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Building new momentum for growth

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By Joni Akpederi

There is no running away from the imperativeness of sound economic growth.  And World Bank President Dr Jim Yong Kim has driven home the fact at the most appropriate forum possible: the plenary session of the Annual Meetings of the World Bank and its twin institution, the International Monetary Fund.

“Economic growth,’’ the Bank President says, “is the most powerful tool we have to end poverty.” Yet, his counterpart at the International Monetary Fund, Christine Lagarde, expects “growth of only 3.3 percent this year, and still under 4 percent next year.”

The Fund’s helms-woman’s tone clearly suggests that the world needs to do lot better than post “mediocre” growth rates  to tackle what Dr Kim  calls the “most difficult problems” facing humanity today: “infrastructure, Ebola and Climate Change.”

It is by no means an exhaustive list of mankind’s current woes. Ms Lagarde supplies one of her own: seven out of 10 people in the world today live in countries where inequality has increased over the last three decades; 200 million people around the globe want to work for their daily bread but can find no jobs; and almost half of the world’s population will live in regions of high water stress or shortage by 2030.

The dismal picture of the global economy did not, however, stop the Bretton Woods institutions’ heads from congratulating each on their 70th anniversary as pioneers in the development assistance business. The challenge, both agree, is to chart a way forward especially now that they have reached, in Lagarde’s beautiful metaphor, “a fork in the road.”

The IMF has decided that a “new momentum” is needed on the policy front. Having poured about $700 billion since 2008 into countries in need, it now wants to focus attention and resources on accelerating global growth, achieving financial system stability and better global cooperation. This task is increasing in complexity as the financial sector gets bigger and bigger, with non-bank entities grabbing larger pieces of the pie. Mutual funds , according to Lagarde, now accounts for 27 percent of global high yield debt; the top 10 global asset management firms now control an incredible $19 trillion, a figure that exceeds the United States’ GDP.

The World Bank can’t wait to put its strategy into play. Dr Kim says the Global Infrastructure Facility,  unveiled on October 9, is expected to unite institutional investors, development banks, and public officials in a grand coalition to tackle infrastructure deficit in new and creative ways, especially in emerging markets and poor countries.

With its self-imposed deadline for helping the world to end poverty by 2030, the earlier the Bank sets out on its course, the better. On climate change, the Bank has gotten 74 countries and over 1000 companies and investors to agree on the plan to put a price on carbon.

Best of all, the IMF’s Lagarde knows that not much can be achieved if the lingering question of  governance reforms agreed four years ago are not laid to rest. Regrettably, the Bank/Fund leadership must leave that controversial issue to the politicos who run the exclusive membership club of the world’s most important development institutions.

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