Stiglitz to IMF: Give Poor Nations $300 Billion a Year to Fight Climate Crisis

The International Monetary Fund, or IMF, should give poorer nations $300 billion a year to respond to the climate emergency, Nobel Prize-winning economist Joseph Stiglitz said.

Stiglitz outlined his recommendation in an interview with The Guardian as he attended the fund's annual meeting with the World Bank in Marrakesh, Morocco, which runs from Monday, October 9 to Sunday, October 15.

"As the scale of climate change impresses itself more and more on us, we are going to need bolder things," Stiglitz said.

"When the time comes and we are frying and somebody says: 'How do we get out of the frying pan?,' this [annual SDR allocations] is one way of doing so."

In his call, Stiglitz joined the push for the IMF to release more Special Drawing Rights (SDRs), a reserve asset that can be exchanged for cash. Wealthy nations also have the option of placing their SDRs in a fund for poorer countries.

"Basically, it is printing money," Stiglitz said. "It wouldn't be inflationary but it would be transformative."

Stiglitz' remarks came about a week after nearly 60 U.S. Democratic lawmakers sent a letter to President Joe Biden and Treasury Secretary Janet Yellen asking them to support a new allocation of SDRs. The IMF issued $650 billion in SDRs in 2021 to help with the recovery from the Covid-19 pandemic, and the legislators wanted it to issue the same amount to help nations address the climate crisis, war, and future pandemics.

Stiglitz's call is even bolder at $300 billion a year, because the lawmakers limited themselves to an amount that the IMF could approve without a vote from Congress. While Stiglitz acknowledged his plan was ambitious and unlikely to pass through the current U.S. Congress, it was worth pushing for given the urgency of the moment.

"When the time comes and we are frying and somebody says: 'How do we get out of the frying pan?,' this [annual SDR allocations] is one way of doing so," he told The Guardian.

Stiglitz said the money should be used to help poorer nations fund their equivalent to the U.S. Inflation Reduction Act—which invested $370 billion in renewable energy. But it's impossible for less wealthy countries to make that kind of investment on their own, Stiglitz said.

"Developing countries can't do it on any scale," he told The Guardian. "Unless developing countries and emerging markets reduce their emissions, no matter what pieties we do in the U.S. and Europe, we will get global warming. The rhetoric is about doing something about climate change and then rather than getting onboard [the people] you most need to get onboard, you alienate them."

In a report published Thursday, the Center for Economic and Policy Research (CEPR) agreed that many poorer nations are not in the financial position to take ambitious climate action, and proposed more SDRs as one potential remedy. What's holding them back, CEPR said, was a large debt burden: Almost 80 low-to-middle-income countries face debt distress, and three-fourths of these are especially vulnerable to climate impacts. This creates a "vicious cycle" in which countries struggle to both service debt and respond to extreme weather events, leaving them unable to either get out of debt or recover from disasters and invest in the future.

"Most of the world is going through what many have termed a 'polycrisis,' facing down high levels of external debt, combined with interlocking crises of food insecurity, fluctuating energy prices, impacts of war, and of course, the climate crisis," report coauthor Ivana Vasic Lalovic said in a statement. "Countries are limited in what they can do to respond to the climate crisis, though, when they are forced to divert so much of their resources toward servicing their debts."

The report, titled The Growing Debt Burdens of Global South Countries: Standing in the Way of Climate and Development Goals, called on major financial institutions to address the situation by updating debt resolution frameworks, providing debt relief, financing through grants instead of loans, and allocating more SDRs.

"The international finance community needs to accept that the current dynamic, which prioritizes debt service–no matter how burdensome–over human needs and the urgency of climate crisis preparedness and response is unsustainable," coauthor Lara Merling said in a statement. "They need to step forward with solutions. Millions of lives may depend on it."