Making Special Drawing Rights work for climate action and development

By Members of the Task Force on Climate, Development, and the International Monetary Fund1

The International Monetary Fund (IMF) is proposing a Resilience and Sustainability Trust (RST), aimed at helping countries build resilience, respond to climate change and make the necessary transitions that can support both development and climate. With the proper modalities and regular replenishment, and without onerous conditionalities or increasing member country debt burdens, such a facility would strengthen the climate finance architecture and put the IMF on the climate change map.  

The IMF is considering an RST initially financed through ‘re-channelled’ Special Drawing Rights (SDRs) from the recent $650 billion in SDRs approved by the IMF this summer. The 2021 SDR allocation was the largest in history, but given the structure of SDR allocations the vast majority of SDRs will flow to high-income countries that will not need them. Indeed, just over one percent of the SDR allocation will go to the poorest countries. In recognition of these asymmetries, G7 leaders recently pledged to re-channel upwards of $100 billion of their allocations for “step change” in investments, including clean energy and green growth in low-income countries.

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The IMF’s turn on climate change

By Kevin P. Gallagher, Professor and Director of the Global Development Policy Centre at Boston University’s Pardee School of Global Studies, and Co-Chair of the ‘Think 20’ Task Force on International Finance to the G20

The International Monetary Fund (IMF) has recently pledged to put climate change at the heart of its work. A laggard to date, the IMF has to catch up fast to ensure that the world community can meet its climate change and development goals in a manner that doesn’t bring havoc to the global financial system. The IMF’s first test on climate change will be the extent to which it incorporates climate risk into this year’s reform of IMF surveillance activities. Given that these reforms will lock in for close to a decade, if the IMF doesn’t act now the consequences for prosperity and the planet will be grave.

Kristalina Georgieva has been a strong advocate of greening the financial system through her new post of Managing Director of the IMF, which she began in the fall of October 2019.  Unfortunately, she took office when the shareholder of the IMF with the most voting power, the United States, was led by a President who claimed climate change was a hoax. In the face of that pressure and to her credit, Georgieva steadfastly advocated for incorporating climate change into IMF operations and for a green recovery from the COVID-19 crisis even though her biggest patron made it difficult to put her words into action.

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