Inequality 2.0

Taking place against a backdrop of geopolitical conflict, worsening debt sustainability and increasing climate impacts in the poorest countries, there was much talk about the problems, but little progress towards solutions at this year’s World Bank-International Monetary Fund Spring Meetings.

Laura Kelly's picture
Insight by 
Laura Kelly
Director of IIED’s Shaping Sustainable Markets research group
26 April 2024
A timelapse photo that shows blurred people entering/leaving a building above which is a big sign saying 'Welcome'

The IMF-World Bank Spring Meetings took place in April 2024 in Washington DC (Photo: World Bank Photo Collection, via Flickr, CC BY-NC-ND 2.0 DEED)

As in many parts of the world, climate change brought an early spring in Washington DC, as finance and development ministers, investors, foundations, think tanks and civil society organisations descended on the US capital for the annual Spring Meetings. 

The rapid temperature change was in sharp contrast to the sluggishness of International Monetary Fund (IMF) and World Bank reforms to help countries deal with the unsustainable debt and climate crises. Meanwhile, the World Bank has yet to deliver on its new president Ajay Banga’s promises to create a fairer global financial architecture that can better support the world’s poorest countries.

Finance going in the wrong direction

As the debt and climate crises deepen, this lack of concrete progress is worrying. World Bank data show that low-income countries are paying more in debt repayments than they receive in aid and investment. This is putting even more strain on both basic social spending and badly-needed investments in adaptation and resilience in the countries most vulnerable to climate impacts.

IIED analysis shows that the level of debt burden in some of the low-income countries at risk of default means that debt-for-climate-and-nature swaps could free up around US$100 billion. That’s over a hundred times more than the approximately $700 million pledged to the Loss and Damage Fund at the 28th UN climate change conference in December 2023.

At the end of the Spring Meetings, the World Bank publicly acknowledged that the current system for dealing with debt is not working. In the words of its chief economist, Indermit Gill, the G20 Common Framework – designed to help debt-distressed countries – “has not provided a single dollar of new money”.

Growing support for innovative solutions

This situation has, at least, focused minds, and there were discussions around a toolbox for low-income countries to address debt sustainability and provide the badly-needed fiscal space for essential social spending. 

I joined several of these sessions, led by the Forest and Climate Leaders Partnership, UN Economic and Social Commission for Western Asia, Global Small Island Developing States Debt Sustainability and Investment Support Service and Civil Society Policy Forum. Debt-for-climate- and-nature swaps featured heavily across these sessions, and there was a range of views on where and when they could be best used and their overall utility.

One key development was recognition of the potential for programmatic swaps, where resources are channelled through government systems and linked to key performance indicators aligned with countries’ own climate and nature priorities to provide fiscal space to deal with debt sustainability. This is something that traditional commercial debt-for-nature swaps do not provide for, as they involve establishing a trust fund, often outside of government.

A group of people sit around a conference table talking.

A discussion takes place at an event hosted by IIED and E3G in Washington DC during the 2024 Spring Meetings (Photo: Bri Sainz, Wilson Center)

Both IMF and World Bank officials told me that low-income countries are increasingly asking for support to consider the possibility of programmatic swaps. The V20 group of climate-vulnerable countries also highlights this issue in its 12th Dialogue communiqué.

Reversing the flows

So where is the new money to meet the Sustainable Development Goals and Paris climate targets going to come from? The UN has estimated around $4 trillion a year is needed. And as you might expect at a meeting of bankers, the Spring Meetings had a strong focus on the role of private finance.

There are two key challenges with private finance: quality and access. The first is about ensuring finance supports inclusive development outcomes at local levels and does not simply prioritise returns for investors. The second concerns low-income countries’ ability to access finance. Private investors often steer clear of both African and the most climate-vulnerable countries, due to perceptions of high risk, which are reflected in assessments by rating agencies such as Moody’s and S&P Global.

Fortunately, the IMF and World Bank have picked up this issue and are starting to discuss approaches to and analysis of risk with rating agencies under the G20 Global Sovereign Debt Roundtable. And, although the Spring Meetings focused less on the quality of private finance, efforts to get public finance to deliver impact where it is needed – for example, through the principles for locally led adaptation – offer potential lessons.

Major takeaways from the meetings are that no single solution will solve the debt, climate and nature crises, and that the problems are increasingly complex and intertwined, requiring a more joined-up approach from all parties. 

As one senior World Bank official told me: “We’ve known for some time that there are no silver bullets; it may be time to start looking for silver buckshot!”

About the author

Laura Kelly ( is director of IIED’s Shaping Sustainable Markets research group

Laura Kelly's picture