Nov 22, 2022
A coalition of more than 300 civil society groups from around the world on Tuesday urged the International Monetary Fund to fulfill its ostensible commitment to fighting the climate emergency by scrapping interest rate surcharges on its loans, which would free up billions of dollars that highly indebted nations could use to pursue a rapid and just transition from fossil fuels to clean energy.
"Following the completion of COP27 and the IMF Managing Director's plea for decision makers to 'do the right thing' to forestall a climate disaster, the undersigned organizations and individuals call upon the IMF to urgently address one of the most glaring and easily rectifiable contradictions between its stated support for a just transition and its actions by immediately ending its surcharge policy," the coalition wrote in a letter sent to the IMF Board of Directors.
United Nations Secretary-General Antonio Guterres argued during his opening remarks at the annual U.N. climate summit that humanity must "cooperate or perish."
Afterward, conference discussions "again emphasized the dire need for climate finance to be made immediately available" to low-income nations, states the letter. COP27 delegates also acknowledged the need to develop what the V20--a group of 58 countries in Africa, Asia, and Latin America that are particularly vulnerable to the devastating impacts of the climate crisis despite collectively generating just 5% of planet-heating emissions--calls a "fit-for-climate" global financial system.
However, "contrary to the established consensus and the rhetoric of important IMF shareholders of the need for urgent action, projections indicate that debt-vulnerable countries already facing multiple crises and a worsening economic outlook may have to pay nearly $8 billion from 2021 to 2028 in surcharges," the letter continues.
"This is a vast sum that should be used to finance climate action and to strengthen countries' ability to meet their international human rights obligations," the letter adds. "The fact that these resources will instead be used to support the IMF's counter-productive and unnecessary policy makes a mockery of IMF statements emphasizing its support for a just transition."
Luiz Vieira, director of the Bretton Woods Project--a London-based watchdog that monitors the IMF, World Bank, and other multilateral development banks and international financial institutions--said in a statement that "the Fund has sought to present itself as in the leadership in the fight against climate change, and to differentiate itself from World Bank leadership that has rightly been called out for failing to meet the moment and for actually questioning the science around climate change."
"But the Fund's actions have failed to live up to its words," he continued, "and its surcharges policy is a clear example where the IMF is putting itself before people and the planet."
Since the conclusion of COP27 in Sharm El-Sheikh, Egypt, progressives have condemned policymakers' collective failure to directly confront the industry most responsible for destroying the planet and the refusal of wealthy polluters, in particular, to commit to slashing emissions and financing climate action at the scale needed to avert the most catastrophic outcomes.
Debt cancellation has been a longstanding demand of the climate justice movement, which contends that such a move would help poor countries keep coal, oil, and gas in the ground and leapfrog to renewables.
Echoing research highlighting the extent to which the Global North extracts resources from the Global South, War on Want noted last year during COP26 that "from the shackles of slavery to the gunboats of colonialism, from imperialist interventions to the neoliberal rigging of the global economy," wealthy countries, and especially the elites within them, have drained trillions of dollars from impoverished nations, and that is reflected in their disproportionate share of global greenhouse gas pollution.
By canceling financial debt held by developing countries, campaigners argue, rich countries whose cumulative fossil fuel emissions have done the most to upend the world's ecology can start to pay back their climate debt.
The International Trade Union Confederation, Oxfam International, 350.org, and other coalition members stressed Tuesday in their letter that "our call is not new."
"The present letter follows our previous April statement, signed by over 250 organizations and experts worldwide," the groups wrote. "Both are supported by overwhelming evidence demonstrating that the policy is pro-cyclical, likely exacerbates the risk of default, and is counter-productive. The policy also violates international human rights law and is unnecessary."
The coalition proceeded to slam IMF Managing Director Kristalina Georgieva for failing to respond to an August 26 letter in which nine U.N. special rapporteurs and independent human rights experts expressed concerns about "the impact of the surcharge policy on the enjoyment of the human rights in affected countries" and asked the powerful financial institution to:
- Explain the legal basis and economic rationale of applying the surcharge policy on countries that are facing severe fiscal constraints in the context of the Covid-19 pandemic and a multitude of intersecting global food, economic, and climate crises.
- Indicate whether any human rights due diligence or impact assessments, including gender analysis, were carried out to review the policy on surcharges to identify, prevent, mitigate, and account for adverse human rights impact on countries that are restructuring their debt under the Common Framework.
- Indicate if the IMF staff-level agreement(s) reached with countries undergoing an economic crisis include a human rights impact or risk assessment of the surcharge policy. Which impact assessments have been undertaken for low- and middle-income countries to protect human rights, including socio-economic rights of their populations?
- Describe to what extent the Fund has considered the impact of the surcharge policy on the ability of countries to mobilize fiscal resources for the realization of economic, social, and cultural rights and other international human rights obligations as Article 15(3) of the U.N. Guiding Principles on Human Rights Impact Assessment of Economic Reforms underlines.
- Indicate if the IMF has considered the impact of servicing surcharges, apart from the high-interest payments owed, on the ability of low- and middle-income countries to prevent any future economic shocks, achieve long-term debt sustainability, and secure a just recovery from the Covid-19 pandemic.
"Considering the significant concerns raised by the letter," the coalition said Tuesday, "we call on the board to ensure the managing director urgently replies to it."
"Given the many challenges faced by middle- and low-income countries and in particular their most vulnerable populations, the retrogression on poverty reduction, and considering UNCTAD's warning that the Sustainable Development Goals are unlikely to be met," the coalition added, "we reiterate our demand that the IMF executive board act immediately to put an end to this damaging, counterproductive, and unnecessary policy."
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