As governance reforms at the World Bank and IMF Annual Meetings in Marrakech, Morocco, proved muted (see Dispatch Annuals 2023), climate vulnerable countries continued to call for urgent reforms to the Bretton Woods Institutions to make them more responsive to their needs.
The V20’s communiqué bemoaned the bloc’s lack of voice and vote within the IMF, despite climate vulnerable countries being heavily reliant on the Fund when faced with climate shock. It noted, “V20 countries, with 21.7% of the global population and 44.7% of IMF programs, have only 5.3% of IMF votes. This unbalanced system harms V20 countries in the allocation of Special Drawing Rights (SDRs). We stress the importance that any quota increase and quota share realignment should result in strengthening the voice and representation of V20 members, including the creation of a Third Chair for Sub-Saharan Africa.”
However, as IMF Managing Director Kristalina Georgieva noted at the V20 ministerial on 15 October, the International Monetary and Finance Committee (IMFC) at the Annual Meetings merely agreed to “support a meaningful quota increase that at least maintains the Fund’s current resource envelope”, according to the IMFC chair’s statement (see Dispatch Annuals 2023), falling well short of a quota realignment that would significantly increase the V20’s voting share in the Fund.
The communiqué also called for the V20 to be granted official observer status at the Bretton Woods Institutions (BWIs, the World Bank and IMF), noting, “We reiterate our call to the World Bank Group and the IMF to recognize the V20 Finance Ministers as an official Group. The V20 Finance Ministers have unique experiences and expertise to contribute to the agendas of the International Monetary and Financial Committee and the joint World Bank Development Committee.”
Ghanaian finance minister Ken Ofori-Atta, who chaired the V20’s ministerial meeting, said he hoped the group’s observer status at the BWIs “would be solidified between here and COP28”, due to take place in the United Arab Emirates from 30 November to 12 December, adding, “we are at a pivotal juncture on our mission to revolutionise global governance.”
V20 calls for BWIs to go further in mainstreaming climate and scaling up climate & development financing
With calls for system change in mind, the V20 finance ministers emphasised, “the need for the IMF to align its lending toolkit with the Paris Agreement. This includes increasing available financing and reforming tools to help nations mitigate balance of payment impacts caused by short-term climate shocks and to secure medium-term and longer-term climate resilient development pathways.”
Despite a new IMF research paper published in September noting that the low-carbon transition, “could have profound stability and resilience implications for global trade and the international financial system” in the coming years, IMF Deputy Managing Director Bo Li noted during the V20’s ministerial meeting that the Fund’s work on climate change to date remains particularly focused on adaptation – raising questions about whether the Fund is doing enough to help its members to avoid a disorderly transition (see Observer Autumn 2021).
They also called for the onerous eligibility criteria for the IMF’s Resilience and Sustainability Trust to be reformed – echoing the G24’s call in its Annual Meetings communiqué (see Dispatch Annuals 2023) – noting, “We reiterate our call for enhanced access to the…[RST] by removing the requirement for eligible countries to have a concurrent IMF program in place alongside Resilience and Sustainability Facility (RSF) financing.”
Additionally, the V20 emphasised the need for more public financing via the World Bank and other multilateral development banks (MDBs), encouraging them “to formulate plans for a general capital increase to boost grant-based resources, technical assistance, low-cost financing with additional concessionality climate and development needs of their climate-vulnerable members, while concurrently pursuing balance sheet optimization measures by Spring 2024.” They also reiterated their call, “to triple concessional International Development Association (IDA) financing for IDA-eligible countries through donor contributions, IDA bonds, balance sheet optimization, and to expand access for climate-vulnerable economies with new resources. We expect an ambitious IDA21 replenishment [in 2024].” IDA, the Bank’s low-income country lending arm, faces a fiscal cliff in fiscal year 2024 and 2025, unless further donor resources can be mobilised (see Dispatch Annuals 2023).
V20 demands more action on debt
The V20 ministers called for improvements to the IMF’s debt sustainability assessments, which currently focus only on ‘sustainability’ related to states’ abilities to service their debts, without accounting for financing needs related to national climate strategies, social spending, or human rights obligations (see Observer Autumn 2023). The V20 noted, “We encourage the IMF to further refine its analytical tools such as debt sustainability analyses, to better capture climate risks including cross-border transition risks, loss and damage, and their macro-critical impacts, and benefits of investments resilience, as well as resource mobilization needs for national climate strategies while supporting capacity acceleration efforts to strengthen climate policy analysis and the development of domestic markets for sustainable finance.”
Against the backdrop of a worsening developing world debt crisis, they also called on MDBs to take part in debt restructuring efforts, where relevant, with the communique highlighting “the importance of participation of MDBs in debt restructuring under a comparability of treatment rule that accounts for the cost of lending and concessionary elements.”
Although Georgieva pointed to incremental progress being made on the G20’s Common Framework for debt restructuring at the Annual Meetings in her statement, V20 ministers requested “a guarantee facility to help move multilateral efforts on debt relief forward by encouraging diverse creditors to resolve debt workouts in a timely and sustainable manner. We encourage the IMF to play a strategic role in these debt restructuring workouts by using the Resilience and Sustainability Trust to provide collateral which guarantees restructured debt.”