74 CSOs and individuals from around the world are calling on the World Bank to first assess its development effectiveness and the impact of its private sector-first approach before designing its reform agenda.

As part of the consultation on the World Bank Group’s controversial  Evolution Roadmap, organisations including the European Network on Debt and Development (Eurodad), the Bretton Woods Project,  Christian Aid, Third World Network, and the Women’s Environment and Development Organization (WEDO) have produced a comprehensive briefing which contains recommendations that would transform the current problematic proposals. 

The briefing calls for the World Bank to #RerouteTheRoadmap, as discussions on Bank reform continue, including at the upcoming Annual Meetings in Marrakech in October.

It makes six key recommendations:

1. Commission an external and independent review of the World Bank Group’s development effectiveness;

2. Invert the ‘private sector first” [or Cascade] approach, putting the public at the core of the World Bank’s efforts to support global public goods;

3. Develop and fund a human rights policy;

4. Mainstream climate justice into the Bank’s operations;

5. Mainstream a gender lens into the Bank’s operations, extending the mandate of the upcoming Gender Strategy;

6. Develop Better metrics for measuring – and policies to tackle – inequality.

Maria Jose Romero, Policy and Advocacy Manager at the European Network on Debt and Development (Eurodad) said: "This current proposal won't deliver in the public interest and will do little more than maintain the status quo. While the WBG says it is set to expand its mandate to incorporate “sustainability” considerations, its roadmap document actually deepens its reliance on a heady cocktail of de-risking instruments such as guarantees and blended finance, and on tweaking national regulatory frameworks to enable a business-friendly environment. This is not credible. It ignores that risks are transferred from private to public actors, further increasing debt vulnerabilities, and it prioritises private profits over distributive goals and state sovereignty.

“We hope that the World Bank group's shareholders will act on the recommendations. The Annual Meetings in Marrakech provides the opportunity to engage civil society in a dialogue to take them forward.”

Bhumika Muchhala, Political Economist and Senior Advisor at Third World Network said: "The derisking approach assumes that there will never be trade-offs between commercial goals and the public interest. It also ignores the developmental dilemma posed by prioritising private risk over that of distributive social equity and state sovereignty in legal and normative affairs. It is yet to be seen if the WBG will incorporate sufficient provisions within its plans to escort private capital that ensure the recipient state’s right to regulate in the public interest, for a rights-based economy that upholds economic, climate, and feminist justice."

ENDS

Media contact: Julia Ravenscroft, Communications Manager, Eurodad: [email protected]/ +44 7958 184 695. 

Notes to editors:

FACTSHEET - Debunking the Cascade’s myths: Why a private finance-led approach won’t deliver rights-based development

There is growing support for increasing the private sector’s involvement in development finance, despite clear evidence that blended finance initiatives and other attempts to mobilise private finance have had very limited success to date. It is key to debunk four myths that underpin attempts to put private finance in the driver’s seat of development and climate action:

1. Myth 1: There isn’t enough public finance to solve global challenges: In the 1970s, rich countries committed to allocating 0.7 per cent of their GNI to ODA. Yet most rich countries have failed to deliver on this commitment. Oxfam estimates that this has cost low- and middle-income countries US$6.5 trillion in undelivered aid between 1970 and 2021. Moreover, in 2009, developed countries agreed to mobilise US$100 billion in new and additional resources a year by 2020 for developing countries’ climate change adaptation and mitigation efforts. Yet, this commitment has not been met. Furthermore, tax-related illicit financial flows cost countries hundreds of billions of dollars in lost tax income every year. In fact, the global south has transferred an estimated US$4.2 trillion in interest payments to global north-based creditors since 1982, far outstripping any calculation of aid/concessional lending during the same period.

2. Myth 2: The Cascade approach is more cost effective than public investment, creating fiscal space: In reality, the Cascade approach - which requires projects to be designed in a way that protects private sector profit margins - can create significant contingent liabilities, co-financing or tax deregulation costs for governments, while passing on higher costs of privatised services to citizens. This is evident in the case of public-private partnerships (PPPs), where the fiscal risks can be sizable. 

3. Myth 3: The Cascade is needed for global climate action: The Cascade’s emphasis on using private finance for climate action - which seeks to minimise the need for rich countries to pay their fair share in public financing for climate action - is an abdication of the climate justice imperative. Climate finance norms agreed in hard-fought UNFCCC negotiations hold that climate finance should reflect the principles of common but differentiated responsibilities, the ‘polluter pays’ principle, and be reparative in light of asymmetrical responsibility for historical carbon emissions. An over-reliance on deregulated private-sector solutions risks deepening the vicious cycle of debt and loss and damage that many climate vulnerable countries find themselves in.

4. Myth 4: The Cascade is the most politically achievable route out of the current global polycrisis: In an environment of shrinking official development assistance, mobilising private finance for climate and development aims is being promoted as a key route out of the current crisis. This ignores not only the growing debt crises across  developing countries, but also the fact that creating an enabling environment for private investment involves a ‘de-risking state’ approach across the global south that risks shifting costs to citizens and state in order to insure against losses for investors. In a context where 85 percent of the world’s population is already living under austerity in 2023, and in which there is a growing number of protests due to the cost of living crisis, a consensus to design projects to ensure returns for private investors could very easily exacerbate political instability.