Paralysis among global finance leaders in addressing the aftermath of the Hamas attack and Israel’s response last week revealed significant geopolitical divisions that are hindering the efforts of the International Monetary Fund (IMF) and World Bank, despite their advancement of new funding plans aimed at mitigating more frequent economic shocks.
On October 7, Hamas initiated an unprecedented attack on Israel just as top finance officials had gathered in Morocco for the IMF and World Bank annual meetings. This unexpected conflict disrupted the planned discussions on new resources and strategies to rejuvenate the global economy.
During the opening events, IMF Managing Director Kristalina Georgieva did not mention the recent conflict. As Israel’s retaliatory strikes continued, she struggled to address the situation, initially characterizing it as a human tragedy but a vague source of economic uncertainty.
In private discussions at the meetings, the implications of the Israel-Gaza conflict were prominent, encompassing concerns about a new refugee crisis, trade disruptions, and the potential for conflict in Lebanon and the West Bank, as conveyed by participants from various sectors.
Rachel Nadelman, a senior research fellow at American University’s Accountability Research Center, who attended civil society and official events at the meetings, noted, “In the face of a major global shock like this that’s human-created, that’s not a climate shock, these institutions are impotent to do anything about it, which is why they’re not even talking about it.”
The inability to respond extended to the statements issued by the Group of 20 major economies and the IMF and World Bank steering committees, all of which failed to mention the conflict. These entities have been unable to issue joint communiques due to deepening geopolitical tensions, including the Ukraine conflict and disputes between the United States and China.
A G20 official highlighted that the body has been divided for two years over the Ukraine war, with a communique only becoming possible after a meeting between U.S. President Joe Biden and China’s Xi Jinping in Bali last year. The official stated, “The Israeli-Palestinian conflict is even more controversial – almost impossible to reach consensus.”
World Bank President Ajay Banga acknowledged on Sunday that the Israel-Gaza conflict, along with the Ukraine war and conflicts in Africa, were “casting long shadows” over the accomplishments of the meeting and contributing to economic challenges.
While the IMF’s steering committee agreed to increase quota funding by year-end, it left the door open to doing so without adjusting its shareholding structure to provide China with more votes. Additionally, a $3 billion fundraising target for its poor-country trust fund was achieved.
Josh Lipsky, a former IMF official who directs the Atlantic Council’s GeoEconomics Center, pointed out that conflicts continue to be the most significant challenge to the global economy.