Raise domestic financing to fund climate action projects: IMF’s Georgieva

livemint.com:

Edited excerpts: Yes, it is difficult in a world that has gone from one shot to another with the consequence being fiscal space in countries has shrunk in some countries. The fight against inflation means that interest rates are high, and for countries with a high level of debt that eats up resources. On top of it, with advanced economies now moving towards industrial policy and green subsidies—which overall is a good track to accelerate decarbonization—they become more attractive for private investors because it’s easier to invest in the developed world.

So, in that environment, it is difficult for emerging markets and developing economies to invest in climate action. And yet, if they don’t, the world is cooked because even if the US, Europe, Japan and Australia bring their emissions down to zero, two-thirds of the emission increase comes from fast-growing emerging markets in developing economies. First, we recognize that the developing economies do need to do more domestically to raise financing and also to deepen domestic capital markets.

We have identified domestic resource mobilization as an area where the fund can do quite a lot. Next year, we will start a very big programme on tax, quality of spending local currencies, and bond markets in collaboration with the World Bank. I talked to leaders from Africa, and they completely embrace our objective of setting a target somewhere between 0.5% and 1% increase of tax to GDP based on better policy, and stronger institutions using digitalization.

Second, we know that many developing economies have difficulty attracting private investors because of complicated regulations and red tape. So, we have built again, a big programme in that area. Help countries to stand tall for