It is the most ironic clash of schedules, the most symbolic too. And no one could be happier about it than Russian President Vladimir Putin. The annual conference of the World Bank and International Monetary Fund (IMF) is in full swing in the most powerful capital in the world, Washington, DC. At the same time, the US’s geopolitical nemesis, Russia, is hosting the BRICS Summit, a gathering that is increasingly seen as a counterbalance to US hegemonic power.
Putin gets to host close to 40 world leaders, including the top diplomat, UN Secretary-General António Guterres. Mahmoud Abbas, the head of the Palestinian Authority, is also in Kazan. What a PR win for Putin, who has used the occasion to demonstrate that Western sanctions as a result of Russia’s invasion of Ukraine have not lost him any friends from the Global South.
Putin was always expected to flaunt this summit and take a swipe at the US-led order. He was on script, drawing laughter from world leaders when he poured scorn on the West, saying there is “No talk of domination, of a fake rules-based order or threats. Just mutual respect, partnership and peace.”
Washington, DC, and Kazan are two stages where geopolitical power plays are being made in real time.
The mood of the two gatherings could not be more distinct. The world’s finance ministers, central bankers, global financiers and development agencies are meeting in a country that is about to hold the most polarised election in its history. The air is fraught with anxiety. Gutter politics are on full display and the rhetoric is volcanic.
The outcome of the US election is pivotal to the life of the Bretton Woods Institutions. Formed by the US 80 years ago, the multilateral financiers remain a trademark of US foreign policy and global dominance in the post-World War 2 era. Their genesis ushered in the US-led Western order and succeeded, largely, in preventing wars based on global economic dynamics.
Even as international relations scholars theorise about the waning of US power and dominance, the country remains the biggest shareholder of the IMF and the World Bank. It will continue to shape the life and form of these institutions for years to come.
The Trump factor
The Trump administration had absolute disdain for multilateralism and its institutional frameworks. A second Trump administration will be more emboldened and acerbic towards the IMF and World Bank. He resents the financial commitments of the US towards the bank, even as the US has benefited from its structure and practices.
While in office, Trump wrongly received praise for approving a capital increase for the World Bank. Less spoken about are the stringent conditions of this move. In typical Trump fashion, he was not spreading the milk of human kindness. Instead, in return for more money, Trump pushed for stipulations that made lending to middle-income, poor countries and China more expensive. Vintage Trump — he’d make Machiavelli blush.
The World Bank cannot ignore its largest shareholder, and while butting heads with the Biden administration over the US’s trade protectionism and fiscal policy, a Trump-led administration is no friend of the World Bank and IMF. The latter views Trump’s unorthodox and impulsive economic framework as a threat to global economic stability. His legendary antipathy towards multilateral institutions and global consensus will also cause some jitters as the world waits with bated breath to see who the US chooses.
Countries in the Global South are well aware of the uncertainty that permeates the air and Russia will capitalise on that. Low-income nations have very little affection for the IMF. The debt burden hangs like an albatross around their necks.
The latest data tell us that some indebted countries, mainly in sub-Saharan Africa, are spending more on debt servicing than on healthcare and education. So appalling is this reality that the UN secretary-general threw the language of diplomacy out the window in 2023 when he wrote that the IMF and World Bank had benefited rich countries instead of poor ones. He had strong words for their response to the Covid-19 pandemic, calling it “a glaring failure” that caused more indebtedness.
He doubled down in a speech in front of world leaders at the Paris Summit for a New Global Financial Pact in June 2023, reminding them that the IMF had allocated $160-billion to European Union countries, while Africa received $34-billion — 13 times less per citizen.
Guterres said, “This was all done by the rules. But, let us acknowledge: these rules have become profoundly immoral. A financial architecture which does not represent today’s world is at risk of leading to its own fragmentation in a world where geopolitics is in itself a factor for fragmentation.”
Costly bailouts
For those countries that receive bailouts, the financiers impose stifling structural reforms that have caused domestic instability and unrest. Kenya is a case in point — servicing its debt to the IMF meant higher taxes, a reality that most of its citizens cannot abide.
The paradox is striking. The East African nation is the fastest-growing economy in Africa, yet its total debt to the IMF is $3.6-billion, before interest. To receive more money from the IMF, Kenya had to agree to tax increases to ease the lender’s anxiety about a “significant shortfall in tax collection”.
The recent deadly protests in Kenya have to be seen in this global context. Their government wanted more of the paltry shillings citizens earn, to service billions of dollars to its international creditors.
It is fair to note that in October, the IMF announced reforms to its charges and surcharges, which will lower borrowing costs from indebted countries by 36%. It’s a welcome move but one that does little to overhaul a broken system and heal the wounds it has caused.
Kenya is but a microcosm of the realities experienced by most of the countries attending the BRICS Summit. Some have earned their sanctions, but even that is emblematic of the power the US wields. BRICS may be a group of ideologically incoherent countries, but they have a lot in common in relation to the US and their antipathy towards the Bretton Woods Institutions. Their grievances against the economic and political monopoly of the West cannot be dismissed.
Drums of global change
While it is tempting for some to see BRICS as merely an anti-West bloc, the reality is far more nuanced. Some members, like India, have a very healthy relationship with the US but recognise that the drums of global change are beating and the world is marching towards a post-Western-led order that transcends superpower competition. This world requires ingenuity and sharpened strategic engagements that are not trapped in the “either with us or against us” bubble.
The BRICS nations will account for almost 40% of global gross domestic product by 2050 and the bloc will be made up of four of the world’s top five economies. US economist Professor Jeffery Sachs asserts, “We already live in a post-American and a post-Western world. We’re in a world where the BRICS countries are larger than the G7 countries … the US is a quarter of a century out of date.”
Whilst the jury is still out on the viability of a BRICS currency, the member nations’ endeavour to insulate themselves from currency fluctuations and dependence on the dollar is not unreasonable. “When the US sneezes, everyone catches a cold” is not a good basis for global stability, particularly as the US itself faces threats to its democracy and a surge of insular, anti-outsider nationalism. This encroaches on the economy.
Of course, there are rogues and perennial human rights offenders among the BRICS nations. The lack of a well-established ethos and the seemingly unstructured expansion are cause for concern. But a quest for global equality, fair trade and multipolarity resonates deeply with millions of people across the globe. This agenda is bigger than Russia and the US and no one superpower can reverse the tide. DM