Blind Spots

The IMF has increasingly acknowledged the necessity of countries pursuing effective climate change adaptation and mitigation policies, which not only make environmental good sense but are also necessary conditions for macroeconomic stability in the medium- and long run. To aid countries in developing such policies, the organization conducts regular surveillance missions that evaluate economic policy environments and—per recent organizational decisions—are meant to include climate considerations. Analysis of 2023 IMF surveillance reports for Colombia and Indonesia finds evidence for concern. First, environmentally damaging austerity measures are prioritized even when key climate risks are recognized by the IMF. Second, green industrial policies, even though a key element of the green transition, are not given meaningful consideration in the IMF’s analyses. Finally, coverage of climate risks receives only a highly cursory examination.

To address these shortcomings, we calls for urgent changes at the IMF in five directions: pursuing more systematic coverage of climate issues in the development of policy recommendations; appropriately sequencing the IMF’s engagement, so that fiscal policies are not designed before the organization has ascertained the level of financing needs for climate change adaptation and mitigation; expanding the policy horizons of economic recommendations, so that its proposals are simultaneously economically sound, aligned with climate change adaptation and mitigation goals, and socially just; reviewing its toolkit’s appropriateness to tackle long-term challenges; ensuring wider engagement with CSOs working on ‘macro-critical’ issues.