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Climate, inequality: the new challenges of the IMF

The annual meeting of the International Monetary Fund (IMF) starts this Monday, October 14 in Washington, in the presence of all Member States. With the agenda, the priorities set by its new director, the Bulgarian Kristalina Georgevia.

Kristalina Georgevia, who is the emerging IMF leader, says climate and inequality have become key topics for her agency. Topics on which the Fund has made so far, but no concrete proposals. Its traditional role is to ensure international financial stability by playing firefighters when a state is on the brink of bankruptcy. And we can see with the new default of Argentina despite the massive support of the IMF, he already has a lot to do with this first mission.

IMF executive believes carbon must be taxed more to lower emissions

According to the latest IMF study, a carbon price of $ 75 per tonne imposed in all G20 countries would limit global warming to + 2 ° by 2100. Kristalina Georgevia's taxation needs to be reviewed. This is effective recognize observers, but is it realistic?

The removal of fuel subsidies demanded by the IMF put Ecuador on fire. The government of Quito has just given up this measure to end the crisis. And it is carbon taxation that triggered in France the movement of yellow vests , again it was finally repealed. As long as this green tax is lived as a tax on the poorest, its implementation seems very unlikely. The Fund's economists will therefore have to deploy ingenious resources to find the right tax formula, ecologically effective, egalitarian and politically neutral.

Rather than fighting inequality, the IMF is also regularly accused of worsening the poverty of the countries it supports.

The austerity programs that systematically accompany the granting of loans have indeed been heavily criticized since the 1980s. Recently the NGO Jubilee Debt Campaign has accused the IMF of overruling its own rules by lending to non-solvent countries. According to this British NGO, in addition to Argentina, 16 other countries are weakened by the new loans granted to them by the IMF. This is the case, for example, in Tunisia, Egypt, Ecuador or even Ukraine. The Fund rejects these accusations, but does not respond to the latest proposal of the NGO: favor the restructuring of the debts to the detriment of the creditors rather than to grant new loans, which will ultimately weigh on the taxpayer.

Does the IMF have the means to realize the agenda of its new director ?

IMF resources are based on member countries' quotas and borrowing from these countries. These resources need to be renewed, so there is an urgent need to increase them to adapt the strength of the fund to the size of the world economy. This also requires a better distribution of weights. Give more power to developing countries, because they are more involved in wealth creation, and also because they are at the forefront of climate transition; Given the domination of the United States for 75 years on this institution, to move the lines will be a tour de force, this is also part of the challenges that the Bulgarian Kristalina Georgevia will face.