Climate Finance for the Global North

And Climate Reparations for the Global South

Happy Earth Week!

Greetings from the belly of the beast! I’ve been in Washington DC over the last few days attending the Spring Meetings of the International Monetary Fund the World Bank Group. Six months after the IMF-WBG meetings in Marrakesh, we are still struggling to get the conversation focused on what it takes to truly transform the international financial architecture and to decolonize the global economic system. Let me share a few reflections here.

To Engage or Not to Engage

That is the question that many of us have about the Spring meetings. It’s always a dilemma to decide if it’s actually worth our time and effort to engage with institutions that are nearly impossible to reform, by design. I am convinced that reforming the Bretton Woods institutions can only happen under the threat of an alternative financial architecture being built to replace them. That being said, I think it is still important to engage, increase the pressure, call them out publicly for not doing enough, and most importantly, doing the heavy lifting and building the alternative financial architecture that would actually force them to reform or perish.

Here is my statement to the media on the first day of the Spring Meetings:

“The real work to redesign the global financial institutions begins now as executives and political leaders return home from the Spring Meetings. Top on their agenda must be to address the debt crisis facing low-income African countries that risks sinking their economies. Under the current IMF and World Bank policies, developing countries have been forced to set aside most of their export revenues to service external debt with oppressive interest rates. This has effectively ridden critical sectors such as health, housing, education and climate action of funding. This is a great injustice that weakens the safety nets of some of the poorest people on the planet. To end this, widespread, radical and urgent reforms of the global financial architectures is non-negotiable. As effects of climate change grow in frequency and intensity, development challenges will only worsen the vulnerability and suffering of communities in poor nations, fueling a full-blown humanitarian crisis. Decisive leadership has never been more urgent.”

It was a mixed week in terms of engagement. We had a few off-the-record candid and very productive conversations with senior officials from the World Bank Group, but we also had several panels at the Civil Society Policy Forum with no representatives from the World Bank or the IMF engaging with civil society organizations. I spoke on two panels that had an empty chair behind the “Representative - World Bank Group” name-cards (pictured above). But the World Bank Group did send their reps to some panel to engage with civil society leaders. Some of that engagement was genuine and productive, whereas some was just down right insulting. My colleague Joab Okanda summarized it very nicely in this social media meme.

An Open Letter on Africa’s external debt

I helped draft this open letter “Stop Africa's debt crisis from spiraling out of control: Time for the World Bank and IMF to act,” which was coordinated by Power Shift Africa and Earth4All. You can read the open letter and see the list of signatories here, but the core set of demands that we sent to the WB and IMF leaders is the following: We call on all bilateral, multilateral and private lenders to: 

1. Immediately cancel public external debt payments for all African countries.

2. Transform biased credit rating practices of the big three credit rating agencies (S&P, Moody’s, Fitch).

3. Commit to urgent reform of the G20 Common Framework.

4. Urge private lenders to participate in debt reduction and rescheduling of loan repayments from low-income African countries to tackle the debt crisis.   

5. Honour commitments to reallocate Special Drawing Rights (SDRs) to vulnerable countries.

6. Restore broken climate finance promises to support African countries’ climate goals estimated at approximately $2.8 trillion.

7. Commit to a credible reform path for the global debt architecture. 

8. Pay climate finance debts owed by G20 countries in the form of unconditional grants and technology transfer. Since low-income countries, especially in Africa, are owed at least $2.4 trillion in climate finance by 2030, they should withhold the equivalent of that debt until promises are fulfilled.

9. Channel climate and development finance to strategic investments in regenerative agriculture and agroecology to restore Africa’s food sovereignty, renewable energy deployment for Africa’s development rather than for export.

10. Stop promoting austerity conditions and promote bold, structural and transformative solutions at-scale, not small, superficial solutions. 

    

Lending to the Wrong Countries

My main message to the World Bank and the IMF is that they are getting climate finance completely backwards. They are lending money to the wrong countries and imposing austerity on the wrong countries. 

