The Spring Meetings of the World Bank and International Monetary Fund (SM26) bring together diplomats, agency directors, experts, and stakeholders, from more than 100 countries. After a year of painful, deadly, and destabilizing shock cuts to development and humanitarian programs, the future of development finance itself may be on the line.
The same tension as always will be at the heart of the meetings: How to provide financing (which normally comes with costs for the recipient) to support health-building human development, without burdening vulnerable countries and communities in ways that ultimately divert resources away from those pressing needs?
Health-building human development is the core standard of international cooperation and peacebuilding after the Second World War. While there were shooting wars throughout the Cold War, it was this commitment to cooperative development, and trade, that helped to save tens of millions of lives during that time and prevent a third cataclysmic global war.
The cost of shock cuts
Shock cuts signal a failure to deliver on long-committed partnerships. They also create real-world havoc that is playing out now, across the world. A conservative estimate finds that 780,000 people died of preventable causes as the result of just one year of cancellation of development assistance from the United States.
The World Bank and IMF are not responsible for USAID or for U.S. policy and development assistance, but they are tasked with preventing destabilization and supporting constructive cooperation between nations for shared benefits. The scale of ongoing disruptions to both humanitarian aid and development finance means even routine investments carry higher stakes and increased risk.
Before the shock cuts and the horrific loss of life in 2025, USAID had been found to have saved 92 million lives over just the last 2 decades before the cuts. Failing to follow through on existing contracts, long-term commitments, and human development priorities written into law by Congress, shattered a core faith many around the world had held—that open democracies would be steadfast friends of all humankind.
That could serve as impetus for a major rethink of outstanding financing arrangements. Why, for instance, should the recipient of development finance be indebted for a generation or more, while sacrificing needed public investment and diverting private investment to service debt, if the later stages or grant-based segments of the agreed financing may not be delivered—even when written into law and enumerated in signed and active contracts?
The cost of shock cuts is already measurable in worsening hunger, disease, and poverty, catastrophic loss of life, increasing instability, and unmanaged involuntary displacement. It is not a stretch to say that all of the professed strategic aims related to aid cuts are being undermined by the effects of those cuts.
Vulnerability & risk
Vulnerability-sensitive debt relief is needed now more than ever, as vulnerability and costs are both intensifying, and the means of efficient cooperative response are being depleted. Climate disruption, Nature loss, armed conflict, mass migration, worsening income inequality and threats to public health, have combined into an ongoing ‘polycrisis’ that is becoming a new background reality.
In this environment, with geopolitical stability and economic prospects deeply disrupted, no one can afford to waste money they do not have servicing debt that expands the wealth of unreliable partners. Far from simplifying the global development challenge, the withdrawal of committed funds has only exacerbated the need, the core issues of trust, and the stakes.
There is a growing total global opportunity for investors—much of which is being obscured, made too risky, or erased, by haphazard, counterproductive geopolitics and by the ripple effects of armed conflict. They key to tapping that opportunity is to find ways to improve the Active Value moving through society, to improve lives and livelihoods, reduce income inequality, and stop the depletion of agricultural landscapes, watersheds, and ecosystems.
While delegates to the SM26 meetings ongoing in Washington, DC, consider ways to ensure peace, security, open opportunity, and shared prosperity, three major issues continue to weigh on financial arrangements, around the world:
- The balance of hidden costs and co-benefits (BHC);
- The need for Earth system science insights to inform decision-making;
- The increasing instability of food systems and food security.
International negotiations around cooperative human development often cite the goal of ‘enhanced domestic resource mobilization’. The challenge is that the countries where that enhanced mobililization is needed are usually those that already devote disproportionate resources to servicing debt and managing disasters imposed on them by the activities of other states.
A foundation for future wellbeing
2026 is a time to consider not only the need for better measurement of risk and resilience, and detailed BHC assessments; it is also a time to start putting in place the pieces of a more robust and diversified rainy day financing infrastructure. Macroeconomy stabilization funds (MSF) can play this role at international, national, and local levels.
An MSF is a reserve-holdings fund that invests to secure stocks of needed supplies and supply capacity, to bridge everyday needs and prevent price shocks, especially with regard to life-sustaining basic needs. The goal is to pool funding, financial instruments, and assets from public and private-sector, multilateral and philanthropic sources.
An effective MSF is governed by rules that prevent market speculation or everyday profit-seeking. It works like a sovereign wealth fund, but is focused on the specific public good of preventing destabilizing price surges and supply shocks. The fund holds financial, logistical, and commercial capacity in reserve, so the wider economy is empowered to address supply shocks and price surges, quickly, effectively, and inclusively.
What might serve as an MSF at the national level could operate in highly vulnerable communities and regions more like a focused innovation fund, to spur investment in local economic diversification. As the local economy in question diversifies, grows, and becomes more stable, such financial mechanisms could evolve to play more of a durable macroeconomy stabilization role.
Agricultural subsidies, incentives, and extension services can serve these multiple needs, if designed to build a wider foundation of Active Value. Public institutions can invest, and activate co-investment mechanisms, to help farmers adopt resilience-building land stewardship techniques, to support diversified commercial activity in rural communities, to prevent wasteful overproduction, and to support snap increases in production, when needed.
Where co-investment mechanisms, cooperative de-risking, and adaptive design thinking are engaged to support fiscal resilience and sustainable development, national and local MSFs can bridge gaps, reduce vulnerability, diversify economic development opportunities, and support expanded private investment. The question this week in Washington is what kind of institutional support major multilateral finance institutions can provide to such endeavors.
Better quality, more reliable and sustained, versatile and inclusive support for macroeconomy stabilization and sustainable development will deliver critical returns and co-benefits for all. In this time of turmoil, we need serious investments in peace, stability, and sustainable development.
FEATURED IMAGE
After the historic Artemis II mission around the Moon, there is renewed public interest in understanding Earth as a planetary system. Human industrial systems are now overshooting Earth’s capacity to replace depleted life-sustaining resources and structural reinforcements of the biosphere. In other words: we are undermining Earth’s ability to support our own existence, let alone the high level of everyday comfort, convenience, and security, we have come to expect.
Fast-moving changes to Earth’s cryosphere will disrupt entire cities and nations in coastal, mountainous, forested, and agricultural regions. Those costs are already inflitrating all areas of economic activity. Whether the word ‘climate’ is mentioned, all international negotiations now involve decision-making about how to deal with costs generated by the industrial degradation of planetary health.
This insight is vital for ensuring investments in infrastructure, trade, and development, are evidence-based, rational, and beneficial to all.
Joseph E. Robertson, III 