Managing Director’s Remarks at the World Bank/IMF/Financial Times Pavilion: A Fireside Chat with President Banga, Moderated by Pilita Clark.
December 1, 2023
This is the first COP when the IMF and the World Bank have shared a pavilion. This sends a signal that we all need to work together in a way that makes sure what we achieve is bigger than we would have achieved on our own.
Going to the money: $5 trillion sounds like an impossible amount of climate finance, but if you look at the world economy today, it is over $100 trillion economy and it will continue to grow. So, by the time we move into the decades ahead, there should be better capacity to finance any activity.
We should also ask ourselves: is this sum really just for climate investment or is it for investments in climate and development? And if this is the case, then we should not be scared of this amount because development investments of that size are not necessarily so significant. But even if we are more comfortable with the figure and that we are not talking about an impossibility, it is still a mountain to climb.
The way we should approach the climb is to use all possible instruments we have at our disposal.
First, we are a huge proponent of carbon pricing. We believe that a carbon price has the potential to raise revenues in a way that is equitable – because the more you consume, the more you pollute, the more you pay – and it also provides an incentive to accelerate decarbonization. In other words, you would need less money because consumption and production would adapt to this incentive.
Second, we are finally at the cusp of private-public partnerships moving to genuinely deliver the impact that is necessary. Blended finance is no longer just a term: it is a reality, and you would hear people talking about various instruments in that regard.
And a third source of financing, frankly, is countries being more disciplined in collecting taxes from their businesses and their people. Tax collection today, in many developing countries, is below the 15 percent tax to GDP ratio which we think is the minimum needed to function.
And even when tax collection is at the 20, 21, 22, or 23 percent ratio, our analysis shows that there is space to improve tax collection. Digitization makes it harder to hide money – collect that tax! And take a more aggressive approach towards tax avoidance. So, this is a problem, but it is a solvable problem – and our institutions can make our contribution towards doing just that.
In our case we can help through the $40 billion Resilience and Sustainability Trust – which is a new trust. We already have 11 programs, of which six are in Africa and the total amount committed is around $4.4 billion. The long and the short is that demand is incredible, and performance is improving. We rely on the World Bank to for the quality of the policy decisions we support.
And today the United Arab Emirates announced an additional $200 million in support for the RST – so, thank you!