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Climate finance: Did the IMF/World Bank spring meetings move the dial?

In a year in which climate finance will take centre stage in climate negotiations, all eyes were on the World Bank and International Monetary Fund (IMF) spring meetings last week to see what kind of tone they would set. Both institutions are under growing pressure to reform, including to massively expand funding available to tackle the climate crisis, but have been accused of moving far too slowly.

We asked a range of experts, academics, and activists what they learnt from spring meetings, whether the talks moved the needle on climate finance, and what the outcomes mean for Africa.

Grace Ronoh: There were two illusions of progress

At this year’s spring meetings, there were two hot topics of conversation in relation to climate finance and Africa.

The first was the announcement by World Bank President Ajay Banga of a new plan to provide 250 million people across Africa with affordable electricity by 2030, with an additional 50 million people being reached by the African Development Bank. All the new power generation will apparently come from renewable sources and the Bank intends to support countries to “green” their electricity production.

This is a welcome move, but it will be important to make sure that the Bank puts its money where its mouth is, and carries out this new commitment with accountability and transparency to the African people who are most affected by the energy and climate crises.

The second was replenishment of the International Development Association (IDA21), the Bank’s lending arm for low-income countries. At the meetings, African civil society representatives called on IDA21 to provide grants and highly concessional finance to support African countries on the frontline of climate impacts, particularly given crippling debt burdens.

Despite these illusions of progress, the IMF and World Bank’s engagement in climate finance for Africa still fails to address the root causes of climate injustice and poverty. To truly support sustainable development and climate resilience in Africa, there is an urgent need for a paradigm shift towards community-led initiatives, debt relief, and genuine partnerships that prioritise social and environmental justice over profit and power.

(Grace Ronoh is the Africa Climate Finance Manager at Recourse)

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Saliem Fakir: Africa remains $2.5 trillion short

2024 is a critical year for making significant headway on international development and climate finance. This year, a new collective quantified goal (NCQG) for climate finance flows will need to be negotiated and agreed. In Washington DC, discussions on climate finance took centre stage, as global efforts increasingly steer towards climate action. This is happening as the agenda on reforming global economic governance unfolds to enhance the legitimacy and efficacy of International Financial Institutions (IFIs).

Despite pledges made to boost lending for climate, the ability for donor contributions and IFIs, alike, to allocate sufficient resources towards climate finance remains in question. Africa is said to be $2.5 trillion short of climate finance by 2030.

For Africa, adaptation finance and debt burdens were strong points of discussion. Adaptation is grossly underfunded, and many African countries are in debt distress or at high risk of distress. The cost of servicing these debts have exceeded the $400 billion due to the lopsided global financial and debt architecture that perpetuates unsustainable debt cycles in low-and-middle countries. In addition, official development assistance (ODA), which remains an important source of external financing, is inadequate and trending downwards. The result is growing financing demands in the most vulnerable countries.

The call for an ambitious replenishment of IDA21 is an important step to availing more concessional resources, and potentially additional climate finance, for impoverished countries. The unveiling of new financial instruments, that could potentially generate $70 billion over years is welcome. But real impact will be felt when needs of people are met.

(Saliem Fakir is Executive Director of the African Climate Foundation)

Joab Okanda: Profit-based approaches are doomed from the start

The spring meetings were clear demonstration of how the WB and IMF and their architects are stubbornly not learning the lessons of the past while the climate crisis clock is ticking. They acknowledge the brutal cocktail of shocks that the Global South faces but are not keen to move away from their failed development models that built the brutal world we live in today.

At the end of the week, the V20, the group of 55 countries most threatened by climate change who represent 1.4 billion people, stressed that continued high levels of debt are “crowding out the ability of governments to achieve their climate change and development goals”, for which the meetings proposed no solutions whatsoever. Instead, we witnessed an attempt to worsen the debt crisis by the desire to provide climate finance largely in the form of loans, not grants.

During the meetings, new pledges of $11 billion were made to make the World Bank bigger and boost three of its initiatives (the eight Global Challenges Programmes, hybrid capital, and the Liveable Planet Fund). Not only is this amount peanuts compared to the needs of what is required under reparative and climate justice; as long as those are debt creating instruments, where the driving question is whether private financiers can profit rather than whether it will actually help people and planet, these initiatives will remain doomed from the start.

The World Bank cannot become bigger before better. A true reform would mean stopping seeking profit-based approaches to attract private sector to the climate space, when we know that private finance is limited for mitigation, neglects adaptation, and is completely inadequate to address loss and damage. A true global reform of IFIs should prioritise grant-based finance, provide measures to increase the fiscal space in the Global South, end their large financing for fossil fuels, and change their governance structures to enable more voice and participation from the Global South.

(Joab Okanda is the Pan-Africa senior advocacy advisor at Christian Aid)

Danny Bradlow: How to balance climate with health, education, poverty and more?

The spring meetings highlighted the complexity of the climate finance issue for the IFIs. On the one hand, they are trying to meet the demand for more climate financing. In the fiscal year ending in 2023, the World Bank Group increased the funds loaned for climate-related purposes by more than 20%, allocating 41% of all its lending to climate. The IMF’s new Resilience and Sustainability Trust is operational and has provided financing to 18 countries, primarily for adaptation. It is reviewing its Debt-Sustainability Framework for Low-Income Countries so that it incorporates climate considerations.

