Jamaica is the latest country to get IMF board approval for loans under the Resilience and Sustainability Trust (RST), following the acceptance of Costa Rica, Barbados, Rwanda and Bangladesh in the last six months.
The multi-million-dollar finance packages vary for each country, from US$183 million for Barbados to US$1,4 billion for Bangladesh, and recipients have different ideas of how they will spend the money.
The RST fund, set up last year, was aimed at redistributing affordable finance from rich to poorer countries, along with policy support to manage macro-economic climate risks. The IMF believes it can also catalyse essential private sector financing to boost climate action and to decarbonise financial markets.
Experts hailed the move as “pivotal” in helping vulnerable nations address the triple crises of debt, Covid and climate change, and said it could fill a gap in climate finance architecture.
Commenting on Jamaica’s US$764 million agreement, Bo Li, deputy managing director and acting chair of the IMF board, said the funding would create incentives to “switch to renewables, reduce energy consumption, develop green financial instruments, and require proper management of climate risks in the financial sector”.
But there was concern that the strings attached would exclude many nations in need. Countries need to show they can repay the loan to the IMF, present a package of policy measures for how they would use the support, such as carbon-cutting and adaptation measures, and already have a programme of policy reforms with the IMF.
Ronan Palmer, clean economy director for think-tank E3G, took “great heart” from the fact that RST money had so far been approved for a diverse range of countries, including fossil producers such as Barbados, and countries at significant physical risk from climate change such as Bangladesh.
“This shows that the trust does have capacity to reach across the issues in climate,” he said.
He said Jamaica’s loan could help protect it against climate risk “so vital in a country at increasing risk of Caribbean storms” and its economy from the risks of transition.
“A small economy like Jamaica will be very exposed to the kind of price and exchange rate pressures that could come as the world moves on from fossil fuels, or changes production patterns, [for example] in the shift to EVs from internal combustion engines.”
John Hicklin, non-resident fellow of the Centre for Global Development and a former senior IMF official, wrote in a blog that getting this far was a “major accomplishment”.
But he said the conditions built into the loans would not necessarily help in their aim of helping countries become more resilient to external shocks and grow sustainably.
Anaitee Mills, a sustainable development expert who helped develop Jamaica’s disaster risk financing policy, said the approval of that policy was one of the milestones it had to achieve to be able to draw money from the RST. — IMF