May 3, 2024
The World Bank shouldn’t lend money for fossil fuels anymore. This means banning fossil fuels in loan agreements and having independent checks to make sure the rules are followed. Stopping new fossil fuel projects is crucial to fight climate change and helps developing countries avoid getting stuck with stranded assets.
Record debt levels are hindering climate-vulnerable countries’ development and climate goals.
The World Bank should offer tailored-fit debt relief and revamp loans for climate projects. This could involve “debt-for-climate swaps” where debt relief is offered in exchange for climate action.
The IMF, on the other hand, should consider climate change when evaluating whether a country can borrow more or not. Right now, the IMF’s Debt Sustainability Analysis only looks at how much money vulnerable countries have coming in, not how much they might need to spend on climate change adaptation and mitigation.
We urge the World Bank to enhance access to grants and low-interest loans for climate change adaptation.
We urge the Bank to assist in developing incentive mechanisms and deploying concessional investment risks in adaptation projects by the private sector, including those that promote local micro, small, and medium-sized enterprises in vulnerable countries.
At COP28, the World Bank was designated to host the Loss and Damage Fund, a finance mechanism to assist countries in responding to the impacts of climate change that go beyond what countries can adapt to.
We urge the World Bank to operationalize the fund in a way that will allow vulnerable countries to get money directly and easily (direct access), with favorable terms like grants or low-interest loans (concessionality).
The Bank should also harness the power of having a strong network of civil society observer organizations to ensure transparency and accountability in the allocation and use of the Fund.
We urge the World Bank to think about climate change adaptation whenever it lends money for any development project. This ensures long-term benefits and avoids projects that could make things worse in the face of a changing climate.
Grants and loans with very low interest rates have an important role to play in supporting climate and development goals.
In this regard, we call for the tripling of the resources of the World Bank’s financing window for low-income countries, the International Development Association (IDA), from USD 93 billion to USD 279 billion. We also urge the Bank to expand access of IDA for climate-vulnerable economies.
This will give vulnerable communities more resources to deal with climate change impacts and build a better future.
The IMF’s Special Drawing Rights (SDRs) are an international reserve asset. They’re not actual money but more like a special credit line that lets countries in need borrow freely usable currencies from other countries.
The problem is that richer countries hold most of the SDRs but don’t necessarily need them right now; while poorer and climate-vulnerable countries have very few and could use some help.
We urge the IMF to change the system for SDR allocations and rich countries to voluntarily redirect their unused SDRs to climate-vulnerable countries. This would help bridge the gap and provide much-needed funds for climate projects.
Climate-vulnerable countries need a bigger say in global finances.
We support the V20 Finance Ministers’ call to be recognized as an official Group within the World Bank Group and the IMF to join G7 and G20 (representing the world’s wealthiest countries) and the G24 (developing nations).
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