AfDB, IMF economists seek climate financing intervention for Africa

Experts at the African Development Bank and International Monetary Fund (IMF) have called for urgent mobilisation of climate financing for Africa to achieve sustainable growth. They made the call at a panel discussion on the African Development Bank’s 2022 African Economic Outlook hosted by the IMF in Washington last week.

Videos of the session were made available to The Guardian.

African countries need $1.6 trillion yearly between 2022 and 2030 to meet their Nationally Determined Contributions (NDCs) to fight climate change, according to assessment by development institutions.

But the countries receive only $18.3 billion yearly, leaving a financing gap of $108 billion. This huge shortfall raises concerns about the capacity of the continent for its NDCs.

AfDB’s Acting Chief Economist and Vice President, Prof. Kevin Urama, told the gathering that Africa has a huge comparative advantage to lead the world in this new green transition except that it lacks the required capital to do so.

Urama said findings of the 2022 African Economic Outlook show that the structure of climate finance is extremely complicated, creating a misallocation of resources.

Hence, he said, the main objective of climate finance –supporting climate-vulnerable countries – is not being achieved.

“One fundamental, existential issue for Africa is climate change. The countries that are receiving climate financing are the less vulnerable ones,” Urama noted, referring to the alleged injustice in the administration of the global climate fund.

The economist said it was important the regional leaders approach the challenges from a fresh perspective to avoid “using the old map to chart a new world.” There are opportunities to trump the challenges, he said, but tradeoffs are important to forge partnerships that work in the interest of all.

Urama was joined in the session by IMF’s Assistant Director of Fiscal Affairs Department and Climate Change Policy Coordinator, James Roaf, and Acting Manager of AfDB’s Macroeconomic Policy, Debt Sustainability and Forecasting Division, Anthony Simpasa. It was moderated by Deputy Director of IMF’s African Department, Cathy Pattillo.

Director of the African Department at IMF, Abebe Selassie, observed that African policymakers faced the unenviable task of sourcing trillions of dollars in investment in the energy transition to advance its development.

“At the same time, they are being asked to think about the adverse effect that this may have on climate change, but advanced countries who benefited from climate unfriendly policies are unwilling to support development in the region. This is one issue that policymakers raise with us when we engage with them on the financing challenges they face,” Selassie said.

Selassie described the findings of the 2022 African Economic Outlook as sobering, observing that “it raises some profound issues.”

Roaf identified adaptation as the biggest issue for Africa, saying: “The African Economic Outlook rightly stresses the need to integrate climate objectives in overall sustainable development pathways. We need to focus on making the most of the opportunities that the clean energy transition offers so that climate mitigation and adaptation policies come hand in hand with rising prosperity.

“Mobilising the private sector is critical, with policies such as carbon pricing to encourage investment in renewables, or improving adaptation incentives by reinforcing property rights or strengthening regional trade.”