On the other hand, these developments have raised concerns in their consumer member states. The World Bank’s survey of its borrower countries shows that climate ranks number 11 on the list of priorities of its borrower states. Health, education, agriculture and food security, and water and sanitation rank much higher. In the case of the IMF, there is concern that while it is expanding its role in regard to the macro-critical aspects of climate – i.e. those crucial to achieving macroeconomic and financial stability – it is doing so in an opaque and unpredictable way because it has not made publicly available the principles and procedures it uses when deciding that a climate issue is macro-critical.

The challenge for the IFIs, therefore, is how to balance the demands to deal with climate, to end extreme poverty, and to operate in way that is environmentally and socially responsible. It is noteworthy in this regard that the Development Committee “reiterated the importance of accountability mechanisms in enhancing development outcomes and stimulating internal learning and feedback”.

(Danny Bradlow is a Professor/Senior Research Fellow at the Centre for Advancement of Scholarship at the University of Pretoria)

Susan Otieno: The WB must get better before it can get bigger

African countries are not only dealing with the unfair impacts of the climate crisis but many are also crumbling under the weight of debt accumulated through climate disasters, and through loans branded as “climate finance”. These huge loans owed to the World Bank, IMF, and wealthy countries’ banks have made it harder to free up the funds needed for climate action. Perversely, countries are often forced to expand fossil fuel and industrial agriculture production in order to repay those debts, worsening the climate crisis and their own suffering.

Civil society’s #FixTheFinance mobilisations across twenty countries including Kenya, Liberia and Washington DC in the US during last week’s spring meetings called on wealthy countries to provide REAL finance (grants) and to cancel the loans that have been pushing countries deeper into debt.

But we are yet to see grant-based finance on the scale needed. The World Bank is letting rich countries off the hook by counting dodgy finance channels as “climate finance” even though this does not help the most affected communities. The richest polluters are insufficiently taxed for the funds needed to finance climate action. Meanwhile, the World Bank is still financing fossil fuels and destructive industrial agriculture.

It’s time to limit the harm caused by colonial institutions like the World Bank and IMF. Until the World Bank gets its house in order, it is not the right channel for climate finance. The World Bank needs to get far “Better” before it can get “Bigger”. While it tries to ignore criticism, it is getting harder for it to hide its problematic approach.

On the plus side, last week’s civil society mobilisations mean that we’re in better shape to keep up the momentum and pressure for COP29 climate talks to agree to an ambitious, fair and grant-based new climate finance goal.

(Susan Otieno is the Executive Director of ActionAid International, Kenya)

Fadhel Kaboub: The WB and IMF have climate finance completely backwards

My main message to the World Bank and the IMF is that they are getting climate finance completely backwards. They are lending money to the wrong countries and imposing austerity on the wrong countries.

They should be lending money to the historic polluters to help them pay for their climate debt in the form of debt cancellation. And they should be providing grants rather than loans to Global South countries to invest in food sovereignty and agroecology, renewable energy sovereignty and high value-added manufacturing, along with transfer of lifesaving technologies to manufacture and deploy clean energy, clean cooking, and clean transportation infrastructure.

Instead of imposing austerity on the Global South, the World Bank and IMF should be asking the historic polluters to tighten their belts, reduce their energy use, reduce waste, eliminate planned obsolescence, and fight consumerism under a coherent and comprehensive degrowth framework.

In other words, we should be thinking of the Global North as the countries that need climate finance, and the Global South as the countries that are owed a climate debt.

(Fadhel Kaboub is an associate professor of economics at Denison University and president of the Global Institute for Sustainable Prosperity)

Yamide Dagnet: Vulnerable countries must be at the table, not on the menu

Many riveting reports and articles ahead of the IMF/WB spring meetings highlighted how ill-suited the Bretton Wood system is to face the climate, nature and health crisis while meeting the sustainable development goals. The V20 Debt Review (2nd Edition) exposed an external public debt for 68 of the most vulnerable countries amounting to $946.7 billion. External debt servicing is expected to escalate, as those countries are expected to pay $904.7 billion in debt service over 2022-2030. The G20 Independent Expert Group (IEG), appointed by the Indian G20 Presidency, exposed an outflow of $200 billion from developing countries to private creditors in 2023, in stark contrast with the incremental increase of bilateral and multilateral financing – including the $11 billion per year pledge by developed countries to invigorate the World Bank’s lending capacity.

The debt restructuring system and Multilateral Development Banks (MDBs) must reform in a much more radical way to reverse the current financial outflows – we need a “revolution” roadmap rather than an incremental “evolution”.  Vulnerable countries must be at the table, among the decision-makers of the IMF, not on the menu. Efforts to mobilise innovative financing coupled with a fair global taxation (e.g. through international tax task force) could get us closer to the trillions needed to transition towards just, safe, resilient, greener and prosperous societies.

This serves as a backdrop, as finance experts and diplomats are negotiating the new climate finance goal and ahead of the International Development Association (IDA) replenishment meeting in Kenya, aiming to scale up the largest (yet insufficient) source of long-term, cheap financing to low-income countries, to secure a fighting chance against intensifying climate impacts and thrive as greener economies.

(Yamide Dagnet is Senior Vice President, International, the Natural Resources Defense Council )

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