By Charles Lotara, SSMJ Washington, DC., Tueday (October 29, 2024) – The South Sudan Central Bank Governor, Dr. James Garang, has called out the International Monetary Fund (IMF) and World Bank to reform the Bretton Woods institutions to equally benefit African countries. Dr. Garang, who doubles as the chairman of the East African Community Monetary Affairs Committee, flagged the inadequate representation of the continent while addressing delegates at the 2024 Annual Meetings of the Intern
By Charles Lotara, SSMJ
Washington, DC., Tueday (October 29, 2024) – The South Sudan Central Bank Governor, Dr. James Garang, has called out the International Monetary Fund (IMF) and World Bank to reform the Bretton Woods institutions to equally benefit African countries.
Dr. Garang, who doubles as the chairman of the East African Community Monetary Affairs Committee, flagged the inadequate representation of the continent while addressing delegates at the 2024 Annual Meetings of the International Monetary Fund and the World Bank Group on Friday.
“Africa, despite being nearly 20 percent of the global population, has historically lacked adequate voting power in institutions like the International Monetary Fund and World Bank,” said Garang in a statement obtained by the South Sudan Mining Journal.
“This lack of representation translates into limited access to resources and higher borrowing costs for African countries,” added the governor.
In December 2010, the IMF introduced the Quota and Governance Reforms, which were approved by the Board of Governors. The Board of Governors approved an earlier set of reforms in April 2008.
In 20216, the Quota and Governance Reforms became effective, which meant every member state can now vote. However, members' voting power at the IMF remained largely determined by its quota, a financial contribution that reflects the country’s economic size and role in the global economy.
Like the IMF, the World Bank, with its five arms, such as the International Bank for Reconstruction and Development , assigns voting power based on financial contributions, represented by subscriptions or shares. Each member country has a certain number of basic votes plus additional votes based on the capital they have invested.
While these quotas are reviewed every five years and adjusted to reflect changes in the global economy, African countries have significantly struggled to match their Asian and Western peers in raising them, consequently narrowing their decision-making powers.
Dr. Garang also pointed out that high-interest loans remained institutionalized, saying financial restrictions impact critical sectors like education and healthcare.
“UNCTAD (United Nations Conference on Trade and Development) data shows that developing countries face a 64 percent increase in interest payments over the past decade, with Africa experiencing a staggering 132 percent rise,” stated the governor.
Dr. Garang emphasized the need for a comprehensive overhaul of the global financial system, which currently hinders the financial progress of developing countries and burdens their economies.
“The current system, with its skewed representation and burdensome debts, poses a significant threat to Africa’s development aspirations,” he said. “Urgent reforms are necessary to create a more equitable and sustainable financial architecture."
The presence of the World Bank and IMF in developing countries dates back as early as the 1960s. Having similar structure and membership, both institutions attempt to provide more stability and certainty for the globalized world economy by providing technical and financial assistance to developing countries and to those nations struggling with economic and financial difficulties.
However, critics often question and castigate their work in developing countries. Like Garang, Carlos Lopes, professor at the Nelson Mandella School of Public Governance at the University of Cape Town, says the two global institutions remain far from fulfilling their objectives in low-income economies.
“The call for reform of the IMF and World Bank is particularly urgent for Africa, where countries require increased access to public and private financing and debt relief. A transformed financial system is essential to support sustained growth that benefits everyone, and that bolsters climate resilience,” he writes in a column published by The Conversation .
Unfortunately, Lopes says, many sources of finance, including those from the World Bank and IMF, don’t adequately cater for African nations’ specific needs. To be effective, financial support for Africa must have several qualities: affordability, dependability, adequacy, and sensitivity to the continent’s climate vulnerability.