open letter to the imf calling for significant increases in climate finance
Kristalina Georgieva, The International Monetary Fund,
cc: Finance Ministers of the G20; IMF Executive Board
16th April 2022
Dear Managing Director Georgieva and Finance Ministers of the G20,
As members of parliaments across the world, we are writing to you to ask you to consider the further extension of significant volumes of Special Drawing Rights (SDRs) to nations to finance climate mitigation, and to renew the calls that many of us have already made for debt cancellation for developing nations. In doing so, we follow the proposal made by the Prime Minister of Barbados, the Rt Hon Mia Mottley MP, at the 26th United Nations Climate Change Conference of the Parties (COP26) in Glasgow last November. The proposal that she made was the only one we saw of a scale to meet the challenges humanity collectively faces.
The Working Group III contribution to the Intergovernmental Panel on Climate Change’s (IPPC’s) Sixth Assessment Report, Climate Change 2022: Mitigation of Climate Change, published at the beginning of this month, underlines just how critical this task is. In the words of Jim Skea, a professor at Imperial College London and co-chair of the working group: “It is now or never, if we want to limit global warming to 1.5C. Without immediate and deep emissions reductions across all sectors, it will be impossible.”
We were pleased that the International Monetary Fund (IMF) was able to disburse the $650 billion SDR allocation upon members’ approval in August 2021. This will provide critical support to the world’s poorest countries who continue to suffer from the pandemic-triggered economic crisis. However, as a consequence of the quota-linked distribution mechanism, G7 countries alone received $290 billion of this allocation, while only $21 billion went to low-income countries. While G20 countries have committed to recycling a target of $100 billion of their SDRs to recovery and climate action for the Global South, we are concerned that some of the world’s richest nations may double-count these new resources as aid commitments rather than as they had been intended, as additional to aid. Such mean-spirited sleights of hand must be prevented for any future issuance.
Support for the pandemic-triggered economic crisis is still needed, but a far greater crisis looms for the world’s poorest nations. The IPCC report Climate Change 2022: Impacts, Adaptation and Vulnerability, the contribution of Working Group II, published in February, showed how deaths from floods, droughts and storms have been 15 times higher in the most vulnerable countries and regions than in the least vulnerable regions and nations. In areas of high vulnerability around the globe – home to 3.6 billion people – the working group documented over 100 climate risks which will become more severe. Some of those changes will be irreversible.
Speaking at the Fifth United Nations Conference on the Least Developed Countries in March, the UN Secretary General, Antonio Guterres, once again emphasised that the policies and finance needed to avert catastrophic runaway climate change are needed not in 2030 or 2050, but now. We are at one with the Secretary General in acknowledging the brief and rapidly closing window of opportunity to hold heating to 1.5C and secure a liveable future.
The world’s least developed countries need a massive boost in technical and financial support to achieve development and climate goals: expanding energy access, transitioning to renewable sources, protecting and enhancing biodiversity, safeguarding and enhancing indigenous lands, creating decent, green jobs and building resilience against the impacts of the climate and nature crises already battering them. That is why we urge you, at this, your first meeting since the Prime Minister of Barbados first proposed the extension of significant volumes of SDRs in response to the climate and nature crises, to consider her proposal
We urge you to support further, annual, major issuances of SDRs to provide nations in the Global South with the financial support needed to adapt to the irreversible impacts of the climate crisis and to decarbonise their economic activity by investing in renewable-fuelled, climate-resilient development pathways. The climate crisis, if left unchecked, will be far more devastating than even the pandemic-induced economic crisis.
As Prime Minister Mottley pointed out when she made the case to world leaders in Glasgow, the Central Banks of the world’s wealthiest nations engaged in 25 trillion dollars of quantitative easing between 2008 and 2021; $9 trillion in 18 months. Had that $25 trillion been used to purchase bonds that financed the energy transition, we would be already reaching a world able to maintain global heating below 1.5C. Right now, we are far from that.[1]
We are in agreement with Prime Minister Mottley when she assesses the need for $500 billion each year for the next 20 years to finance the transition and adaptation needs of developing countries. Regular issuances of SDRs provide a critical opportunity to secure[2]this target, whether by adjusting from a quota-based to needs-based SDR allocation mechanism, or by routing these resources into development finance instruments that could make them more predictable and less dependent on political agendas.
We recognise your efforts to develop the Resilience and Sustainability Trust to support climate adaptation but are concerned about preliminary design features that are likely to render it a less effective instrument than is needed by many countries. In concordance with the recent open letter to you, signed by almost 300 regional and global civil society organisations, academics and researchers, we reiterate their concerns and urge you to ensure that all SDR rechannelling mechanisms to:
1. Provide debt-free financing, so it does not add to unsustainable debt burdens of developing countries, whose annual external public debt payments are projected to average US$300 billion over 2021 and 2022. Grant-based financing is critical for loss and damage related to climate change but, if additional loans are to be offered for mitigation, then maximum concessionality is critical (zero interest and lengthy repayment terms with extended grace periods).
2. Refrain from tying transfers to policy conditionality (directly or indirectly). Conditionality could hinder take up, will lengthen the time it takes to negotiate such financing, could force countries into adopting difficult adjustment or austerity measures; or put the financing beyond reach for countries unable to comply with some of the conditions.
