WASHINGTON, April 12, 2023 (GLOBE NEWSWIRE) -- The International Monetary Fund has a historic opportunity to take immediate measures, undertake institutional reforms, and establish partnerships through which it can finally support the central role of biodiversity in macroeconomic and financial stability, Avaaz said in a policy briefing. Separately, in a 90-page report, Avaaz said that the IMF and Argentina, even without waiting for broader reforms of the current financial architecture, can already lead the way to innovative finance to restructure debt and deliver on effective outcomes for the economy and biodiversity.
The 2023 Spring Meetings of the IMF and World Bank Group are the first step in a sequence that must lead to reforming international financial institutions and make them more relevant for the challenges of the 21st century. During the last six months, the intimate interconnections between debt and climate emergencies have finally received more attention. But biodiversity, another major part of the ecological crisis, is still largely ignored in this conversation, despite the adoption of the new U.N. biodiversity framework last December in Montreal, according to the policy briefing.
The case of Argentina
The first paper, titled Debt×Debt The Argentine Case: A Post-Pandemic Proposal for Settling Sovereign and Ecological Debts and Pursuing a Fair and Equitable Transition in Argentina focuses on the case of Argentina, a G20 country that faces chronic debt crises and strong impacts from climate change, while harboring rich biodiversity which provides services to the rest of the world. The report proposes the establishment of Public Observatory on Debt in Argentina and a deeply participatory process to reinvigorate the national debate on debt in the country, and to connect this with a debt clearing mechanism at the international level to restructure the debt of Argentina.
Realizing the importance of Argentina’s biodiversity is central in these proposals: Argentina is a financial debtor, but an ecological creditor to the world. Its footprint is less than the natural resources its ecosystems produce. Avaaz suggests that Argentina develops debt-for-nature and debt-for-climate swaps (with a mechanism relying on sustainable bonds – see report for details).
The case for biodiversity in a global reform
But debt swapping is just but one mechanism that the IMF can use to jointly address the debt and ecological crises. The institution has only recently developed initiatives on climate but has taken even more time to respond on biodiversity. However, as the second Avaaz paper (Out of Oblivion. Why Biodiversity Must Be at the Heart of All IMF Policies) describes, there is a wide range of immediate measures, institutional reforms, and partnerships through which the IMF can finally support the central role of biodiversity in macroeconomic and financial stability. In its key messages, the report points to the precise governance levels of the IMF that have to take action. There is enough available expertise, at the IMF and outside, to move forward on this pressing issue.
Oscar Soria, Campaign Director at Avaaz, said: “Argentina, a G20 country, is choking in debt, strongly impacted by climate change, while still contributing major ecosystem services to the world. This is the situation of many countries from the Global South today. With countries being encouraged to destroy more of their biodiversity for debt servicing, creating even more mid to long term vulnerability for their economies. In the current efforts for reforming global financial cooperation, an end must be put to this vicious cycle.”
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The tango is a dance that emerged from the Argentine barrios which codifies the relationship of power, domination, and submission in a ritualized courtship routine. The power relationship can be understood as one of inequality, in which the partners play out the intricacies and dependencies that inequality creates. As the saying goes, “it takes two to tango”, and the debt crisis is fueled by the same power dynamics present in the tango, with the main creditors in the IMF – and now China as the world’s largest bilateral creditor and emerging lender of last resort – jockeying and repositioning themselves to stay on top of the debtors for world domination, in a complex dance of the billions.
An ambitious global program for debt-for-nature, debt-for-climate and other targeted proceeds debt swaps must be implemented to reach a critical mass of these operations, as country-by-country negotiations are insufficient. As IMF researchers point out, debt-for-nature swaps can open new revenue streams, especially for countries with globally relevant biodiversity, by materializing investments in global public goods. Avaaz has prepared a detailed proposal for an integrated approach to debt-for-nature swaps that takes into account its enormous capacity for generating globally relevant ecosystem goods and services such as climate regulation.
Among other urgent actions, what’s needed now is a financial "haircut" to significantly reduce debt levels. "Haircuts" are a fundamental part of reaching a long-term solution to the debt crisis and will contribute to debt sustainability. Without a common agreement amongst creditors on reasonable "haircuts" and other necessary concessions, the debt crisis will continue to spiral on an unsustainable path.
China has recently become more active on debt restructuring issues, in spite of blocking the inclusion of debt relief and specifically debt swaps in the context of the Kunming-Montreal Global Biodiversity Framework, in its role as President of the Conference of the Parties. In March, following the G20 meetings in Bengaluru (India), China joined efforts by the Paris Club and multilateral creditors to support flexible measures as a principal creditor for Sri Lanka in order to pave the way for a new agreement with the IMF. China has also hinted at including debt insured by the China Export and Credit Insurance Corporation in support of broader Common Framework debt negotiations in Zambia. As the world’s largest bilateral creditor, without being a member of the Paris Club, there is an opportunity and global responsibility for China to step up in its efforts to provide comprehensive debt relief, particularly in Africa but in general in developing countries that have taken on additional debt as part of the Belt and Road Initiative (BRI).
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