The vital economic interests of the vast majority of the world’s population are being sacrificed in the political confrontation between the collective West and Russia. This was confirmed by the spring session of the governing bodies of the International Monetary Fund and the World Bank (IMF and WB), held April 18-24 in Washington. For the first time in their history, the ministerial headquarters of both organizations – the International Monetary and Financial Committee and the Development Committee – completed their work without issuing final communiqués.
Recovery is delayed
The world economy is stalling. The IMF’s new forecast and analytical report on its status and immediate prospects (WEO) is entitled “War is throwing back global recovery.” According to this document, the economic growth rate in the world, which was estimated at 6.1% in 2021, will slow down to 3.6% this and next years. Back in January of this year, higher figures were announced: by 0.8 percentage points for 2022 and by 0.2 percentage points for 2023.
For Ukraine, the IMF promises an economic downturn of 35% this year, while refraining from making forecasts for next year. In Russia, the fund expects a reduction in GDP in the current and future years by 8.5% and 2.3%, respectively. The first indicator is worse than the January forecast by 11.3 percentage points, the second – by 4.4 percentage points.
However, just before the session, these estimates were adjusted for improvement. And at a briefing for journalists at the presentation of the WEO, the fund’s chief economist, Pierre-Olivier Gurinsha, stated that “the Russian authorities manage to mitigate the impact of sanctions” from the West; in his opinion, Moscow is acting “quite successfully” in preventing “an internal financial collapse”, helping the banking system “keep on its feet” and “trying to stabilize its economy in a very hostile environment.”
In the world as a whole, India, where GDP is expected to increase by 8.2% this year, and China (4.4%) remain the main engines of growth. The US and EU have more modest figures. All of them have also been revised down as compared to the January estimate.
In addition to “war and sanctions”, inflation is of particular concern to specialists. Gurinsha at his briefing called her “clear and present danger”. In rich countries, the IMF expects prices to rise by 5.7% this year, and by 8.7% in developing countries. That is, as usual, the most defenseless will have to suffer the most.
Who is guilty?
Naturally, all this raises the classic questions: who is to blame and what to do? According to informed observers, direct and absentee disputes on these topics, in fact, became the main “nerve” of discussions at the session; they also served as the main reason for the lack of final documents.
It is clear that for the United States and its “friends and partners” the root of all troubles in the current situation comes down to Russia’s special military operation in Ukraine. It was this position that the West tried to consolidate in the communiqué, in the form of a kind of political “preamble” to the main economic content of the texts. They had never had such “hats” before.
Russia did not allow their appearance even now. As a result, the controversial passages were quoted word for word only in a separate statement issued by the chairman of the IMFC. This is now the Minister of Economic Affairs and Digital Transformation of Spain, Nadia Calvinho. By the way, three years ago she was one of the contenders for the post of Managing Director of the IMF, which eventually went to the Bulgarian Kristalina Georgieva.
Since the creation of the Bretton Woods institutions at the end of World War II, they have maintained a vicious practice: the World Bank is run exclusively by the Americans, while the IMF is left to the US’s reliable European allies. Of course, the secret distribution of top posts causes growing dissatisfaction in other countries and regions. In this case, they opposed the attempt of the West to transfer all the arrows for the hardships of the world economy to Russia.
“We are moving towards a multipolar world”?
A direct rebuff to the ideological adversary at the session was given by Deputy Prime Minister of Russia Alexei Overchuk and Finance Minister Anton Siluanov. True, I didn’t manage to read their speeches in the original: Overchuk’s text is posted on the website of the WB Development Committee in English, and Siluanov’s speech, who spoke at the IMFC, is not available at all, there is only a press release about it, distributed by the Ministry of Finance of the Russian Federation.
According to this document, the head of the Russian financial department said that the acceleration of inflation in most developed countries is the result of mistakes in economic stimulation of the largest Western economies during the COVID-19 pandemic. “The scale of inflationary pressure is unprecedented in the context of recent decades,” Siluanov said. “This is the result of the irresponsible actions of the financial authorities of Western countries, from which the whole world suffers, and above all the most vulnerable low-income countries.” Here, in fact, is the answer to the question of who is to blame and for what.
Overchuk, for his part, recalled that Russia is a major exporter of “many vital goods,” including energy, food and fertilizer. “More than 50 countries depend on Russian food exports, especially in the Middle East and Africa,” he said. Sanctions hinder supplies and “create a vicious cycle of declining living standards for people in both the developed and developing worlds.”
The Deputy Prime Minister added that global climate change also affects the food situation. Under these conditions, he believes, “further plans for the long-term isolation of Russia” can only exacerbate the difficult situation, “especially for the economies most prone to global warming.”
Finally, Overchuk stressed that “the sanctions have begun to undermine confidence in the international financial system, which has worked well for many years.” “Economic sanctions and isolation are leading the countries of the world to a split,” he said. Meanwhile, “the international community should join forces to mitigate the consequences of the impending food and energy crises, especially for the most vulnerable countries.”
I must say that the IMF is also talking about the “fragmentation” of the modern world, the division of the global economy “into geopolitical blocs with different technological standards, cross-border payment systems and reserve currencies.”
