Finance

Commentary

Civil society organizations urge end to IMF surcharges to finance climate action instead

22 November 2022 | Letters


Notice: Undefined variable: briefing_cover in /var/www/web130/web/wp-content/themes/bretton-woods-project/library/template-fragments/article.php on line 70

International Monetary Fund Board of Directors

Dear IMF executive directors,

Following the completion of COP27 and the IMF Managing Director’s plea for decision makers to “do the right thing” to forestall a climate disaster, the undersigned organisations and individuals call upon the IMF to urgently address one of the most glaring and easily rectifiable contradictions between its stated support for a just transition and its actions by immediately ending its surcharge policy.

As the world watched deliberations at COP27, the choices ahead were made crystal clear by the United Nations Secretary General during his opening remarks: “We must cooperate or perish”. Discussions at COP again emphasised the dire need for climate finance to be made immediately available and for what the V20 calls a “fit-for-climate” global financial system. Contrary to the established consensus and the rhetoric of important IMF shareholders of the need for urgent action, projections indicate that debt-vulnerable countries already facing multiple crises and a worsening economic outlook may have to pay nearly $8 billion from 2021 to 2028 in surcharges. This is a vast sum that should be used to finance climate action and to strengthen countries’ ability to meet their international human rights obligations. The fact that these resources will instead be used to support the IMF’s counter-productive and unnecessary policy makes a mockery of IMF statements emphasising its support for a just transition.

Our call is not new. The present letter follows our previous April statement, signed by over 250 organisations and experts worldwide. Both are supported by overwhelming evidence demonstrating that the policy is pro-cyclical, likely exacerbates the risk of default and is counter-productive. The policy also violates international human rights law and is unnecessary.

Additionally, as you know, on 26 August, the UN independent Expert on the effects of foreign debt, the Special Rapporteur on the promotion and protection of human rights in the context of climate change and several other United Nations Independent Experts and Special Rapporteurs added to the above-mentioned apprehension and evidence in a letter to IMF Managing Director, Kristalina Georgieva. The letter was sent under the communications procedure of the Special Procedures of the United Nations Human Rights Council and expressed concerns “with the impact of the surcharge policy on the enjoyment of the human rights in affected countries” and requested a reply to six questions. Disappointingly, particularly given the IMF’s status as a UN specialised agency and its stated focus on multilateral cooperation, to our knowledge the IMF has to date deemed the communication unworthy of a response. Considering the significant concerns raised by the letter, we call on the Board to ensure the Managing Director urgently replies to it.

Given the many challenges faced by middle- and low-income countries and in particular their most vulnerable populations, the retrogression on poverty reduction, and considering UNCTAD’s warning that the Sustainable Development Goals are unlikely to be met, we reiterate our demand that the IMF executive board act immediately to put an end to this damaging, counterproductive and unnecessary policy.