3. Be accessible to middle-income countries. These countries have persistently been left out of debt relief initiatives and concessional financing and should not be excluded from yet another financial assistance option when many of them face deep debt distress and challenging pandemic and climate vulnerabilities.
4. Include transparency and accountability safeguards on both providers and recipients of such financing in the spirit of democratic ownership, strengthening independent scrutiny, participation and accountability to citizens.
5. Ensure that SDR contributions are additional to existing ODA and climate finance commitments.
Finally, neither the initial SDR allocation nor the channelling of SDRs can be a substitute for the urgent implementation of debt relief measures that benefit both low- and middle- income countries, especially to ensure that the additional resources are not directed to repay external private and other creditors, but into productive recovery and climate investments.
To that end, we urge you to take note of the open letter sent by Alliance members Representative Omar, Representative Tlaib and others urging US Treasury Secretary Yellen to use her vote and voice to work for the abolition of the IMF’s surcharge policy, which requires countries with substantial or longstanding debts to the IMF to pay considerable fees on top of their debt servicing costs. The Fund’s pro- cyclical surcharge policy, designed to penalise countries for the size and duration of loans, discourages social investment by developing countries. That is why in May last year, the G-24 group of countries recommended that the Fund suspend, reform, or eliminate surcharges.[3] We urge you to heed their call.
As a collaborative international community, we can only respond effectively to the climate and nature crises if we work together – recognising, as we do, that they are inextricably linked to intolerable levels of inequality within and between nations. Not only do we have a moral duty to support those nations least responsible for the interlinked climate and nature crises faced by humanity; we have a common, vested interest in supporting the transition to a habitable planet.
For those reasons, while committing to doing our part to advance global climate justice and support the further issuance and judicious channelling of SDRs in our parliaments wherever possible, we urge the IMF to take strong leadership to provide extensive financial assistance for all developing nations most at risk of the devastating human costs and the long-lasting economic injuries of the interlinked climate and nature crises. We ask that you work with relevant bilateral and multilateral partners to provide a response no more than 15 days after receipt of this letter.
It is in our shared public health, security, and economic interests that we come together and act boldly to assist the most vulnerable nations among us. We stand ready to work with you and support immediate and long-term solutions to ensure those countries on the frontline of the climate and nature crises, and least responsible for their advance, receive the flexibility, resources and guidance they need in order to advance the transition to a world able to live within 1.5C, and preserve the ecosystem we share and rely on for our survival.
In service,
Representative Ilhan Omar, Member of U.S. Congress and advocate of the Green New Deal
Caroline Lucas MP, UK, co-chair of the All Party Parliamentary Group on the Green New Deal
Clive Lewis MP, UK, co-chair of the All Party Parliamentary Group on the Green New Deal
Manon Aubry MEP, European Parliament, Co-chair of the Left Group in the European Parliament and a co-founder of the Inter-Group on the Green New Deal
Dep. Joenia Wapichana, Brazilian Federal Parliament, and member of the Wapixana tribe of northern Brazil.
Congresswoman Paola Vega Rodriguez, Chair of the Environment Committee of the Costa Rican congress
Saber H. Chowdhury MP, Bangladesh, Chair, Parliamentary Standing Committee on the Ministry of Environment, Forest & Climate Change and Honorary President, Inter-Parliamentary Union
Representative Rashida Tlaib, Member of U.S. Congress and advocate of the Green New Deal
Yanis Varoufakis MP, Greece, former Finance Minister and Secretary General of MeRA25
The Honourable Boma Goodhead MP, Nigeria, MP for Rivers State in the Niger Delta.
Frank Habineza MP, founder of the Democratic Green Party of Rwanda, President of the African Greens Federation.
Charles Santiago MP, Malaysia, Chair of the Human Rights and Constitutional Affairs Committee of Malaysia, and of the Parliamentarians for Human Rights Group in ASEAN (Association of South East Asian Nations).
Deputada Esther Cuesta, Ecuador, former vice minister in the government of Rafael Correa.
Elizabeth May MP, Canada, environmentalist, writer, activist and lawyer
Representative Maria Jose Pizarro, Colombia, artist, feminist and environmentalist
Marama Davidson MP, co-leader of the Green Party of Aotearoa New Zealand
James Shaw MP, co-leader of the Green Party of Aotearoa New Zealand
Adam Bandt, Leader of the Green Party of Australia
Senator Risa Hontiveros, Philippines
Ibu Mercy Barends MP, Indonesia, Chair of the Green Economy Caucus and Member of ASEAN Parliamentarians for Human Rights.
Sanela Kleric MP, Chairwoman of the Green Council, Bosnia and Herzogovnia
Zitto Kabwe, former MP and leader of the Alliance for Change and Transparency, Tanzania
Peter Julian MP, initiator of Motion M1- the Canadian Bill for a Green New Deal
[1] Speech at the World Leaders Opening Ceremony, 1 November 2021. Available at: https://pmo.gov.bb/2021/11/01/speech-at-world-leaders-summit-opening-ceremony/
[2] Open Letter to G20 Finance Ministers, Central Bank Governors and the IMF, available at: https://medium.com/@OxfamIFIs/civil-society-organizations-call-for-principles-for-fair-channeling-of-special-drawing-rights-2f3795cdb14c
[3] Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development Statement, 4/5/2021, https://www.imf.org/en/News/Articles/2021/04/05/g24-communique-april-5-2021
Read the letter in French, here.