WASHINGTON, Oct 4 (Reuters) – The International Monetary Fund (IMF) ought to create a brand new instrument that lets richer international locations channel their newly created IMF reserves to assist a broader set of nations sort out the COVID-19 pandemic and local weather change, a brand new job power stated Monday.
IMF officers have searched for months to rally assist for a brand new Resilience and Sustainability Trust (RST) that its members may use to donate or lend their share of $650 billion in newly issued Special Drawing Rights (SDR) to low- and middle-income international locations – as a substitute for the Poverty Reduction and Growth Trust, which may be tapped solely by the poorest international locations.
The problem shall be an enormous subject when IMF member international locations meet in the course of the international lender’s fall conferences later this month, however some international locations have been reluctant to again the proposed belief, arguing that it might transfer past the scope of the IMF.
The Task Force on Climate, Development and the International Monetary Fund, launched Monday, urged assist for the brand new belief, saying the worldwide lender’s actions have been important to serving to international locations higher tackle the rising toll of local weather change.
Global damages from excessive climate occasions totaled over $6 trillion over the previous twenty years, and can attain an estimated $298 billion in 2021 alone, with a single climate occasion costing small island states some 100% of GDP, the report stated.
The consortium of specialists, convened Monday to assist the ministers of finance from the Intergovernmental Group of Twenty-Four (G24) and Vulnerable Group of Twenty (V20), stated the IMF had a “central role to play in the transition to a low carbon and resilient global economy.”
“Sustained re-channeling of new SDR issuances into (the RST) could form an essential part of the climate and development finance landscape in emerging market and developing countries, said the experts, who hail from institutions such as the Boston University Global Development Policy Center, the African Economic Research Consortium, and Peking University.
They welcomed a June pledge by the Group of Seven rich economies to rally some $100 billion in resources for countries in need, but said far more funding would be needed.
Even before the pandemic, experts estimated that emerging market and developing economies needed to raise at least 2% of their GDP to meet their climate goals each year through 2030, but the pandemic has further complicated the situation with big debt overhangs and higher borrowing costs.
To help countries reach a net zero economy by 2050, the new trust should offer both short- and long-term financing options, while helping countries respond to climate shocks without sharp increases in their debt levels, the group said.
The IMF could also help by encouraging countries to incorporate fiscal buffers for climate-related risks in budget planning, which would help build up disaster, reserve or contingency savings, they said.