“Delayed action is contributing to a deepening climate crisis in nations of the Global South,” according to a study
In Karachi, during a webinar titled ‘How the IMF Can Enhance Its Policies in Times of Crisis,’ Federico Sibaja, IMF Campaign Manager at Recourse, based in Brussels, cautioned that the conventional development approaches guiding IFI (International Financial Institutions) operations, and the global financial architecture in general, could paradoxically exacerbate the climate crises in Global South nations.
Sibaja, an economist specializing in climate and ecological crises, made these remarks during a webinar that discussed the report ‘How the IMF and the World Bank Are Influencing Climate Policy? Insights from Pakistan.’ The report scrutinizes the shortcomings of these strategies and assesses the adverse consequences of climate-related initiatives in Pakistan over the past decades.
He added, “The IFIs’ limited and feeble ‘reform’ agenda, combined with their growing interventionist authority under the guise of climate action, raises serious concerns for Global South countries struggling to chart an effective climate-compatible development path.”
According to the report, the IMF and the World Bank Group (WBG) aim to ramp up their climate work in light of the reform process of International Financial Institutions (IFIs); however, they fail to undergo substantial transformation, and their current frameworks are ill-suited to address the climate crisis.
The IMF and WBG interventions in Pakistan have contributed to the entrenchment of fossil fuels, significant hydroelectric impacts, a lack of fiscal and policy flexibility during the deadly 2022 floods, and the country’s utilization of local coal reserves.
As the WBG discusses its Evolution Roadmap to alter its mandate, operations, and financing model, and the IMF expands its focus on climate, a report by Alternative Law Collective, the Alliance for Climate Justice and Clean Energy, and Recourse questions the institutions’ limited ambitions in their reform plans.
Pakistan has a lengthy history of 23 IMF programs and over $40 billion in WBG investments. These include the WBG-backed energy policy that placed fossil fuel Independent Power Producers (IPPs) at its core, its advocacy for incorporating harmful large-hydro projects into the renewables policy, and its IMF programs in recent years that have failed to provide support for adaptation and mitigation in the face of the pandemic, rising fossil fuel prices, interest rates, and the 2022 floods.
“The WBG and IMF’s interventions examined in this report expose a shared structural flaw in the underlying analytical and developmental logic currently guiding their climate-related operations,” said Zain Moulvi, Research Director at Alternative Law Collective.
“These institutions have largely followed a historical and compartmentalized approach that fails to recognize the interconnected and dynamic 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 long-term timeframes,” he added.
The phasing out of consumer energy subsidies is central to the IMF’s policy conditions in Pakistan, which has driven up inflation amid the 2022 floods that affected 33 million people, destroyed 1.7 million homes, and resulted in losses estimated at $40 billion.
Both institutions fail to acknowledge the role of the failed WBG-led energy policy, which led to overcapacity, energy firms’ indebtedness, and the failure to expand energy access through sustainable renewables. Instead, the WBG is championing large-hydro projects that neglect climate risks, as was the case with the LBOD and Tarbela dams.
The report calls for more accountable and democratic institutions through a review of toolkits, including the necessity for impact assessments, debt sustainability analyses, equitable compensation for affected communities, and immediate revisions to current loans, including the IMF’s Stand-By Arrangement (SBA) and the WBG’s Pakistan Accelerating Clean Energy Program (PACE).