Barbados Prime Minister Mia Mottley Shaking hands with Canada’s Justin Trudeau. By PMO Barbados from Bridgetown, Barbados – Bilateral meeting on the fringes of the UN General Assembly with Canadian Prime Minister Justin Trudeau., PDM-owner, link.
Essay by Eric Worrall
Bad timing? As GOP leaders retake control of Congress, Barbados chose now to pitch for more money for climate action.
Tackling climate change will require reforming the World Bank and IMF – here are two options
Published: November 26, 2022, 2.44am AEDT
Assistant Professor of Finance, Bocconi University
At the start of the conference, the prime minister of Barbados, Mia Mottley, proposed a way to kickstart this process by reforming two of the largest financial institutions: the World Bank Group and the International Monetary Fund (IMF). Her plan, known as the Bridgetown initiative, would mobilise more than US$1 trillion from the World Bank among other development lenders and US$500 million from the IMF.
The World Bank disbursed more than US$60 billion in 2022. This amount can be increased in two ways.
First, high-income countries could bring fresh funds to the World Bank. The organisation would in turn use this to offer grants and loans to low and middle-income countries with a zero-interest rate (or close to). But this process is open to political influence which might prioritise objectives other than mitigating climate change, like expanding primary education.
Second, the World Bank could act without receiving additional capital from governments. Instead, it would borrow from financial markets and use these funds to lend to low and middle-income countries. In the short term, this would meet the demands from delegates and activists at COP27 that the World Bank give more loans and take more risk. But this is not a long-term solution. Issuing debt may increase the World Bank’s cost of financing, which would eventually be passed on to those borrowers.
I’d love for the World Bank to embrace option two and take on a trillion dollars of unfunded debt. Can you imagine the hilarity which would ensure if the GOP cut off funding, and refused to repay that debt with American taxpayers’ money? Anyone crazy enough to advance money to an institution like the World Bank in the current political environment deserves to lose.
Of course, the real losers in that scenario would be ordinary people who trusted their financial institutions to take care of them.
So why would Barbados attempt such a poorly timed cash grab?
My theory is “developing countries” like Barbados aren’t actually being strategic about their timing. I believe they are just hurling random cash demands as fast as possible, in the hope some of them stick.
Let’s hope GOP politicians like Rep Jim Banks (R-IN) succeed in shutting off the money fountain and stop nations like Barbados getting a free ride on the backs of American taxpayers.
via Watts Up With That?
November 26, 2022