Climate-vulnerable economies in a ‘financial death trap’ due to lack of internationally supported national climate initiatives
DHAKA, 10 April 2022 – Senior finance officials from the V20 Group of climate vulnerable economies expressed alarm over different conditions in the Resilience and Climate Sustainability Trust Funds, which they fear will undermine national climate efforts as immediate liquidity needs expand and national coffers face intense pressure stemming from the prolonged impact of the COVID-19 pandemic and the global energy crisis.
V20 member states are still developing and already suffering from very low access to international climate funds. The gap between financing tools and resources to be deployed to match V20’s immediate investment needs continues to grow. The situation is troubling. An institutional response to recognize the climate context of the current period means. V20 countries must be given the opportunity to utilize their fiscal space in a sustainable manner while having access to immediate liquidity. However, the speed in which such options can be made available along with the appropriate quantum of resources cannot be realized if international finance is not made available in the near-term.
Last year the G20 backed the development by the World Bank and IMF of the Resilience and Sustainability Trust (RST) so that funds may be directly allocated towards strategies seeking to manage climate risks in poor countries. While this was a welcome development, experts from the V20 warn about barriers preventing member states from tapping identified solutions will become even more problematic. Difficult conditions of different multilateral financial institutions prevent low and middle-income climate vulnerable countries from accessing the fund. The V20 urges to establish more climate-responsive rules in accessing the RST. Global cooperation is a necessary respond to climate change and the COVID-19 pandemic that this fund is supposed to address.
The V20 Senior Officials Meeting was hosted by the current Presidency, Government of the People’s Republic of Bangladesh on 28th March 2022 to prepare the technical details and design for the V20 Ministerial in April, which is held annually alongside the World Bank and IMF Spring Meetings.
The V20 Senior Officials Meeting focused on several challenges and initiatives. Foremost among them: a) the accelerated mobilization of financial resources and investment, b) responding to growing loss and damage conditions, c) easy access to the IMF’s Resilience and Sustainability Trust, and d) carbon financing development. Member states also discussed V20’s planned activities for the rest of the year and wished the success of upcoming the V20 Ministerial on 21st April 2022.