Delegates from 200 countries closed this year’s UN climate summit, COP27, with an agreement to create a fund to compensate countries most vulnerable to climate change. The accord reached in Sharm el-Sheikh, Egypt, recognizes that climate-related damage contributes to growing debt burdens and hurts development in countries. 

"During the climate conference negotiations, the concept of loss and damage refers to negative climate change impacts that include extreme weather events, rising sea levels and destruction of forests," noted Eric LeCompte, a United Nations finance expert and leader of the religious development coalition Jubilee USA Network. "A number of countries have chronic debt problems that can be traced to the growing severity and frequency of natural disasters."

Future negotiations will determine the loss and damage fund parameters and set it in motion.

"When wealthy countries took and consumed natural resources from developing countries to fuel industrialization, it spurred global warming and climate change impacts like rising sea levels that developing countries can't stop alone," noted LeCompte. "This new climate fund can start to repay a climate debt that wealthy countries owe to developing countries."

Negotiators also reviewed progress on setting a new climate finance goal and reiterated the plan to finalize it by 2024. In a report commissioned by the COP presidencies of last year and this year, a group of experts estimated developing countries need $1 trillion annually to meet climate goals. Wealthy countries failed to meet a $100 billion annual climate finance commitment, promised in 2009.

“In order to get the resources we need to fight climate change we'll need debt relief, more money from development banks and other innovative sources of aid,” added LeCompte. “This is why G20 and IMF decisions are so critical to raising the resources we need to protect our planet, lives and jobs.”

Last year the Group of 20 decided to create $650 billion in IMF emergency currency or Special Drawing Rights. Developing countries' share was more than $230 billion and the G20 targeted $100 billion of the share wealthy economies received, to finance poorest members. Proposals on debt relief and scaling up loans from global development lenders are also on the group’s agenda. The G20 heads of state met in Bali, Indonesia, on November 15-16, while climate negotiations were still ongoing, and agreed to take action to limit temperature rises to 1.5 °C.

“The G20 commitment to limit global warming helped the Sharm el-Sheikh negotiations at a crucial moment when continuing the target was in doubt,” shared LeCompte. 

World leaders gathered for the annual IMF and World Bank Meetings, focused on the pandemic, Ukraine war and decades-high inflation impacting the global economy. The IMF downgraded growth and forecasted losses of $4 trillion between now and 2026. Neither the G20, nor the policymaking bodies of the IMF and World Bank, reached a consensus on statements.

"Russia's invasion of Ukraine dominated the meetings and prevented world leaders from reaching agreements to address the growing global economic crisis," noted Eric LeCompte, Executive Director of the religious development group Jubilee USA Network.

Multiple reports during the meetings focused on a likely global recession, economic downturns, inflation and climate challenges.

"It’s hard to believe that three years into the pandemic, the economic warnings from the IMF forecast greater problems to come,” said LeCompte. “It seems we will see a global recession.”

Developing countries struggle with high debts and interest rate hikes that drive up their debt payments.

"As interest rates rise to tackle inflation, we could see a number of defaults in developing countries,” added LeCompte. "The financial system does not have the tools to deal with multiple debt crises.”

Three countries applied for debt relief under a process agreed by the G20 last year and still have not received debt reductions. The Chair of the International Monetary and Financial Committee welcomed progress on the Zambia debt restructuring under the G20 Common Framework process.

"Beyond some progress on Zambia’s debt restructuring, which comes with significant delay, none of the signals the G20 provided today would encourage borrowers facing debt crisis to use the Common Framework,” stated LeCompte. "Lacking a predictable path for debt relief, indebted countries choose to postpone facing their debt problems."

IMF membership finalized details that allow a new vehicle, the Resilience and Sustainability Trust to begin loans. Three countries, Barbados, Costa Rica and Rwanda, already reached initial agreements to receive loans under the Trust, which takes Special Drawing Rights aid from wealthy countries to fund cheap climate and pandemic loans for vulnerable countries. The IMF also announced pledges of $40 billion in SDR contributions towards the Trust.

