IMF, RFAs urge concerted global action on resilience against climate risks

.As AfDB proposes regional financial stabilisation mechanism in Africa

By Clara Nwachukwu

The International Monetary Fund (IMF), and the heads of the Regional Financing Arrangements (RFAs), yesterday, urged concerted and continued action at global, regional, and national levels, as countries adapt to and build resilience against climate risks.

This is one of the fallouts of the seventh High-level Regional Financing Arrangements (RFAs) Dialogue, held in Washington DC, amidst a highly uncertain global outlook and slowing growth.

In a joint statement, the parties said: “The discussion focused on ways to strengthen cooperation in the face of the multiple shocks that are testing the resilience of the world economy, and how to contribute to a stronger Global Financial Safety Net (GFSN).”

Against this backdrop, the RFAs outlined on-going progress to integrate climate considerations into member states’ operations of a greener economy, in accordance with their individual mandates and policies.

Financial stabilisation mechanism

This call comes as the African Development Bank (AfDB), presented a proposal to establish a regional financial stabilisation mechanism in Africa.

“If set up, this regional safety net could complement the existing international financial architecture, creating an additional buffer for concerned countries to protect against external shocks,” the statement said.

Based on their multilateral dialogue, the RFAs reflected on the paths of the creation of their own institutions, sharing insights with the AfDB on key ingredients for a successful process and lessons learnt.

While exchanging views on the global and regional conjunctures and risks going forward, the parties noted that “In this period of heightened fragility and multiple shocks facing the global economy, they reaffirmed their commitment to cooperate closely to help members overcome these difficult challenges.”

No region will be spared from the impacts of climate change, with many parts of the world already experiencing more frequent and severe extreme weather events that disrupt lives and livelihoods.

Added to the IMF, were the heads of RFAs, who were represented by various funding institutions. These include:

  • the Arab Monetary Fund;
  • the ASEAN+3 Macroeconomic Research Office cum the Chiang Mai Initiative Multilateralisation, represented by the People’s Bank of China – the 2022 co-chair;
  • the BRICS Contingent Reserve Arrangement, represented by the South African Reserve Bank;
  • the Eurasian Fund for Stabilization and Development;
  • the European Commission;
  • the European Stability Mechanism; and,
  • the Latin American Reserve Fund

Updates by RSA heads

The RSA heads presented updates on ways through which they could support the global fight against climate change and their members’ efforts to achieve the Paris Agreement’s goals.

They noted that “No region will be spared from the impacts of climate change, with many parts of the world already experiencing more frequent and severe extreme weather events that disrupt lives and livelihoods.”

The efforts from RFAs focused on building up internal analytical and technical expertise, enhancing monitoring capabilities to better account for climate vulnerabilities and risks, disseminating and sharing information across their memberships, and greening internal policies to support social and environmental responsibilities through various activities such as portfolio investments.

 In this context, the French co-chair of the G20 International Financial Architecture Working Group updated participants on the group’s priorities, including supporting vulnerable economies and increasing resilience of the international financial architecture.

Low low-carbon economy

The IMF expressed its readiness to deploy and continuously adapt its toolkit such as the Resilience and Sustainability Trust (RST), approved in April this year, to ensure effectiveness in tackling the confluence of challenges facing the global economy.

It also highlighted its on-going efforts to support members’ climate change mitigation, adaptation, and transition to a low-carbon economy.

These include “the adoption of a climate strategy, which envisions a greater focus of the Fund’s surveillance on climate-related issues; a stronger focus on the climate-financial nexus; and the enhancement of the Fund’s analytical and capacity development work on climate, including through the production of climate macroeconomic assessments.”

The seventh joint RFA Research Seminar will be held in Colombia in the first half of 2023. The eighth High-level RFA Dialogue will be convened at the time of the next IMF/World Bank Annual Meetings in October 2023.

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