IMF, World Bank 'impotent' on Israel-Gaza war shock as reforms edge
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[October 16, 2023] By
Andrea Shalal and David Lawder
MARRAKECH, Morocco (Reuters) - Global finance leaders' paralysis in
addressing the fallout from the Hamas attack and Israel's response last
week exposed deep geopolitical divisions hampering the International
Monetary Fund and World Bank, even as they advanced new funding plans
aimed at easing more-frequent economic shocks.
Hamas launched its unprecedented attack on Israel on Oct. 7, just as top
finance officials arrived in Morocco for the IMF and World Bank annual
meetings, upending the gathering's carefully crafted script calling for
new resources and steps to revive flagging global growth.
IMF Managing Director Kristalina Georgieva did not mention the new
conflict at opening events. Later, as Israel's retaliatory strikes
mounted, she struggled to address it, initially describing it as a human
tragedy but a vague source of economic uncertainty.
In private conversations at the meetings, the Israel-Gaza conflict's
implications were front and center, from a new refugee crisis to trade
impacts and the threat of fighting in Lebanon and the West Bank,
participants from finance groups to non-profits told Reuters.
"In the face of a major global shock like this that’s human created,
that's not a climate shock, these institutions are impotent to do
anything about it, which is why they’re not even talking about it," said
Rachel Nadelman, a senior research fellow at American University’s
Accountability Research Center, who attended civil society and official
events at the meetings.
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The inability to respond extended to chair's statements issued by the
Group of 20 major economies and the IMF and World Bank steering
committees, which failed to mention the conflict.
These bodies were again unable to issue joint communiqués, reflecting
deepening geopolitical tensions, most recently over Russia's invasion of
Ukraine, but also disputes between the United States and China, which
have long sparred over communiqué language.
A G20 official said that body has been riven for two years by the
Ukraine war, with a communiqué only possible after a meeting of U.S.
President Joe Biden and China's Xi Jinping in Bali last year.
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Palestinians walk past the rubble of houses following Israeli
strikes in Gaza City October 15, 2023. REUTERS/Mutasem Murtaja
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"The Israeli-Palestinian conflict is even more controversial -
almost impossible to reach consensus," the official said.
ACCOMPLISHMENTS OVERSHADOWED
World Bank President Ajay Banga acknowledged on Sunday that the
Israel-Gaza conflict, along with the Ukraine war and fighting in
Africa, were "casting long shadows" over the meeting's
accomplishments and adding to economic challenges.
"You know, without peace, it's hard for people to get stability,
growth, look after their children, get jobs," he said.
The World Bank's governing body approved a new vision statement "to
create a world free of poverty on a livable planet" to incorporate
its new mission to fight climate change, pandemics and fragile
states, along with new steps to expand lending.
The IMF's steering committee agreed to boost quota funding by
year-end, leaving the door open to doing so without adjusting its
shareholding structure to give China more votes, while a $3 billion
fundraising goal for its poor-country trust fund was met.
But conflicts remain the biggest challenge to the global economy,
said Josh Lipsky, a former IMF official who directs the Atlantic
Council's GeoEconomics Center.
"If these institutions are going to be legitimate and
fit-for-purpose for the coming decade, they're going to have to
respond to geopolitical crises in close to real time," he told
Reuters.
"Geopolitical shocks are economic shocks now and economic shocks are
geopolitical shocks - and they're trying to detach the two."
(Reporting by Andrea Shalal and David Lawder; editing by Giles
Elgood)
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