Statement delivered by Ms. Kristalina Georgieva, Managing Director, IMF
V20 MINISTERIAL DIALOGUE IX
16 October 2022
Ms. Kristalina Georgieva, Managing Director, IMF
Thank you, thank you, Ken. Thank you very much for your call for us to wake up and face reality and also to the young girl who spoke to us. We all have our awakening moment. Mine was actually linked to another young girl, my own granddaughter. In 2018, I’m sure you remember, we got the IPCC report that was devastating. It said we are not running out of time; we already ran out of time. I read the report and all I can think of was what have we done? What have I done to my little granddaughter, to her future? You wouldn’t be surprised, I couldn’t sleep that night.
The next day I got up, went to work, I was at the World Bank at that time, and I called on the great people at the Bank who work on climate, saying we have been planning to announce a stepping up, look at this report, we have to do much more. And unfortunately, since then we got yet another IPCC report. It is even more devastating. We don’t actually have to read reports. We just have to look around the world.
This year we had climate disasters on all continents. It is not just the V20 countries that are being hit. So, what does that translate into for us, for your hosts, for the IMF? It translates into a sense of urgency for us to play our role as systemically-significant institution in the fight against climate change, and I want to tell you what we do, recognize the staff of the IMF for their incredible commitment to make the IMF a solution institution in this area.
As Ken said, we started from the basics, which is our policy engagement with countries. If we don’t integrate climate mitigation, adaptation, and transition in these policy engagements, if we do it as a parallel activity, then we are not doing our job. So, we are now having a full-fledged program for bringing climate in Article IV consultations.
I am very pleased to say that 17 of the 20 large emitters, we are including mitigation in our Article IV, and we are including adaptation virtually in every Article IV that concerns countries highly vulnerable to climate change. This is very important because it underpins what we do in our programs, in our capacity development.
The second step we have taken is to bring climate into financial sector assessments. Why is this important? Because finances are the transmission line of our economies and if this transmission line pushes us towards a climate catastrophe it is a very dangerous transmission line. So, we want, when we assess financial sector, to look into climate-related financial stability risks and help the work we do to stress test banking institutions to integrate this climate-related stress testing.
Three, we are integrating climate in our data work. Our objective is to be able to put next to core microeconomic indicators the key climate indicators, so I get the, actually I will be meeting Ken later, I have a brief for Ghana, and I have at the bottom of the brief Ghana’s growth, unemployment, balance of payment, inflation, what we are striving is to have then carbon intensity and vulnerability to climate shocks. You know the work that is being done on vulnerability, we are stepping into this work with excellent people who work in our statistics department. But, of course, we are a financial institution and you look to us to put money, which is actually your money, the money you extend for us to lend, put this money where our mouth is when you talk about climate action, and I am very proud that one promise we made in April, we met, in October we said we are going to have a resilience and sustainability trust.
In April we said by this annual meeting it would be operational. And it is open for business. Three countries are, already have staff level agreements, Barbados, Costa Rica and Rwanda. I am very — Bangladesh is next on the queue, we have started already very constructive engagement, and I really hope that everybody around this table, if you want to work with us on policies to reduce your risk to climate shocks, increase your resilience, that we would be there for you.
The money in this resilience and sustainability trust is not huge vis-à-vis the demand for climate transformation. We are at this point aiming for 40 billion dollars. But we think that if we work hard to use this money to work for bringing private finance on scale, so we measure our success not by the dollar we provide but by the dollars we mobilize.
If we work with other institutions like the World Bank, the regional development banks, so the whole becomes bigger than the sum of individual parts, this could be a very big driver of transforming finance, so it serves you and the world better. And, of course, we expect that as we build experience, our traditional programs will be much more enhanced to support the new climate economy, one that is low carbon and climate resilient. I want to talk about that because you brought this topic and, of course, we are very, like you, we are very concerned at the high level of debt that have been pushed up by COVID, by responding to the COVID crisis, and now are becoming less serviceable because of tightening financial conditions, the interest rates going up.
For those who have dollar-denominated debts, the appreciation of the dollar also makes servicing this debt harder. So, there we have — I want to make two points. One, how important it is to move forward in a timely manner for debt restructuring. So, we bring down the level of debt early, not when it is too late. And we are engaged with quite a number of countries in that regard.
But secondly, you’re absolutely right. We have to find a way to link two problems with one solution, and the problems are climate and debt. The solution debt for climate swaps. Yes, we said we are going to come up with a proposal. We are a bit slower on that and I will tell you why. Because our teams when they analyze what has been done, realized that what has been done successfully is project-based swaps. But project-based swaps ain’t gonna cut it. They are just not big enough on scale to make a difference.
So, what we want is to find the pathway to have a programmatic approach, in other words, identify key performance indicators against which that can be swapped for climate action, rather than identifying, as we have done in the past, identifying projects and then funding. I am not against, by the way, don’t get me wrong, anything that can be done helps, so project-based swaps, please, if you are doing one right now, finish it. Every little step in the right direction helps. But we want to find a way to also incentivize private sector to be willing to participate in these swaps.
What would incentivize the private sector? If they can score for their environment and social position on the basis of releasing that pressure for climate objectives. And it is an area where we are also engaging with the World Bank, they have done a lot of very good work in this, so I would urge us to be a bit– to sort of rush slowly, to not — come up with something that is really sound and solid, we can have a discussion at COP27 of the way forward, but let’s not in the desire to show we are making progress make progress in too small steps to be meaningful.
I want to finish with a very strong endorsement of the call we heard from the young girl. We need to remember that we are custodians of our planet. It doesn’t belong to us. Our duty is to pass it to the next generation as good as we inherited it from our parents, or better. And let’s face it. Our generation has not been a good custodian so far. We can change that. And institutions like the IMF, we have such an important role to be part of that change.
Whenever I tell people, if you don’t know what to do, whether you should be more proactive in the climate battle, just pull the pictures of your family, look at them. What do you owe your children? And then do the right thing. Thank you.