Opinion | IMF-World Bank meetings are the last stop before an economic storm

When they gather in Washington next week for the International Monetary Fund and World Bank Group annual meetings, the world’s finance ministers face what has been labeled a polycrisis: Challenges ranging from increased interest rates, climate change and an epically strong dollar, to food-supply shortages, high inflation and a still-prevalent pandemic all combine to threaten not just the global economy but also the livelihoods of hundreds of millions.

It is likely that in the next year the United States will go into recession, Europe will be battered by high energy costs and China will suffer its lowest growth in decades. A major slowdown in the global economy is almost inevitable.

What is at stake — what will greatly depend on decisions that finance ministers make next week — is whether developing countries suffer a lost decade of economic opportunity, as happened to many countries in the 1980s, or whether they are enabled to maintain momentum, as occurred after the 2009 financial crisis.

While much will depend on national policy choices, the external environment will be enormously important for most countries. Global cooperation through the IMF and the World Bank matters a great deal. The challenge for these institutions will be not to just discuss new funds and funding mechanisms but to actually deliver the greatly increased support the moment demands.

Action in three areas is essential:

Ease immediate financing pressures: Beyond Ukraine’s need for sustained support, the war has led to higher food, energy and fertilizer prices, all of which are straining the budgets of the most vulnerable low- and middle-income economies. There will be further challenges as interest rates rise, exports to the industrial world fall and diminishing global liquidity makes it harder to attract capital. To avoid cascading downturns, rapid and substantial new finance will be required.

The IMF has provided some financing. As its covid response demonstrated, however, it can do much more — if the fund’s major shareholders provide clear and united direction. Appropriately, the IMF has temporarily raised by 50 percent the ceiling on the financing it provides to countries through its emergency window; it now needs to show similar initiative for its regular programs. Many countries that need IMF financing do not seek it because of the stigma involved. This problem can be addressed by developing a new contingent financing facility that provides funding to countries hurt by external developments without insisting on traditional IMF conditionality.

The World Bank announced that it will scale up new funding commitments to $170 billion through June 2023 to help borrowing countries address these shocks. However, as the bank’s response to the pandemic demonstrated,…