They should be lending money to the historic polluters to help them pay for their climate debt in the form of debt cancellation, grants rather than loans to Global South countries to invest in food sovereignty and agroecology, renewable energy sovereignty, and high value-added manufacturing, along with transfer of lifesaving technologies to manufacture and deploy clean energy, clean cooking, and clean transportation infrastructure in the Global South. 

Instead of imposing austerity on the Global South, the WB-IMF should be asking the historic polluters to tighten their belts, reduce their energy use, reduce waste, eliminate planned obsolescence , and fight consumerism under a coherent and comprehensive degrowth framework. 

In other words, we should be thinking of the Global North as the countries that need climate finance, and the Global South as the countries that are owed a climate debt. 

This is a new framing that I am trying to put on the table, but I’ve written several posts about this subject in recent months with similar framing with the hope to shift the narrative about climate finance from a Global South perspective (here, here here, and here).

You can watch these clips from my interventions last week at the Civil Society Policy Forum. I explained the colonial nature of the Bretton Woods institutions and the economic entrapment they have committed. I also explain the recent “greenwash, rinse, and repeat” model of green industrialization in Africa (specifically in Namibia). And finally, the last clip is from a panel on IDA replenishment (IDA21).

A few things to read

There were a number of very good publications that came out ahead of the Spring meetings. Let me quickly highlight a few of them here.

ActionAid published a series of one-pager briefings on climate justice and finance under #FixTheFinance.

ActionAid also release a new report called: Adapting Our Financial Architecture in a Crisis-Prone World: A Civil Society Proposal for Special Drawing Rights Reform.

Recourse published a new report calling out private sector-driven "Bigger, Bolder, Better" MDB reform agenda.

Recourse also published a new report analyzing initial experience with IMF’s Resilience and Sustainability Trust shows evidence of concern: austerity, privatization, and fossil fuel expansion.

The Bretton Woods Project published their Spring 2024 quarterly Observer and a report called: Gambling with the planet’s future? World Bank Development Policy Finance, ‘green’ conditionality, and the push for a private-led energy transition.

Them Belly Full (but we hungry)

And finally an interesting anecdote from the WB and IMF headquarters is that their cafeterias serve subsidized meals! You can get a decent meal here for at least half the price you would pay at any nearby restaurant in Washington DC. The irony of pushing for removing food subsidies in the Global South but maintaining them at HQ made many of us roll our eyes here. It reminds me of Bob Marley’s wonderful song Them Belly Full (but we hungry). Take a listen!

New International Economic Order at 50

My next blog post will be from Havana, Cuba, where we will be celebrating the 50th anniversary of the New International Economic Order, and hopefully reviving that tradition and crafting a pathway for its implementation.

---

Fadhel Kaboub is an associate professor of economics at Denison University (on leave), and the president of the Global Institute for Sustainable Prosperity. He is also a member of the Independent Expert Group on Just Transition and Development, an expert group member with the International Tax Task Force, and serves as senior advisor with Power Shift Africa. He has recently served as Under-Secretary-General for Financing for Development at the Organisation of Southern Cooperation in Addis Ababa, Ethiopia. Dr. Kaboub is an expert on designing public policies to enhance monetary and economic sovereignty in the Global South, build resilience, and promote equitable and sustainable prosperity. His recent work focuses on Just Transition, Climate Finance, and transforming the global trade, finance, and investment architecture. His most recent co-authored publication is Just Transition: A Climate, Energy, and Development Vision for Africa (May 2023, published by the Independent Expert Group on Just Transition and Development). He has held a number of research affiliations with the Levy Economics Institute (NY), the John F. Kennedy School of Government at Harvard University (MA), the Economic Research Forum (Cairo), Power Shift Africa (Nairobi), and the Center for Strategic Studies on the Maghreb (Tunis). He is currently based in Nairobi, Kenya and is working on climate finance and development policies in Africa. You can follow him on Twitter @FadhelKaboub and you can read his Global South Perspectives on substack where he blogs regularly.