Washington, DC – July 22, 2024:
The President of the Inter-American Development Bank (IDB) and the
Managing Director of the International Monetary Fund (IMF) have agreed
to enhance their collaboration to better support the efforts of common
members in Latin America and the Caribbean to foster sustainable and
inclusive growth and address the structural challenges of climate
change.
Operating within the scope of each institution’s mandate, IDB and IMF staff
will increase their cooperation in two main areas: general coordination and
climate finance.
As part of their enhanced general coordination, the IDB and the IMF staff
will deepen their cooperation on four topics: (i) surveillance of
macro-economic policies, (ii) IMF arrangements, in particular the
Resilience and Sustainability Fund (RSF), (iii) IDB lending operations,
including investment and policy-based loans, and (iv) capacity development.
The climate finance collaboration will focus
on:
i) identifying policies to support member countries’ climate objectives in
the context of the RSF, ii) capacity development to support the
implementation of the RSF and iii) building programmatic approaches to
mobilize climate finance.
By strengthening their collaboration in these areas, the IDB and the IMF
staff will enhance their support for designing economic policies and policy
reform programs in common member countries, as well as mobilize climate
finance more effectively. This includes working with country platforms to
attract additional funding for climate action.
In this context, climate finance roundtables recently convened in Barbados,
Jamaica, and Costa Rica, brought together authorities, development partners,
and private investors. These initiatives helped explore solutions to the
countries’ climate finance needs and provide faster and broader access to
financing and capacity development.
“Our enhanced partnership with the IMF is a very significant step
towards better supporting our member countries tackle climate change more effectively and
seizing the opportunities that the green transition can offer and foster
sustainable growth. We see a lot of synergies between the work of both
institutions, and I look forward to amplifying our impact thanks to this
closer collaboration,” said Ilan Goldfajn, President of the Inter-American
Development Bank.
“We are committed to enhancing our collaboration with IDB to deliver
tangible results for people, businesses and institutions throughout Latin
America and the Caribbean. We do this by leveraging our respective
expertise to tackle challenges posed by climate change,” said IMF Managing
Director Kristalina Georgieva.
Demonstrated Success
This new stage in the partnership between the two institutions builds on a
long history of successful collaboration, including most recently in
Paraguay, Jamaica, Barbados, and Costa Rica, in the context of the IMF’s
RST.
-
Paraguay. The IDB’s and the IMF’s joint work
includes public financial management, revenue administration and
mobilization, and governance. The collaboration was recently
broadened to include climate initiatives under the Resilience and
Sustainability Facility (RSF) arrangement and the Policy Coordination
Instrument (PCI). The IDB is actively supporting the implementation of
RSF reform measures such as the development of a green taxonomy,
the expansion of the country’s clean energy matrix, and waste
management. The IDB’s support to Paraguay’s Ypacaraí Lake's
sanitation project complements the RSF reform matrix and creates
performance incentives for better water/wastewater management
using IDB CLIMA, the IDB's results-based financial tool that
incentivizes faster progress on adaptation and mitigation. In
addition, the IDB is contributing to the implementation of reforms
under the PCI to enhance public financial management,
including on public investment.
-
Jamaica. The partnership between the IDB and the IMF
played a critical role in designing and implementing reforms under the
RSF arrangement to incorporate climate adaptation and mitigation
elements in fiscal management, as well as to launch initiatives
aiming at greening the financial sector. The IDB provided
extensive and timely capacity development for several areas in the
authorities’ reform agenda, which included the inclusion of
climate requirements in public-private partnerships policy
frameworks, the definition of a methodology to conduct climate
impact assessments in public investment, the introduction of investment
projects selection criteria (including climate change elements), the
development of an electric vehicle policy, new guidelines for energy
efficiency in public buildings, and the establishment of a framework for
green-bond issuance.
-
Barbados. Collaboration between the IDB and the IMF has
played a critical role in the successful design and implementation
of the current RSF arrangement. The IDB has supported the
enhancement of the public financial management framework by
integrating climate elements into the Procurement Act. This
includes designing and approving guidelines for a green
procurement framework, developing standard procurement contracts that
incorporate climate change requirements, and implementing green budget
tagging to inform policymakers and the public about the quantity and use
of on-budget climate finance. Furthermore, the IDB has coordinated the
design and execution of innovative financial instruments, such as the
2022 Debt-for-Nature conversion.
-
Costa Rica. Collaboration between the IDB
and the IMF facilitated the successful completion of the RSF
arrangement in June 2024. The IMF, through its convening power and
expertise in macro policy, contributed to prioritizing and sequencing of
reform measures, while the quality and granularity of the design as well
as the implementation of reform measures benefitted from active inputs
from development partners, particularly the IDB. In particular, the IDB
supported the Ministry of Finance and Ministry of Planning (MIDEPLAN) in
meeting several of the RSF policy commitments through technical
assistance, in key areas like the design of a new budget classification
system that will allow for the estimation and evaluation of
climate-related expenditures, and the development of tools and
guidelines to prioritize capital projects including a range of
clime change criteria. In addition, the Costa Rican authorities
are strengthening the legal and regulatory framework for
public-private partnerships with support of IDB, which is an
important step toward the establishment of a Project Preparation
Facility that can unlock private sector financing for climate
investments.
Looking ahead, IDB and IMF staff will continue to partner in the design and
implementation of policies and programs to support the structural
transformation the countries in the region need to reach their strategic
climate goals. This will include exploring options to advance green fiscal
policies and enhance financing alternatives for climate resilience
investments through a combination of different financial tools.
The staff of IDB and IMF are also working closely together with the World
Bank to support the ambitious climate reform agenda of other member
countries.
