I was astonished recently to be told by one of the representatives of the Caribbean on the Board of the World Bank (WB) that Antigua and Barbuda, The Bahamas, Barbados, St Kitts-Nevis and Trinidad and Tobago, should not expect any change in the bank’s policy not to make concessional loans to them because, supposedly, they are ‘high income’ countries.
My astonishment did not result from the sharp finality of the statement but rather because it came from a person who is charged with the obligation of representing the views of Caribbean governments on the WB’s board. By an outdated arrangement, which like many aspects of the WB’s structure and operations requiring urgent reform, no Caribbean government has a seat on the Bank’s board. Instead, Caribbean countries are represented by the Canadian or Brazilian Executive Directors.
I always remember the observation of the late Prime Minister of Barbados, Owen Artur, that it was offensive that he, as the head of government of his country, could not address a meeting of the WB’s Board without the permission of a Canadian official.
But all that is part and parcel of being small and powerless, and the seeming inability of Caribbean countries to pool their sovereignty so as to argue jointly for the reform the WB urgently requires to make it fit for purpose. An integral part of being fit for purpose, in today’s world, is to raise the massive amounts of capital that are going to be necessary in the coming years to help countries adapt to and mitigate a changing climate.
While climate financing has grown in importance recently as part of the policy of the WB, largely due to the emphasis placed on it by the Bank’s largest member, the United States of America (US), under its present Biden Administration, it is still a far way from what it should be. Last year, the Bank lent US$32 billion for climate-related projects. And while this was a vast improvement over previous years, it was still woefully short of the needed money.
Noteworthy is that countries classified as ‘high-income’, like Antigua and Barbuda and St Kitts-Nevis, did not qualify for a cent of the allocated US$32 billion. The only ‘high-income’ countries that did manage to access special loans were those in an IMF budgetary support program with all its harsh conditionalities.
Authoritative bodies estimate that an additional US$2.5 trillion of financing will be needed every year until 2030 to reach the 2015 Paris Agreement climate goals and to achieve the Sustainable Development Goals (SDGs) agreed by all countries at the United Nations (UN). If the WB is to play any meaningful role, it has to get more money and it has to change its lending policies to allow access to concessional funding by so-called ‘high-income’ countries in the Caribbean and elsewhere, which share similar circumstances of neighbouring states of both extreme vulnerability and lack of resilience to Climate Change and its impacts. The WB needs to revisit and revise this rule which may be convenient for denying funding, but which is short-sighted in its neglect of a problem that is growing and threatening the viability of countries.
Here’s what is an even more troubling situation related to funds available to the WB and how they are allocated. Many developing countries are deeply concerned that even as the Bank attracts more funding, allocations for climate-related projects (36 per cent of the Bank’s lending last year) will reduce the amount of money available for infrastructural development and for improving social services. Thus, they argue with considerable justification, that funding for coping with the impacts of climate change and global warming, should be separate from traditional funding for development.
In all this, therefore, a greater responsibility falls on the countries that are the greatest CO2 emitters to ease the burden on the World Bank and to create a special and different mechanism to fullfill their promises to mobilize US$100 billion a year to fund mitigation and adaptation in countries that are being irreparably damaged by Climate Change. It is not hard to identify which countries are responsible for the present situation. Studies by the Centre for Energy and Climate Solutions show that from 1751 (beginning of meaningful industrialization) to 2017, the share of cumulative CO2 emissions is: the U.S.(25%), the countries of the European Union and Britain (22%), China (12%), Russia (7%), Japan (4%) and India (3%).
However, this is unlikely to happen. Indeed, even providing sufficient money to the WB appears increasingly remote, as countries such as China and Britain opt to provide their loans and grants bilaterally than through international institutions.
So, the prospects for securing funding for developing states to meet their development challenges, particularly building resilience to the impacts of Climate Change, are not promising. Novel ideas have been proposed, including what is called the “Bridgetown Initiative”, a proposal of Barbados Prime Minister, Mia Mottley, to increase concessional financing by multilateral development banks to US$1 trillion among other things.
Much hope is also being placed in Ajay Banga, the former chief executive of Mastercard, who has been nominated by the Biden Administration to be the next president of the World Bank. But he alone – however skilful he may be – cannot bring about the transformation that is needed, or the political will that is required, to change the policies of the WB which is made by its richest members. And right now, nationalism and self-preservation prevails amongst the world’s powerful nations.
Developing countries should create a unity of the global south, using their own resources, including their purchasing power to defend and advance themselves. That goal must never be dismissed as unattainable. To do so is to surrender a significant strength that could be a game changer. There is a vacancy in committed leadership; it should be filled.