IMF Mum on Demand for $500 billion in annual climate finance for developing countries
The International Monetary Fund (IMF) and World Bank concluded their annual spring meeting in Washington, DC, last week without responding to a request for an additional US$500 billion a year in climate finance for countries in the Global South for next 20 years.
“Support for the economic crisis triggered by the pandemic is still needed, but a much deeper crisis threatens the world’s poorest countries,” says an open letter to the IMF published by 27 lawmakers from around the world who belong to the Alliance. world for a green. New contract.
“The climate crisis, if left unchecked, will be far more devastating,” States their letter, repeating a plea first made by Barbados Prime Minister Mia Mottley at the COP 26 climate summit last November. Vulnerable countries seek $500 billion a year through the IMF’s existing Special Drawing Rights (SDR) mechanism, an artificial currency created by the IMF that can be used to repay international loans or exchanged for other currencies.
The alliance also renewed calls for debt cancellation for developing countries, with British MP Caroline Lucas urging the IMF to prove it is ‘fit for purpose’ by tackling the ‘greatest challenge of the 21st century’. and “cancelling unpaid debts, abolishing punitive sanctions”. surcharges and make available the billions in low-cost financing that low- and middle-income countries need.
“Climate adaptation continues to be grossly underfunded” and pandemic recovery “will be much slower and longer” for least developed countries (LDCs) and small island developing states, Bangladeshi minister says Saber Chowdhury, adding that debt relief and the expansion of SDRs in the Global South “is desperately needed to avert climate catastrophe.”
LDCs need a “massive boost in technical and financial support to achieve development and climate goals: expanding access to energy, switching to renewable sources, protecting and enhancing biodiversity, safeguarding and improve indigenous lands, create decent and green jobs and build resilience against the impacts of climate and natural crises already affecting them,” the letter reads.
Alliance members said they recognize the IMF’s new Resilience Sustainability Trust (RST), established April 18 to support global climate adaptation, but remain “concerned about preliminary design features that may to make it a less effective instrument than many need”. countries.”
The alliance urged the IMF to “provide debt-free financing, so as not to add to the unsustainable debt burden of developing countries,” adding that “grant-based financing is essential for climate change-related loss and damage.” And “if additional loans are to be offered for mitigation, then maximum concessionality is essential” – meaning zero interest and long repayment terms with extended grace periods,” the letter states.
As adopted, the RST does not meet these requirements: it is based on loans, but with a grace period of 10.5 years, and “with the most concessional financing conditions granted to the poorest countries” . according to an IMF press release. With an initial funding target of $50 billion, the RST will also fall well short of the $500 billion per year requested by Mottley and the alliance.
Tirivangani Mutazu, Senior Policy Analyst for the African Debt and Development Forum and Network, wrote that the “design features of the RST are inconsistent with supporting a sustainable and equitable recovery and are inconsistent with civil society organization principles for fair and transparent channeling of SDRs”.
Mottley thanked the IMF for the RST, calling it “a step in the right direction” and “the only step to date that recognizes vulnerability”. But she pointed to past and present injustices – including the climate crisis – that have left the developing world and small island states like Barbados “taking on our balance sheets the actions of others”. The IMF, World Bank and development banks needed to “go further”, she said.