The heads of the International Monetary Fund and the World Bank said on Thursday that the two bodies will enhance joint efforts to tackle the “existential threat of climate change”, as the world continues to grapple with economic challenges.
“Climate change is a threat to global peace, security, economic stability and development,” Kristalina Georgieva, managing director of the IMF, and Ajay Banga, president of the World Bank, said in a joint statement.
“To address this challenge, our institutions need to help all our member countries integrate their climate and development goals. Given the critical nature of this work stream, we will put Bank-Fund collaboration in this area on a more structured and institutionalised footing.”
The two entities said that the world is facing significant economic challenges, as well as a digital transition, all in the context of more frequent shocks, high debt levels, limited policy space in many countries and rising geopolitical tension.
“The world can, and must, come together to address global challenges. The IMF and World Bank are committed to help advance this common effort,” said Ms Georgieva and Mr Banga, the Indian-American executive who, following his accession to the World Bank presidency in June, has placed a strong emphasis on climate change.
“Growth in the world economy has slowed, with the medium-term outlook at its weakest in over three decades. Progress in poverty reduction has come to a halt. Conflict and fragility are on the rise. The world is facing geoeconomic fragmentation, extreme natural disasters exacerbated by climate change, and increasing levels of public debt.
“Rapid digitalisation and technological transformations create new challenges, but also opportunities.”
Geopolitical and economic uncertainty is mounting around the world amid a multitude of factors that have significantly slowed growth momentum.
The IMF in July marginally raised its forecast for the global economy for this year and the next but said it is “not out of the woods” due to persistent headwinds, even though recovery is on track.
The Washington-based fund revised its earlier forecast for this year upwards, raising it by 0.2 percentage points to 3 per cent, although lower than the 3.5 per cent expansion recorded in 2022. It is projecting a similar pace of growth for 2024.
The World Bank, meanwhile, said in June that the world economy is set to grow at a slower pace as continued monetary policy tightening to rein in inflation is expected to crimp development.
The lender forecasted 2.1 per cent growth for the global economy this year, down from 3.1 per cent last year, before recovering to 2.4 per cent in 2024, it said in its Global Economic Prospects report in June.
Climate financing has taken centre stage as the global economy continues its shaky recovery from the pandemic-driven slowdown.
The IMF and the World Bank said in their latest statement that they would promote complementarity and synergy in their climate-related initiatives.
“Today, we need to enhance further our collaboration, in particular with regards to climate change and renewed high debt vulnerabilities,” the statement said.
The two institutions said they would further strengthen co-ordination and focus on results.
“We will formalise the regular meetings of the new Bank-Fund Climate Advisory Group, tasked with ensuring co-ordination of our climate related work streams,” it added.
The group will meet every two months to discuss “global and country level engagements”, including the results of Country Climate and Development Reports, country-level climate analytical work, and the pipeline of key projects and policy-based lending, it said.
“We will also incorporate climate considerations in our ongoing work on debt sustainability, including through the revised joint Low Income Country Debt Sustainability Framework,” the two leaders said.
They also said they would boost support for countries to “reap the benefit of new digital technologies while mitigating the risks, including on ways to improve cross-border payments”, as well as “support implementation of the G20 road map to enhance cross-border payments, and ensure that payment innovations spur growth, poverty reduction and job creation”.
Ms Georgieva and Mr Banga said the ongoing digital transition provides an opportunity for countries to accelerate economic growth and connect citizens to services and jobs.
“Yet in 2022, nearly three billion people remained offline, the vast majority of whom live in developing countries, and the wide gaps in usage of digital products between and within countries remain a challenge,” they added.