The IMF and World Bank’s spring meetings will focus on an ambitious reform and fundraising agenda, but concerns over high inflation, rising geopolitical tension, and financial stability are likely to overshadow discussions. The IMF predicts global growth to fall below 3% this year, with close to 90% of the world’s advanced economies experiencing slowing growth. The meetings also provide an opportunity to reform the World Bank to better tackle long-term issues like climate change, with the US pushing for changes to the bank’s mission statement and financial capacity.
China has provided $240 billion in bailout loans to 22 developing countries in danger of default, mainly in Belt and Road Initiative (BRI) countries like Sri Lanka, Pakistan, and Turkey, according to a report by AidData, the World Bank, Harvard Kennedy School, and the Kiel Institute for the World Economy. The report noted that China’s bailout loans have accelerated between 2016 and 2021, with Beijing distributing 80% of its rescue lending during that period. Critics have accused China of luring developing countries into debt traps by providing massive, unaffordable loans.
Sri Lanka’s president has warned of more economic pain as the country undertakes strict austerity measures to restore its finances after an IMF bailout deal. The deal, which was lauded as a milestone, is only the first step in a difficult journey that will require structural reforms, including tax hikes, anti-corruption laws, and the sale of state-owned companies. The country defaulted on its foreign debt last year, leading to shortages of food, petrol, and electricity, among other issues. Trade unions have opposed the austerity program, with strikes affecting the health and transport sectors.
Sri Lanka saw hospitals, ports, and banks crippled by a nationwide strike over high-income taxes imposed as a precondition for an IMF bailout. Armed troops were deployed, but protests continued despite a ban, and talks with authorities failed. The IMF is expected to release a $2.9 billion loan in nine tranches over four years to help Sri Lanka, which has seen an unprecedented economic crisis since late 2021.
Sri Lanka hopes that an IMF bailout approved in September 2020 will be finalised, allowing foreign aid for projects suspended since last year to be unfrozen. Government spokesman Bandula Gunawardana said that approval of the $2.9bn bailout, which will be considered at a board meeting on 20 March, would immediately release billions of dollars in bilateral aid and loans that have been frozen since the country defaulted on its external debt last April.