Kenyan President Ruto’s Global Green Bank solution could be what the world needs.
Special thanks to Lorena James for contributing research, editorial editing, images, and quantitative data to this article.