Impossible Mission Creep at the IMF

Clarice Feldman28 Apr, 2023 4 Min Read
Vox populi.

The International Monetary Fund (IMF) was created along with the World Bank in post-war 1944 at Bretton Woods. The plan was to prevent another worldwide depression and lift more people around the world out of poverty. It is not a lending institution, but rather its focus is to keep watch over monetary and exchange rate policies so important to the global markets. Or at least it was. It seems to have stepped out of its lane with its new Resilience and Sustainability Trust (RST). So far (as of December 15, 2022) the Trust has received from seven countries (not the United States) more than forty billion dollars and explains in generalities how it plans to use these funds:

The IMF helps countries tackle the challenges of climate change. Through its Resilience and Sustainability Trust (RST), the IMF plays an increasingly important role in helping countries with limited room in their budget address long-term challenges, including climate change.

 The Trust helps low-income and vulnerable middle-income countries build resilience to external shocks and ensure sustainable growth, contributing to their longer-term balance of payments stability. It complements the IMF’s existing lending toolkit by providing longer-term, affordable financing to address longer-term challenges, including climate change and pandemic preparedness.

The resilient ghost of John Maynard Keynes refuses to die.

To the extent that it intends to use these funds to address "climate change" challenges, whether or not you believe that climate change exists on a scale that requires substantial funding, the notion of adaptive measures seems to me more promising than impoverishing the world with pie-in-the-sky notions of achieving zero carbon dioxide emissions. Like most things, the worth of the project demands on the details and implementation. But there’s little detail to go on.

The Fund will be financed from Special Drawing Rights (SDRs), supplementary foreign exchange reserves. "Special Drawing Rights (SDRs) are an asset, though not money in the classic sense because they can’t be used to buy things. The value of an SDR is based on a basket of the world’s five leading currencies – the US dollar, euro, yuan, yen and the UK pound," explains the IMF. In essence it means wealthier countries channeling money to poorer and more vulnerable ones to provide for "climate change" adaptation and transitioning to cleaner energy sources.

A conference last April discussed whether the IMF trust can deliver inclusive and sustainable recoveries. It focused on the Special Drawing Rights management of the IMF. Without considering the fine points of the SDR program itself, it’s worth looking at the criticism of its operation detailed in this session to see the likelihood of the RST program achieving its goal.

Vimal Thakoor, senior economist at the IMF, explained the intention of the program. The IMF will provide the “catalyst “ for financing and establish a set of reforms “that country can push through as part of the RST.” Importantly “mitigation, adaptation and transition policies can be included in climate-related reforms.”

Panelists complained the allocations were unfair, mostly going to richer nations. (The IMF by tradition is headed by a European). Some participants took issue with the allocation of the program, claiming the $50 billion target was too small; others expressed concern that a conditionality of “accountability” was a problem, that the debt load for most of the African countries  was unsustainable. One panelist said all the countries’ debt to the IMF would be erased “if rich countries only donated 25 percent of their SDRs."

Some of these criticisms are in line with those earlier aimed at the IMF by those who think its economic reforms were counterproductive and devastating for the citizens in the countries who accepted IMF lending. (Greece and Spain are the recipients most cited by those who think the IMF policies have been too intrusive and counterproductive.)

In April of this year the managing director of the IMF, Kristalina Georgieva said 44 countries expressed and interest in borrowing from the RST fund. Five loans had been granted, the recipients being Rwanda, Barbados, Costa Rica, Bangladesh and Jamaica. I can find no explanation for the specific purposes these loans are to be made.

To take the first named recipient, Rwanda, it has a temperate to subtropical climate. It has two rainy seasons and two dry seasons a year. One India-based think tank (Strategic Foresight Group) has reported that the country lately has had fewer rainy days but more torrential rains, pegging the shift to "climate change."

Impossible mission or Mission: Impossible?

Since "climate change" (like racism) is blamed for everything, and weather is notoriously erratic due to a multiplicity of out-of- human-hands things like cyclones, solar output, etc., there have always been natural periods of above and below precipitation. The Biblical Joseph dealt with such natural weather cycles by adaptation— having the Pharaoh build storehouses for food in times of surplus. So the concept of weather shifts and adaptation are hardly new.

Modern agronomists have a number of adaptive suggestions for "climate change" resilience, including changing planting times, storing excess water in reservoirs, selecting plants accustomed to new weather conditions, diversifying crops, managing flood plains, and relocating planting where topsoil has been washed away by heavy rainfall. In other words, doing what smart farmers have done from time immemorial. Today, however, this is known as "resilience."

If the IMF focuses on genuine mitigation, it can help. The nature of the organization and its history, however, is ample cause for skepticism. More likely we’ll see yet another grand, very expensive and not terribly effective plan. Call it Mission: Impossible.

Clarice Feldman is a retired attorney living in Washington, D.C. During her legal career she represented the late labor leader Joseph ("Jock") Yablonski and the reform mine workers against Tony Boyle. She served as an attorney with the Department of Justice Office of Special Investigations, in which role she prosecuted those who aided the Nazis in World War II. She has written for The Weekly Standard and is a regular contributor to American Thinker.


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