The IMF and the World Bank must be abolished to save the planet | The Climate Crisis

With yet another United Nations Climate Change Conference failing to produce a firm commitment to urgent climate action, the climate crisis is on track to get worse.

Although its consequences, such as unprecedented floods, devastating droughts, hurricanes, loss of biodiversity and extreme storms seem novel to many people in the Global North, these disasters have caused untold destruction for decades throughout the Global South, especially the Caribbean.

Extreme weather events not only threaten the economic performance of these communities, but also call into question the role of the most powerful international economic institutions, the World Bank and the International Monetary Fund.

The intervention of these agencies has made the economic situation worse in the communities affected by the weather. This is why the World Bank and the IMF must be abolished to save the planet and human lives.

Caribbean island nations know this fact all too well. On July 1, Hurricane Beryl struck Grenada. Its two island territories, Carriacou and Petite Martinique, were devastated, as Beryl damaged or destroyed nearly 100 percent of homes and destroyed infrastructure. At least six people were killed.

The neighboring island nation of St Vincent and the Grenadines was also heavily devastated by the storm. In both countries, about 80,000 people were affected, 20,000 people were left homeless and 11 were killed.

Jamaica was not left out either. The storm killed at least four people and affected 160,000. Farming communities have suffered the most.

It has been almost five months since this hurricane hit the Caribbean and these communities are still struggling. This is because these island countries are caught in bad deals with the IMF and the World Bank.

Instead of helping the region at the center of climate disasters, the two institutions are forcing their countries to create lending programs that prioritize resilience and global capital goals, rather than immediate and long-term aid and recovery. As a result, communities suffer under increasing public debt and reduced investment in supporting the social infrastructure needed to deal with climate disasters and mitigate the effects of climate change.

In addition, instead of providing unconditional aid and subsidies with the necessary conditions to meet the real needs of the people, these organizations have openly supported debt-related financial instruments such as disaster insurance or bonds, debt restructuring, and now “crisis clauses” combined with debt. contracts. A disaster or hurricane clause adds to the contractual terms of a debt instrument the borrower's ability to defer payments of interest and principal in the event of a qualifying natural disaster.

The clause sets out the types of pre-conditions for certain events or triggers that would allow the borrower to temporarily postpone the payment of interest, principal, or both for a period of one to two years. This method does not reduce or eliminate debt.

Although it aims to provide “help”, it brings additional suffering and heavy costs to governments and communities devastated by the climate. Take for example the crisis clause, recommended and promoted by the Caribbean economist and current financial advisor of the Inter-American Development Bank, Avinash Persaud, one of the architects of the “Bridgetown Initiative” to reform the international financial system. .

It can only be activated when an arbitrary limit such as wind speed or the financial cost of destruction during a storm is satisfied or exceeded. In the case of Hurricane Beryl, Grenada was able to trigger this clause, but Jamaica was unable to use the same financial instrument. In the case of Grenada, deferred payments will be added to the principal in subsequent years.

In the case of Jamaica, the disaster bond could not be used because the storm did not meet the so-called “air pressure”, which means that investors' funds remain safe. A disaster bond is a high-yield debt instrument organized by the World Bank and designed to raise funds for insurance companies in the event of a natural disaster. These investors make up to 15 percent return on these instruments if they default. If the payment was made, bondholders could pay up to $150m.

These restrictions do not follow scientific evidence or take into account the complex and unpredictable nature of these disasters. That is because they are determined by financial analysts who pursue high returns for investors.

Without adequate resources for aid and relief efforts, Jamaica and Grenada may be forced to seek bailout loans from the IMF and the World Bank, thereby increasing their debt burdens even further.

The long-term impact of these programs can be seen in Barbuda, Sint Maarten and Dominica, which were devastated by the Category 5 hurricanes Irma and Maria in 2017. My recent visit to these islands, which have not yet fully recovered, shows that debt-related financial instruments are not only completely inadequate, but unfair. They cannot guarantee social, economic and environmental sustainability.

In Dominica, for example, debt increased after the hurricane disaster as climate finance for “recovery” came in the form of loans. Because of this, a nation of 70,000 people has to pay $30m a year just to service the debt. As one Dominican taxi driver said to me: “The real storm started after the storm passed.”

The hardships that the IMF and the World Bank are heaping on climate-affected communities are parallel to the legacy and realities of colonial rule. The understanding of their methods can be traced back to the insurance system, capital markets, and financial instruments that fueled the transatlantic slave trade.

At the time, enslaved Africans were considered chattel and non-human, slave ships were insured by large buyers, and slave products received investment from colonial governments and financial institutions. All this was aimed at accumulating wealth that produced metropolitan Europe.

The World Bank and the IMF operate today as neocolonial institutions that further the Euro-American imperial power agenda. They do nothing to mitigate the disasters but perpetuate them through the debt slavery imposed on climate-ravaged countries in the Caribbean and elsewhere.

In this moment of many, intersecting problems, they do not deserve the dangers and challenges of the climate crisis. To be sure, the World Bank and the IMF were not meant to help the “World's Poor” to borrow the language of Frantz Fanon. They were created to support Euro-American supremacy and hegemony and protect the interests of world capital.

Therefore, we cannot expect these structures to be changed and work against the economic and political interests of state power and big money. We need a global movement that seeks and takes action to end these institutions to meet the needs of these difficult times. We need to end the World Bank and the IMF for the sake of people's lives and for the sake of the planet.

The views expressed in this article are the author's own and do not reflect the editorial position of Al Jazeera.