Barbados proposes rich nations to provide $1 trillion to fund climate action – Can it be achieved?
Essays by Eric Worrall
Bad timing? As GOP leaders regained control of Congress, Barbados has now chosen to campaign for more money for climate action.
Tackling climate change will require reforms to the World Bank and the IMF – here are two options
Published: November 26, 2022 2.44 am AEDT
Nicola Limodio
Assistant Professor of Finance, University of Bocconi…
At the start of the conference, the prime minister of Barbados, Mia Mottley, proposed a way to jump-start the process by reforming two of the largest financial institutions: the World Bank Group and the International Monetary Fund. (IMF). Her plan, called Bridgetown initiativewill mobilize over US$1 trillion from the World Bank among other development lenders and $500 million from the IMF.
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The World Bank has disbursed more than $60 billion by 2022. This amount can be increased in two ways.
The first day, High-income countries can bring new capital to the World Bank. The organization, in turn, will use this to provide grants and loans to low- and middle-income countries at zero (or close to) interest. But this process unlocks political influence that could prioritize goals other than climate change mitigation, like expanding primary education.
Monday, The World Bank can act without receiving additional capital from governments. Instead, it will Borrow from the financial market and use these funds to lend to low- and middle-income countries. In the short term, this will meet the needs of COP27 delegates and activists launched by the World Bank. more loans and take more risks. But this is not a permanent solution. Issuing debt could increase the World Bank’s financing costs, which would eventually pass on to those borrowers.
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I want the World Bank to accept option two and take on unfunded trillion dollars of debt. Can you imagine the hilarity that would warrant if the GOP cut funding and refused to pay that debt with American taxpayer money? Anyone crazy enough to transfer money to an organization like the World Bank in the current political climate deserves to lose.
Of course, the real losers in that scenario would be ordinary people who trust their financial institutions to take care of them.
So why is Barbados trying to get money at the wrong time?
My theory is that “developing countries” like Barbados are not really strategic about their timing. I believe they are just filling random cash needs as quickly as possible, in the hopes that some of it will survive.
Let’s hope GOP politicians like Rep Jim Banks (R-IN) succeeded in shutting down money and preventing countries like Barbados from getting a free ride on the backs of American taxpayers.
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