International Monetary Fund Reform, With Kelly Varian

A white building, with a crane to the right, stands in front of a blue sky.

Image: The International Monetary Fund’s headquarters in Washington, DC, from which the IMF controls almost $1 trillion in assets. Image credit: Carol M. Highsmith via Wikimedia Commons

Script, Burb, and Audio Editing by Hannah Kaminker

What is the IMF?

The International Monetary Fund (IMF) provides aid to developing countries to promote global economic and monetary growth.  IMF investments and loans can significantly impact the ability of developing countries to improve climate resilience. Most directly, reforms to the IMF can allow developing countries to invest more in climate resilience and disincentivize fossil fuel production.

How does the IMF affect the climate crisis?

According to critics, the IMF’s Climate Change Strategy inadvertently worsens the climate crisis and amplifies financial risk. Specifically:

1.     Prohibitively high IMF borrowing rates for developing countries block vital investments in climate change mitigation, adaptation, and recovery and trap Global South nations in a cycle of escalating climate risks and mounting debts.

2.     IMF loan conditions and policy advice that make fossil fuel production more profitable enable the expansion of oil, gas, and coal, prolonging dangerous global heating.

What can be done to reform the IMF?

In a report issued this month, the UC Berkeley Center for Law, Energy & Environment (CLEE) suggested the following reforms:

  • Form a Climate Advisory Group consisting of diverse external experts to recommend updates to the IMF’s Climate Change Strategy and adopt legal requirements for timely IMF action.   
  • Reform longstanding IMF practices that exacerbate risk by (1) improving climate-related risk assessment, (2) expanding climate finance and alleviating debt distress in developing countries, and (3) curtailing fossil fuel profitability. 

The CLEE report also envisions a significant role for the US, as the largest shareholder in the IMF with significant influence, including  championing ambitious IMF reform on the global stage, leading by example, addressing climate change domestically and allocating new resources to support climate resilience in developing countries, highlighting the financial threat posed by the IMF status quo and actively participating in international dialogue, research, and analysis related to climate-related financial risk.

The IMF controls almost $1 trillion in assets and could be a linchpin for climate action in support of worldwide economic stability.  


About our Guest

Kelly Varian is a policy analyst working at UC Berkeley Law. She has a Master of Public Affairs degree from UC Berkeley’s Goldman School of Public Policy and a decade of experience in the social sector. In her current role as a Climate Policy Analyst at UC Berkeley’s Center for Law, Energy, and the Environment, she leads research to design equitable policies to mitigate climate-related financial risk.


Resources


Transcript

Ethan: I’m Ethan Elkind, and you’re listening to Climate Break. Climate solutions in a hurry. Today’s proposal: helping developing countries finance climate action through reforms to the International Monetary Fund. We spoke to Kelly Varian, a policy analyst working at UC Berkeley Law. She says that the International Monetary Fund, or IMF, isn’t doing enough to support climate action in developing countries. 

Ms. Varian: We’ve been looking at The International Monetary Fund, which is charged with maintaining global economic and monetary growth and stability and we have found that     their efforts have been insufficient and that there’s real opportunities to reform some of their policies to move the needle on climate finance. Developing countries need to pay really high borrowing rates when they borrow from the IMF that keeps them from investing in critical climate projects. Loan conditions oftentimes can incentivize countries to support new coal projects

Ethan: Kelly offers three different reforms for how the IMF could better address climate change 

Ms. Varian:  The IMF should update its climate strategy in a way that is ambitious and comprehensive. The second goal is to essentially enable developing countries to invest more in climate resilience. And then finally we have a goal around making fossil fuel production less profitable to disincentivize it. A listener or individual could contact their congressperson and urge them to support IMF reforms for climate resilience, but generally, advocating on behalf of IMF reform.

Ethan: To learn more about the IMF, visit climatebreak.org

International Monetary Fund Reform, With Kelly Varian