In contrast to a bland communiqué from the IMFC, which trotted out tired platitudes as the IMF struggled to meet the moment in the midst of rising geopolitical tensions (see Dispatch Annuals 2024), the V20 made no bones about its outrage that the global financial architecture continues fail to intervene in order to save its members from the edge of the climate abyss.
In language rarely seen in the heavily-sanitised communiqués typically issued at the World Bank and IMF Meetings, the V20 members offered a searing indictment of rich countries’ failure to act in their communiqué: “As global temperatures climb perilously close to the 1.5-degree Paris target, our hopes and dreams are slipping away…Our nations are hemorrhaging money: vastly more capital flows out due to increasing debt payments to fund the cost of disasters than comes in from concessional loans and investment. This is development in reverse.”
This language was echoed at the V20 ministerial on 22 October itself, where Madagascar finance minister Rindra Hasimbelo Rabarinirinarison noted sentiments that were raised by a number of her counterparts, saying, “We have to get to the point. We are about to celebrate the ten-year anniversary of the Paris Climate Agreement,…[but] climate vulnerable countries are still experiencing climate injustice.”
Rising seas and rising debts – with little relief in sight
The V20 observed that, “Our total external public and publicly guaranteed debt stock currently amounts to just over USD 945 billion, significantly constraining our ability to mobilize resources towards investing in critical climate and development initiatives,” noting that eight V20 nations are allocating more than 20 per cent of their tax revenue to external debt servicing.
The V20 made a direct link between this unsustainable situation – which for some of its members increasingly poses an existential threat – and the lack of governance reform at the Bretton Woods Institutions (BWIs, i.e. the World Bank and IMF) in the context of their 80th anniversary, as rich countries – most notably the US with its veto power – continue to exercise control over key decision-making powers. The communiqué noted, “representation of climate vulnerable economies, especially the 70 members of the V20, remain[s] dismal in the governance of the Bretton Woods institutions. V20’s voice and representation in the IMF and World Bank must be improved. This is critical to IMF and World Bank legitimacy, important for impact, and vital for policy traction.”
The V20 called for the IMF, in particular, to undertake a number of actions, including launching a replenishment drive for the Catastrophe Containment and Relief Trust (CCRT) in order to provide grant-based debt relief; removing the Resilience and Sustainability Trust’s (RST) requirement to have a concurrent IMF Upper Credit Tranche (UCT) programme in order to access its funds (see Inside the Institutions, What is the IMF Resilience and Sustainability Trust?); and for “RST resources to back new bonds following debt restructuring negotiations.”
V20 calls for a change of BWIs’ approach, from austerity to fiscal space for climate action, including via SDRs
The V20 also noted that, “given the tremendous liquidity needs [of climate vulnerable countries], it is time for the IMF to again authorize at least USD 650 billion issuance of SDRs for climate vulnerable countries to invest in resilience and sustainable development.” While this marked a significant change in position for the V20 from its Spring Meetings communiqué (see Dispatch Springs 2024), mention of a new SDR allocation was conspicuous in its absence in the IMFC communiqué, despite continued support for this from civil society, as a means to help mitigate the current climate and debt crises facing climate vulnerable countries.
The V20 also called for the Fund to shift away from fiscal consolidation (read: “austerity”) towards a focus on ensuring climate investment in V20 countries. It noted, “‘Austerity measures which destroy livelihoods and crush aspirations are not inevitable; they reflect a deliberate fiscal choice.” While the V20 welcomed, “recent changes to the surcharge policy,” it encouraged “the IMF to make further downward revisions” (see Observer Autumn 2024).
The bloc also backed capital increases to the World Bank and its multilateral development bank peers, with a particular focus on the International Development Association (IDA), the bank’s low-income country lending arm, arguing, “A bigger bank cannot be possible without a bigger IDA.” It called for a $120 billion war-chest for the 21st replenishment of IDA, which will conclude in December (see Observer Autumn 2024).
The V20 also called for an ambitious New Collective Quantified Goal on climate finance, to be agreed at COP29 in Azerbaijan in November, noting, “The NCQG must directly connect with ongoing reforms to facilitate effective resource mobilization, enhance accountability in the international financial system, and address cost of capital, debt instability, and loss and damage comprehensively.” This call came as civil society continued to raise concerns about the lack of transparency in the World Bank’s climate finance reporting and wider approach to the energy transition at the Annual Meetings (see Briefing, Year one of World Bank Paris Agreement alignment in the energy sector: ‘green conditionality’ dwarfs green investments).
IMF Managing Director Kristalina Georgieva attended the V20 ministerial, and was candid about the challenges posed by the climate crisis, saying, “we have heard the science, but we have failed to act. Can we change course? This is what you as a group can help us do. I am very keen to have your voice in these corridors of economic and financial power.”
However, despite the V20’s strongly worded missive, the lack of action from the IMF’s wealthy shareholders at the Annual Meetings also spoke volumes – even as a new report from the UN Environment Programme indicated the world is on track for a catastrophic 3.1°C of temperature rise this century.
A better deal for climate vulnerable countries will require more than Georgieva’s pretty words.