KARACHI: The operating frameworks of the International Monetary Fund (IMF) and the World Bank Group (WBG) are ill-suited to respond to the climate crisis as their successive interventions have locked in fossil fuels, caused large-scale hydro impacts and led the country to tap into local coal reserves.

According to a report released in a webinar on Tuesday by the Alternative Law Collective, Alliance for Climate Justice and Clean Energy, and Recourse, the global financial entities have failed to review their policies and mandates to ensure that they become more accountable and 1.5-degree-celsius-aligned institutions.

Speaking on the occasion, Alternative Law Collective Research Director Zain Moulvi said the IMF and WBG should adopt proper “Do No Harm” methodologies, introduce governance reform and carry out a review of their toolkits.

He talked at length about the phasing out of consumer energy subsidies which, he claimed, is at the centre of the IMF policy conditions. The phase-out of these subsidies has caused inflation in the midst of the 2022 floods that affected 33 million people, destroyed 1.7m homes and led to losses of about $40 billion.

Both institutions have failed to recognise the role of the unsuccessful WBG-led energy policy that produced overcapacity and indebtedness of energy companies while ignoring sustainable renewable sources, he said. The WBG is actively championing large-hydro projects that ignore climate risks — something witnessed earlier in the cases of the Left-Bank Outfall Drain and Tarbela Dam.

Mr Moulvi reminded the participants that the 2019 Extended Fund Facility (EFF) of $6bn withdrew tax exemptions on renewable energy (RE) technology and imposed “severe cuts” on public spending, including reversals of fuel and electricity subsidies.

Subsequently, the WBG published Pakistan’s Country Climate Development Report 2022, which contained no diagnostic study of its role in perpetuating climate-averse hydro and power sector developmental frameworks. It presented no analysis of debt and climate connection and took no clear stance on local coal while pushing for more private investments in RE.

Amid the 2022 floods, Mr Moulvi said, the IMF delayed Pakistan’s ninth EFF review, costing $2.2bn in the net outflow. Moreover, the 2023 Stand-By Arrangement (SBA) with the IMF signed in the immediate aftermath of the floods ramped up the austerity measures, including more fuel and electricity subsidy cuts.

It also encouraged private investments for “climate adaptation” against its reading of the market without providing any diagnostics of the climate harms caused by its fiscal and developmental strategies, he said.

For example, budgetary reforms under the SBA programme prescribe Rs12bn support for an Asian Development Bank-funded coal project and Rs19bn for large hydropower investments, he pointed out.“These institutions have generally followed an ahistoric and siloed approach that fails to recognise the interactive and dynamic interlinkages between their fiscal and macroeconomic policies, and the broader everyday realities of economic exploitation, gender inequality and climate change,” he said.

Published in Dawn, October 4th, 2023