Webinar Summary – Climate, Development and International Financial Institutions: Perspectives from the Global South

Barbados. Photo by Jessa Lundquist via Unsplash.

By Samantha Igo

On Tuesday, October 22, 2024, the Boston University Global Development Policy Center and Global Economy and Development at the Brookings Institution co-hosted a high-level panel alongside the 2024 International Monetary Fund (IMF)/World Bank Group Annual Meetings in Washington, D.C. on Global South perspectives for international financial architecture reform.

The event featured a keynote address from Barbados Prime Minister Mia Mottley, followed by a presentation from Kevin P. Gallagher, Director of the Boston University Global Development Policy Center, on a new report from the Task Force on Climate, Development and the IMF that outlines a transformative reform agenda for the IMF to 2030. The remarks were succeeded by a ministerial-level panel featuring Olavo Avelino Garcia Correia, Vice Prime Minister and Minister of Finance, Cabo Verde; Ketleen Florestal, Minister of Finance, Haiti; Samuel Arkhurst, Director, Treasury & Debt Management Division, Ghana; and N.K. Singh, Co-chair of the G20 Independent Expert Group on Strengthening Multilateral Development Banks. The discussion was moderated by Amar Bhattacharya, Senior Fellow at Global Economy and Development at Brookings and member of the Task Force on Climate, Development and the IMF.

Brahima Sangafowa Coulibaly, Vice President and Director of Global Economy and Development at Brookings, opened the event with scene-setting remarks. He underscored that the impacts of climate are not evenly felt, with the Global South bearing the brunt of floods, droughts and severe storms now – not in the distant future. This is despite the fact that these countries have contributed the least to the climate crisis. He noted that these communities on the frontline are resilient but under-resourced. Access to climate finance, then, is vital because it is about the survival of millions of people around the world.

It is against this backdrop, Coulibaly said, that there is growing consensus that the international financial architecture is not fit for purpose to address 21st century problems. In reimagining this system, he stressed the importance of Global South perspectives, not only as a point of inclusion but because it is the right approach.

Coulibaly then introduced Prime Minister Mottley, who has been a leader in the international community for bolder, more ambitious reform through the influential Bridgetown Initiative and now as the chair of the Vulnerable Twenty (V20) Group of Ministers of Finance of the Climate Vulnerable Forum.

She opened her keynote acknowledging that, while the needle on reform has moved, it is not moving fast enough. The establishment of the Resilience and Sustainability Trust (RST) at the IMF is an example of movement, as Mottley explains how there had been calls for a longer-term instrument that would address the issues of vulnerable middle-income countries. It is not enough to get out of poverty, she said, but to stay out of poverty, and climate has the potential to catapult countries backwards.

Mottley used this keynote as an opportunity to call on the audience to use their influence to move the needle more. In one sentence on where the needle needs to move, Mottley said, “When all is said and done, we need longer, cheaper capital to save people and planet. Full stop.”

She transitioned to calling for a global methane agreement. Methane is much stronger climate pollutant than carbon dioxide, and she cited advice from scientists that containing methane would be an important element in containing global temperature increase, avoiding half a degree of warming. While she acknowledged that this is not a panacea, it would provide the international community more time to navigate the realities of insufficient public money and a challenging geopolitical environment. She then argued for a global solidarity levy, which could tax public ‘bads,’ like shipping pollution, to generate climate finance, which Barbados is collaborating on with France and Kenya.

There is an imperative for global leaders to listen to climate-vulnerable countries about the need to shock-proof their economies, she argued, because otherwise middle-income countries will become poor countries again. She argued that a new allocation of Special Drawing Rights (SDRs), channeled through multilateral development banks, is one critical way of providing much-needed finance.

Mottley underscored that an underbelly of global poverty has been – and will continue to be – exacerbated by the climate crisis, and solving poverty must be at the heart of the solution. “You don’t have the time to treat this sequentially if you are serious about solving problems,” she said.

There is a complex set of issues, but when these issues are deconstructed, she contended, it invariably comes back to the political will of several governments. If this political will is not mobilized, she warned that these governments will be “part and parcel with an ecosystem of victims that has started to develop across the world.” She ended on a call to those with influence: “We are from a very small country, and you may say that all we have is voice, and that may be true. But we will use it and use it and use it, because we believe that better can be done across the world.”

