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CGD research explores how international financial institutions such as the International Monetary Fund, World Bank, multilateral development banks, and other international development agencies can become more responsive to the needs of developing countries. The Center’s work concerns itself with the future of these institutions, all of which are facing shifts in demand for their traditional services, the emergence of new institutions, and reform of their leadership selection processes.
Given the changing global landscape, development finance – rather than aid – is poised to be the future of development. The spotlight is increasingly on Development Finance Institutions (DFIs) to be catalysts in mobilizing needed financing. At a time when their record on development finance mobilization and development impact is still debated, they are nevertheless being asked to play a critical role in helping to fill huge financing gaps associated with meeting the SDGs. Several countries have established new DFIs and others are considering expanding DFI operations.
International actors have criticized decisions by the Trump administration to reject the Paris Climate Accord, abandon the Trans Pacific Partnership, and withdraw from a United Nations declaration intended to protect the rights of migrants. However, there is one international body, the Paris Club, whose members may be rooting for the United States to leave. That’s because, in the absence of congressional action, continued US membership in the Paris Club could impair the economic prospects of some of the poorest countries in the world.
Even for countries that are far away from graduating from foreign aid, the importance of domestic resource mobilization for maintaining macroeconomic stability and sustained economic growth is well documented. A look at the experience of countries that have received HIPC debt relief validates this point and underlines the need for attaching a high priority to tax policies and practices in international assistance programs for low income countries.
Last year the World Bank adopted a new “cascade” approach that intended to maximise finance for development by prioritising private solutions wherever possible. In what world would this “cascade” algorithm make sense? Without a good answer to that question, the cascade risks looking like ideology rather than sound development finance advice.
Since the early 2000s, Latin America has become increasingly integrated with the global economy, liberalizing trade and opening its capital account. These initiatives were prompted by the assumption that advanced economies would not impose barriers to the cross-border movement of goods and services. But today, a rising wave of protectionism not seen since the Great Depression challenges this assumption.
With this new reality as the backdrop, the Latin American Committee on Macroeconomic and Financial Issues (CLAAF) will be meeting in Washington, DC to discuss how to tackle these emerging global economic challenges. Members of this committee include former finance ministers, former central bank governors, and other high-level economic officials and academics from across Latin America.