"With the Trust already in place, the G20 should focus on similar Special Drawing Rights funding to expand development bank lending," shared LeCompte.

In a statement to the meetings, Africa's Catholic Bishops and major faith leaders called for wealthy countries to rechannel a significant portion of their stock of more than $400 billion in Special Drawing Rights to African countries.

“We especially want to highlight, in our region, the enormous potential of rechanneling through the African Development Bank,” the faith leaders shared.

The IMF also passed a Food Shock Window – a temporary expansion in low-conditions, low-cost loans for countries dealing with food crises.

Members, on the other hand, did not make decisions on the IMF penalty rates for countries taking loans. The surcharges will cost 14 developing countries $8 billion in payments during 2021-2028.

"IMF penalty rates for countries taking loans should be suspended when so many countries need these loans for shocks that fall outside of their control,” stated LeCompte.

Finance ministers discussed proposals to increase development bank lending. US Treasury Secretary Janet Yellen called for development banks to devise new approaches to address global challenges without sacrificing their primary poverty-reduction goals.

"Responding to climate change and other global challenges means that development banks will need to do more,” said LeCompte. "At these meetings, we saw growing momentum to boost development banks so they can provide more aid and lending."

According to the IMF, developing countries will need $300 billion annually in additional funding to adapt to climate change. The World Bank estimates current climate finance amounts should quadruple.

"There is growing concern about the way the climate emergency disproportionately hurts the poor,” added LeCompte.

Jubilee USA, IMF and World Bank Vigil and Paper Chain Delivery: Saturday, October 15th, 11:30 AM, Community Park, outside of the IMF. The chains that we will display in front of the IMF and World Bank between 11:30 AM and noon, were made by churches and synagogues across the US to send messages of debt relief to world leaders. View the advisory here. Link to the online and in-person press registration here.

G20 finance ministers conclude their meetings during the Annual IMF and World Bank Meetings. The ministers focused on the pandemic, Ukraine war and inflation shocks to the global economy, debt vulnerabilities in developing countries, food insecurity and the climate crises. 

"The G20’s internal rifts prevent the group from responding to multiple crises.

"As interest rates rise to tackle inflation we could see a number of disorderly defaults in developing countries.

"The financial system does not have the tools to deal with multiple debt crises.

"The G20 debt relief process has not, yet, passed key tests showing it can be speedy, reduce debt and involve the private sector.

"Beyond the progress on Zambia’s debt restructuring, which comes with significant delay, none of the signals the G20 provided today would encourage borrowers facing debt crisis to use the Common Framework.

"IMF penalty rates for countries taking loans should be suspended when so many countries need these loans for shocks that fall outside of their control.

"Food price inflation and the pandemic shocks led to a rise of 200 million people going hungry in the last two years.

"The IMF Food Shock Window that expands cheap loans to deal with the food crisis is important, but only a temporary and limited relief measure.

"The G20-commissioned expert group made proposals to expand development bank lending.

"It's up to the G20 to decide which proposals to implement that could yield hundreds of billions of dollars to respond to global challenges. 

"The G20 gave the green light to the Resilience and Sustainability Trust to provide long-term, cheap loans for pandemic and climate reforms in poor countries.

"Wealthy countries can donate their Special Drawing Rights to the Resilience and Sustainability Trust.

"With the Trust already in place, the G20 should focus on similar Special Drawing Rights funding to expand development bank lending."

Join us for a Jubilee USA, IMF and World Bank Press Conference: Friday, October 14th, 2:15 PM, Community Park Outside of IMF, view advisory and online and in-person press registration. (Link to registration here).

Find Jubilee USA's October 14th and 15th interfaith vigil, press conference and teach-in details here.

Read Jubilee USA's press release on the World Economic Outlook and Global Financial Stability reports here.

Read Jubilee USA's press release on IMF chief Kristalina Georgieva's curtain-raiser speech here. 

Read Jubilee USA's press release on the IMF Food Shock Window here.