The International Monetary Fund (IMF) and the World Bank kicked off their spring 2024 meetings in Washington. These meetings aim to raise finance for the international climate challenge. It has tried to find solutions by discussing the growing crises in reforming and dealing with the “multiple crises” engulfing the world. Many developing countries are struggling with growing food insecurity, income inequality and debt that is consuming much of their resources. The reduction in foreign investment by developed countries makes this process more difficult to resolve.
IMF and the World Bank have offered different solutions to help tackle climate change. While this process included various proposals, at the end of the meeting it was reported that progress was very slow. Developed countries, which were major contributors at the meeting, pledged 11 billion dollars at the spring meetings to help the World Bank increase its lending capacity. But the world’s calls for new funding and debt relief for underdeveloped or developing countries have gone largely unanswered.[1]
As a result of a study conducted by the Independent High Level Expert Group on Climate Finance (IHLEG) in 2022, it was shared that developed countries and developing countries, excluding China, need to invest 2.4 trillion dollars every year until 2030 to achieve climate targets. Large amounts of funding are reportedly needed to address the climate and development challenges facing developing countries. IHLEG explained that the failure to implement the goals set by the Paris Agreement is due to the lack of investment in the economy by states that are today considered developed.
Developing countries cite the economy affected by the Covid-19 pandemic, debt distress, income inequality and food shortages as reasons for the slowdown in this process. For these reasons, it is reported that investment has become more difficult and measures to combat climate change have been reduced.[2] At its spring meetings, the World Central Bank presented a potentially radical proposal to end the deadlock. This proposal was explained as excluding some countries from debt restructuring agreements.[3]
Multilateral development banks (MDBs) distribute billions of dollars to developing countries each year, largely in the form of loans. These banks are vital to expanding international climate finance at scale. Multilateral development banks ensure that the World Bank is at the center of this process. Multilateral development banks disbursed the highest amount of climate finance to developing countries in 2022 with 60.9 billion.
IHLEG estimates that scaling up the 2.4 trillion dollars investment for such countries will require about $250-300 billion per year by 2030 from multilateral development banks and other development finance institutions. It was stated that an investment of this magnitude would have serious consequences. By focusing on financial stability rather than development, the lending IMF plays an important role in helping debt-laden countries facing serious climate hazards.[4]
Last year, the World Bank undertook further reforms in climate-related projects as part of its “evolution roadmap” to increase its spending in developing countries. Research by the Center for Global Development concluded that only one-fifth of the necessary reforms have so far been implemented by the World Bank, and that progress has been uneven among multilateral development banks overall. The spring meetings indicated the need for leaders to discuss the status of these activities and to press for further progress.[5]
As a result, Danny Scull, senior policy advisor for development, declared that the spring meetings “will mark an important year in transforming the international financial system”. At the end of this year, developed countries called for a renewal of the World Bank’s International Development Association (IDA), which provides grant-based financing to underdeveloped countries. Given the challenges ahead, World Bank President Ajay Banga has called for a 30 billion dollars commitment, stating that these investments should be “the largest of all time”. Such a commitment would allow the International Development Association to lend more than 100 billion dollars. Much of this money will be climate finance, as the World Bank has committed to spend 35 percent of its funds on climate-related projects, rising to 45 percent by 2025.[6]
[1] “Q&A: Climate finance at World Bank and IMF spring meetings 2024”, Carbon Brief, https://www.carbonbrief.org/qa-climate-finance-at-world-bank-and-imf-spring-meetings-2024/, (Date of Access: 26.04.2024).
[2] Ibid.
[3] “Breaking the Debt Deadlock in Africa: the IMF’s Balancing Act with China”, ECFR, https://ecfr.eu/event/breaking-the-debt-deadlock-in-africa-the-imfs-balancing-act-with-china/, (Date of Access: 26.04.2024).
[4] Ibid.
[5] Ibid.
[6] Ibid.
