Karachi: Brussels-based Federico Sibaja, IMF Campaign Manager at Recourse, said that the old developmental thinking underpinning IFI operations (or in the global financial architecture as a whole) carries a very real and ironic danger of deepening the climate crises in Global South nations.
Sibaja, who is an economist focused on the climate and ecological crises, was speaking at a webinar ‘How can the IMF makes its policies more effective in an era of crises’, which was based on the report ‘How are the IMF and the World Bank Shaping Climate Policy? Lessons from Pakistan’. The report examines the limitations of these strategies and assesses the negative impacts of climate-related interventions in Pakistan in the last decades.
“The limited and weak ‘reform’ agenda of the IFIs coupled with their expanding interventionist power under the guise of climate action, raises serious concerns for Global South nations struggling to chart an effective climate-compatible developmental path,” he added.
The report suggests that the IMF and the WBG aim at scaling up the climate work in light of the International Financial Institutions (IFIs) reform process; however, fail to properly transform and their current frameworks are ill-suited to respond to the climate crisis.
IMF and WBG interventions in Pakistan have locked in fossil fuels, are responsible for large-scale hydro impacts, have failed to provide fiscal and policy space in the midst of the deadly 2022 floods and led the country to tap into local coal reserves.
As the WBG discusses its Evolution Roadmap to change its mandate, operations and financing model and as the IMF expands the scope of its work to climate, a report by Alternative Law Collective, the Alliance for Climate Justice and Clean Energy and Recourse questions the institutions’ limited ambition in their reform plans.
Pakistan has an extensive history of 23 IMF programs and over $40 billion in WBG investments. These include the WBG-sponsored energy policy that had special incentives for fossil fuel IPPs at its centre, its lobbying to include harmful large-hydro in the renewables policy, and its IMF programmes in the recent years that have failed to provide support for adaptation and mitigation in light of the pandemic, the spike in fossil fuel prices and interest rates and the 2022 floods.
“The WBG and IMF’s interventions analysed by this report reveal a shared structural failing in the underlying analytic and developmental logic currently driving their climate-related operations,” said Zain Moulvi, Research Director at Alternative Law Collective.
“These institutions have generally followed an a historic and siloed approach that fails to recognise the interactive and dynamic inter-linkages between their fiscal and macroeconomic policies, and the broader everyday realities of economic exploitation, gender inequality, and climate change – in both the short-term and longer-term time frames,” he added.
Consumer energy subsidies phase out is at the centre of the IMF policy conditionalities in Pakistan, which has spiralled inflation in the midst of the 2022 floods that affected 33 million people, destroyed 1.7 million homes, with losses estimated at $40 billion.
Both institutions fail to recognise the role of the failed WBG-led energy policy that led to overcapacity, energy companies’ indebtedness and failed to scale up energy access through sustainable renewables. Rather, the WBG is championing large-hydro projects that ignore climate risks like was the case of the LBOD and Tarbela dams.
The report calls for more accountable, democratic institutions through a review of toolkits, including the need for impact assessments, debt sustainability analysis, proper compensation to affected communities, and immediate amendments to current loans including the IMF’s SBA and WBG’s PACE.
Copyright Business Recorder, 2023
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