Following Mottley’s keynote, Bhattacharya invited Gallagher to present a new report from the Task Force on Climate, Development and the IMF, a consortium of experts primarily from the Global South advancing a development-oriented approach to climate at the IMF. The Task Force’s report argues that a swift transformation of the IMF is necessary for mobilizing a stepwise increase in financing for climate change and responding to climate risks in a fiscally sound and financially stable manner. It presents three core policy recommendations animated by an IMF 2030 Action Agenda, comprised of concrete reforms to be implemented over the next 12 months.

Gallagher highlighted that the Fund must reform its surveillance activities, align its lending toolkit by shifting away from fiscal consolidation and enhance global leadership to support resource mobilization efforts. He underscored that a development-centered approach is vital first because the biggest costs of climate will be borne by the Global South, and second because climate investments will result in a positive new development trajectory for these countries.

He explained the importance of the Fund’s role in climate by noting three key things. First, climate vulnerability increases the likelihood of requesting an IMF program, meaning that the Fund, perhaps without realizing it, is on the frontlines of the climate crisis and is acting as a ‘firefighter’ for climate vulnerability. Second, Task Force research shows that the energy transition will reshape public finances. And third, carbon pricing, despite being core to the IMF’s current approach, cannot offset financial losses, such as those endured by major hydrocarbon producing countries as they shift away from exporting fossil fuels.

Key reforms from the IMF 2030 Action Agenda include better attending to adaptation and loss and damage, replenishing the Catastrophe Containment and Relief Trust (CCRT), increasing the scope and efficiency of SDRs, and more.

To underscore the momentum around reforming the IMF to meet current global economic realities, Gallagher closed with two quotes from the April 2024 communiqué from the Intergovernmental Group of 24 (G24) and the September 2024 Climate Vulnerable Forum Leaders’ Declaration, both of which explicitly call on the IMF to evolve.

In the last portion of the event, Bhattacharya opened the ministerial panel. In response to a question on how the World Bank’s International Development Association (IDA) can be more effectively used to tackle vulnerabilities in the Global South, Correia spoke to the challenge of extreme poverty. He noted that the African continent must double its economic growth, and billions must be invested for this to happen. For Correia, the ongoing replenishment of IDA is very important, as it can help guarantee energy, water, sanitation and employment for Africans.

Next, Florestal spoke to the key reforms necessary to serve the interests of the G24 and the countries that are most vulnerable. She highlighted the importance of increasing the voice and representation of developing countries within the IMF, including recognizing the V20 as an official entity within the Fund, like the G24. There is also an urgent need, Florestal said, to replenish both the CCRT and the Poverty Reduction and Growth Trust, which serve developing countries. She also made a case for increased attention to the ‘silent’ destruction of climate change that happens every day, in addition to catastrophic climate shocks like hurricanes.

On how the Global South can work together to deliver the ambition necessary for climate action, Singh first acknowledged that these issues are, indeed, existential. He then highlighted ways in which the needle has moved, including the World Bank updating its mission to “end extreme poverty and boost shared prosperity on a livable planet,” the availability of finance, and that the issues being discussed at this event would not have been on the table even two years ago. Still, it has not met expectations, he said. The Bridgetown Initiative led by Mottley, however, is symbolic of bringing the South together and enhancing the consciousness of human society to address today’s problems.

In his remarks, Arkhurst drew a link between debt vulnerabilities and climate vulnerabilities. Citing Ghana’s recent experience with debt restructuring and the Fund program, he highlighted that the value of a country’s natural assets, particularly those that help improve the climate, should be considered in determining a country’s economic wealth. He closed with a call for urgency for the voices of climate vulnerable countries to be heard.

Iyabo Masha, Director of the G24, offered closing remarks for the event. Climate is now a part of the global discourse in a way that it wasn’t even 10 years ago, she said, but there is still a long way to go. She argued that it is only through this kind of discourse, and continuing to push international organizations, that substantial progress can be achieved.

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