• 08.04.2024
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The International Monetary Fund (IMF) claims to have added the fight against climate change to its mandated work, but when designing plans to help countries restore economic stability, it pushes them to deepen their dependence on fossil fuels, which are the main cause of global warming. This is exactly what is happening in Argentina, its largest debtor, with a liability of more than 44 billion dollars.

This is shown in the report “The IMF talks about climate change, but it pushes Argentina into more and more fracking. The IMF, its climate policy and the conditions for Argentina” by Recourse and Periodistas por el Planeta, which was compiled on the basis of information contained in public IMF documents.

The financial organization is pressuring the country to speed up the exploitation of Vaca Muerta (which translates to ‘dead cow’), a 30 thousand square kilometer gas deposit located in Northern Patagonia. It is the second largest shale gas basin in the world and the fourth largest unconventional oil basin, a dangerous carbon bomb capable of diverting the goals of the Paris Agreement, not only for Argentina but globally. The exploitation technique used in Vaca Muerta is fracking (hydraulic fracturing), which has an enormous impact on the atmosphere due to the emission of CO2, methane and volatile organic compounds. In addition, fracking causes irreversible damage to the territory, demanding an intensive use of water where it is scarce, causing serious damage to public health and the environment, and infringing on human rights.

The IMF explicitly supports Argentina’s large-scale export of fossil fuels so as to balance fiscal accounts and have the capacity to repay debt, without paying any attention to the needs of domestic consumption. This is demonstrated by the conditions included in the 2022 loan agreement between Argentina and the IMF that include an increase in gas and electricity rates.  The conditions rely only on the idea of ​​establishing carbon pricing as a tool to confront the climate crisis, instead of focusing on underlying policies that could question the expansion of the fossil fuels frontier.

Kristalina Georgieva is expected to lead the IMF for the next five years, which is the key moment for action on climate policy. The IMF can either accelerate the changes needed to keep global temperatures from exceeding 1.5°C, or help the world continue to burn. Now is the time to make the choice, but it cannot sustain a policy that is nothing more than greenwashing.

While pressuring the Argentine government to reduce subsidies for the population’s energy consumption, with the subsequent increase in rates, the IMF does not question the use of public funds in the payment of incentives to companies that extract unconventional gas, which since 2016 have reached a total of USD 4,000 million, distributed among eight companies predominantly.

This is why we ask ourselves: is the IMF’s climate policy a mere statement of unsubstantiated political correctness? What is the purpose of a climate strategy if the IMF does not mention the 1.5°C goal? Is it worth achieving macroeconomic and financial stability if environmental and social sustainability cannot be guaranteed?

Obsessed with a dead cow 

IMF documents from 2016 onwards proclaim that Vaca Muerta is a key part of the country’s economic solution, not only because it would  reduce energy imports but also because it outlines an export horizon in the short term. The IMF did not question the fact that investing public funds in infrastructure such as the President Nestor Kirchner gas pipeline would require enormous cuts in social spending.

Even the World Bank questions the sustainability of this model, saying that hydrocarbon activity can bring benefits to the private sector but could generate risks to the Argentine State such as stranded assets, as international demand for fossil fuels falls.

The fact that the IMF places intensive exploitation for the export of raw materials at the centre of its debt repayment policy makes it difficult for the countries of the Global South to address the climate crisis. And when extreme events seriously hit commodity production (such as the drought in Argentina in 2023, that had losses equivalent to almost half of what was owed to the IMF), it keeps on pushing debtor countries to deepen unsustainable economic models in the environment and social areas.

Federico Sibaja, IMF Campaign Manager at Recourse, said: “The focus of the IMF’s work is on macroeconomic and financial stability and, it is from this point on, where the institution focuses to work in the challenges of mitigation, adaptation to climate change and transitions. This approach presents great limitations because it does not lay out a concept of “macroeconomic stability” that includes climate impacts, moving away from a comprehensive change of the business as usual. 

Other of the authors, María Di Paola researcher from Periodistas por el Planeta states: “In fact, the current climate strategy values macroeconomic stability over other objectives, opens the door to the expansion of fossil fuels in countries of the Global South with hydrocarbon reserves to ensure the repayment of debt services and balance of payments stability.”.

 “Therefore, the “climate concern” of the institution shows a clear contradiction with its usual modus operandi. This encourages countries to reduce fiscal spending and increase exports without analysing the social and environmental impacts, as is the case of Argentina, which requires a wake-up call,” it adds. This concern is not limited to Argentina, since the IMF operates in a similar way in Uganda, Senegal and Surinam, among other countries.

The IMF itself admits that Argentina’s current policies (such as its nationally determined contribution) are not aligned with the Paris Agreement, despite the encouragement and expectations it places on the development of Vaca Muerta. In fact, emissions from the country, which is the 25th largest emitter according to the IMF, increased 3.3 percent since the climate treaty came into force. In order to meet with the climate goals voluntarily adopted by Argentina, the country would have to reduce its emissions 7 percent in absolute terms by 2030.

This report is a wake-up call for the United States Treasury, which represents its government within the IMF, since it does not have any strategy on how to use its voice and vote to support the goals of the Paris Agreement at the core of this institution, as it does for other international financial entities such as development banks. The silence of the Treasury on this issue, as the Fund’s largest shareholder, is striking. Furthermore, this work serves as a roadmap for other countries in the Global South that also have onerous debts with the credit organization and are forced to remain anchored in fossil projects due to the conditions posed by the IMF.

Among the recommendations, the study indicates that the IMF must:

Develop a climate strategy that ensures that its short-term interventions are aligned with long-term goals such as the development paths under 1.5°C, with mechanisms for the involvement of governments and civil society.

Reduce the ambition of the conditions of their programs, letting national governments design economic, social and environmental plans that respond to the needs of the citizens and are aligned with the climate commitments taken on at the international level (aligned with 1.5°C).

Increase concessional financing that is long-term and without conditions, to prevent countries from having to choose between defaulting or setting aside their development plans to focus on debt repayment in the short term.

Include in debt sustainability analysis the investments needed for the long-term environmental and social sustainability of debt-taking countries.

Carry out thorough analysis on the risks to macroeconomic and financial stability caused by dependence on the export of raw materials (particularly fossil fuels) given the volatility of international prices.

Periodistas por el Planeta is an organisation in Argentina founded by communication professionals to spread new narratives about the planetary crisis, both the climate and the rapid deterioration of biodiversity and the environment. Recourse is a Dutch organisation working with various organisations around the world to transform the international financial system to ensure compliance with the Paris Agreement and human rights.

For further information, please contact:

Federico Sibaja, IMF Campaign Manager, Recourse –  federico@re-course.org +32491199367

Maria Di Paola, Senior Researcher, Periodistas por el Planeta – mariadipaola@gsccnetwork.org

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