From Surcharges to the Debt-Climate Nexus: A Think20 Policy Brief Roundup
The Think20 (T20) is an engagement group of the Group of 20 (G20) that seeks to convene think tanks and research centers from G20 members, guest countries and organizations in order to provide evidence-based research to support policymaker decisions in the G20.
As a busy fall policy season kicks off this month with the United Nations General Assembly, the International Monetary Fund (IMF)/World Bank Group Annual Meetings in October, and the upcoming T20 and G20 Summits in November, GDP Center staff and researchers have co-authored a series of five new T20 policy briefs to present recommendations to G20 leaders on facilitating just energy transitions and reforming the international financial architecture.
The research spans topics from eliminating IMF surcharges to providing access to climate technologies and breaking the vicious cycle between debt and climate. The briefs provide G20 policymakers actionable recommendations for achieving a more resilient, equitable and sustainable global economy. Explore the latest research below:
Reforming the IMF Surcharge Rate Policy to Avoid Procyclical Lending
The IMF levies surcharges, or extra fees, on member countries that either draw “substantial” amounts of IMF credit to mitigate the balance of payments constraints or maintain their credit exposure with the institution for sufficiently long periods. Reportedly designed to discourage the overuse of Fund resources and ensure the IMF’s financial soundness, surcharges have been scrutinized in recent years for two reasons.
First, such surcharges are inherently procyclical, as they increase the burden of debt payments at exactly the time when a member country is in need of counter-cyclical and low-cost financing, contravening the very rationale of the IMF. Second, IMF surcharges have become among the largest sources of revenue for the IMF, creating a situation whereby the most economically disadvantaged member countries are a major source of income for Fund operations.
A new T20 policy brief by Kevin P. Gallagher, Martin Guzman, Joseph E. Stiglitz and Marilou Uy reviews the rationale for IMF surcharges and evaluates their impact on member country economies, ultimately calling for their elimination. Read the policy brief.
Advancing Affordable Access to Climate Technologies for Clean Transition and Sustainable Industrialization in Developing Countries
The clean transition toward net-zero is often constrained by inadequate finance and access to affordable climate technologies, especially for developing countries. While the G20 has been at the forefront of efforts to take steps to address the financial challenges, the generation and diffusion of climate technologies must also receive due attention.
A new T20 policy brief by Rachel Thrasher, Nagesh Kumar, Elizabeth Sidiopoulos, Kevin P. Gallagher and Faizel Ismail discusses key barriers to generating climate technologies and their affordable access by developing countries to advance a clean transition and sustainable industrialization. Read the policy brief.
Breaking the Vicious Cycle of Debt and Climate Crisis: Debt Relief for a Green and Inclusive Recovery
It is now widely recognized that emerging market and developing economies (EMDEs), excluding China, need to mobilize $3 trillion annually by 2030 to meet shared climate and development goals and help transform the world economy into one that is low-carbon and more equitable and resilient.
However, EMDEs are currently slashing essential basic services and forgoing investments in education, health and climate resilience to meet record levels of external public debt service. With high interest rates, mobilizing these investments at high costs could risk increasing debt vulnerabilities and deepen the debt crisis.
In a new T20 policy brief, Marina Zucker-Marques, Maria Fernanda Espinosa and Jörg Haas propose significant reforms to make the G20 Common Framework for Debt Treatments more efficient, inclusive and oriented towards climate and development goals. Read the policy brief.
Mobilizing Innovative Sources of Finance: Lessons from the Resilience and Sustainability Trust
In April 2022, the IMF established the Resilience and Sustainability Trust (RST), its first lending facility to provide longer-term concessional financing to low- and middle-income countries to help tackle key structural challenges such as climate change and pandemic preparedness. The RST is resourced through voluntary re-channeling by G20 countries as part of their 2021 historic allocation of Special Drawing Rights (SDRs), the Fund’s reserve asset.
In a new T20 policy brief, Jwala Rambarran, Sara Jane Ahmed, Fahmida Khatun and Rishikesh Ram Bhandary present three actionable recommendations to the G20 to help make the RST an important, transformational part of the global financial architecture, particularly as the IMF undertakes a comprehensive review of the lending tool in 2026. Read the policy brief.
Towards a More Robust and Equitable Global Financial Safety Net
In the face of a series of challenges rocking the global financial system, there has been a call for a more equitable and resilient Global Financial Safety Net (GFSN), or the set of institutions tasked with providing emergency liquidity assistance to countries in need.
Given the IMF’s vital role within the international financial architecture as the lender of last resort, a strong and effective GFSN with a quota-based IMF needs to be at the center of G20 initiatives. Although the IMF’s 16th General Review of Quotas increased quota resources, the additional resources will replace borrowed resources, leaving the IMF’s lending capacity unchanged. The additional quotas are also to be allocated equi-proportionally, rather than rebalancing quota shares to reflect the increased importance of EMDEs in the global economy.
In a new T20 policy brief, William Kring, Marilou Uy, Rakesh Mohan and Laurissa Mühlich navigate these fundamental shifts in the global economy, arguing for an adjustment of the Fund’s quota formula to ensure better access to resources and more equitable governance. They present three key policy recommendations to ensure that the GFSN is sufficiently resourced, quota-based and equitably distributed as well as providing voice and representation to all countries. Read the policy brief.
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