The same Gurinsha from whom this quote is taken believes that “such a tectonic shift would lead to a long-term decrease in efficiency and increase in volatility, would be a major challenge to the rule-based system that has dominated international and economic relations for the past 75 years”.
Although not in the near future, but still “we are moving towards a multipolar world due to the rise of emerging markets in the global economy,” the specialist said. “We know that we will eventually find ourselves in a world where everything is not about the US dollar, about the dominance of the dollar,” he added. From an outside perspective, this is quite in tune with what has been heard lately from the highest Moscow stands.
What to do?
In fact, the answers to the question of what to do are similar. The IMF’s position at the WEO is very succinct: “A multilateral effort is essential to respond to the humanitarian crisis, prevent further economic fragmentation, maintain global liquidity, address the debt turmoil, tackle climate change, and end of the pandemic.
Siluanov, according to his departmental press service, said that it was possible to get away from the price disproportions that have arisen recently only by removing barriers in international trade. He also emphasized the need for a coordinated economic policy aimed at addressing issues of sustainable development, and not focused on the benefits of individual countries.
Overchuk recalled that one of the important virtues of the Bretton Woods institutions was their “non-political mandate” from the outset, that they were “conceived as a forum where countries, regardless of their differences of opinion, can work together on the most complex and urgent issues of global development.” He expressed the hope that such a role “will be maintained in any current or future crises.”
The vice-premier noted that Moscow has not attracted new loans from the organizations of the WB group for eight years, and expressed regret over the recent decision of the leadership of this group to “completely stop all programs in Russia.” He recalled that in working with the World Bank, our country has long been not a borrower, but a lender, and projects with its participation are beneficial for the whole world.
By the way, we can share not only resources, but also knowledge. As an example, the Russian experience was cited, which showed that “digitization can be a significant factor in the sustainability of fiscal policy.” At the same time, it was emphasized that the digital economy cannot be created without significant investments in the energy sector.
It can be added to what has been said that the mentioned eight-year period is not accidental.
The World Bank, at the request of its leading shareholders, froze cooperation projects with Russia after the “Crimean spring” of 2014. But this only confirmed that it is quite possible to do without loans approved in Washington and without the expertise behind them.
“Just because I’m Russian”
At the end of his speech, Overchuk called on the overseas Bretton Woods to elementary decency, asked the leadership of the organizations to inspire the apparatus that “any persecution or discrimination based on nationality or language is intolerable.” It is clear that this was not said from a good life: Russophobia in the West is now going through the roof.
In my opinion, one of its egregious examples was an attempt to deprive Alexei Mozhin, Executive Director of the IMF from Russia, of the honorary status of doyen, that is, the senior in terms of work experience and, accordingly, the first among equals on the board of directors of the organization. However, Mozhin himself commented on this episode to me rather with pleasure. “The whole West wanted to remove me: simply because I’m Russian,” he said. “And the whole non-Western world stood up for me. And unconditionally: no, that’s all. in this capacity are temporarily frozen. As they say, until the next decision is made “…
And the point, of course, is not only in protecting the interests of a particular person, the Russian director. The same thing, according to Mozhin, occurs when discussing other topics. “If the West starts talking about how nasty Russia is, then everyone else is talking about the economy,” he said. “But they don’t make political statements – they just don’t allow themselves to do that.”
“We don’t lose!”
Accordingly, according to the interlocutor, it would be absolutely not in our interests to leave the IMF and the World Bank now, as some hotheads in Russia suggest. “Why should we leave?” he answered a question with a question. “This is the main battlefield. And we don’t lose here!”
In confirmation, Mozhin referred to the absolutely non-politicized statement made during the session by the “Group of 24” countries with developing economies and emerging markets. In fact, this group now unites more than three dozen states, in which, according to the interlocutor, 92% of the world’s population lives.
As for the collective West, now, according to the expert, it is trying to shift the responsibility for the real problems of the world economy to Russia, primarily its already mentioned “fragmentation”, as well as the “imminent debt crisis” in a number of countries, starting with Lebanon or Sri Lanka. Mozhin is confident that this attack did not start by chance at a time when, in terms of macroeconomic indicators, Russia’s position was “the best in the world.” It strikes him that for the sake of political attacks, they have trampled on the tradition of consensus that has been maintained since 1974, when the IMFC was called something else.
Regarding the “stealing of part of Russia’s foreign exchange reserves” and the confiscation of property of Russians in the West, the dean of the IMF board of directors explained that the fund “cannot directly assess” such actions, since all its documents stipulate that steps taken for reasons of national security are not fall within its area of competence. And to the question of whether Ukraine’s debts could be written off, he answered with a counter question: “What kind of Ukraine? What will it be like or will it be? Do we know that now?”
No matter how much the rope twists…
In fact, we do not know the future. This year marks the 30th anniversary of Russia’s membership in the IMF and the World Bank. When Moscow joined these organizations, hardly anyone could have imagined the conditions under which we would approach the current milestone.
But at the same time, it is clear that what is now coming around is exactly what has not been properly settled in three decades. Life has shown again that without dealing with the past, you can’t build the future, if not bright, then at least more or less fair. This in itself is an important lesson.