Press Release No. 24/283

The President of the IDB and the Managing Director of the IMF Outline Enhanced Partnership to Better Support Latin American and Caribbean Countries

July 22, 2024

Washington, DC – July 22, 2024: The President of the Inter-American Development Bank (IDB) and the Managing Director of the International Monetary Fund (IMF) have agreed to enhance their collaboration to better support the efforts of common members in Latin America and the Caribbean to foster sustainable and inclusive growth and address the structural challenges of climate change.

Operating within the scope of each institution’s mandate, IDB and IMF staff will increase their cooperation in two main areas: general coordination and climate finance.

As part of their enhanced general coordination, the IDB and the IMF staff will deepen their cooperation on four topics: (i) surveillance of macro-economic policies, (ii) IMF arrangements, in particular the Resilience and Sustainability Fund (RSF), (iii) IDB lending operations, including investment and policy-based loans, and (iv) capacity development.

The climate finance collaboration will focus on: i) identifying policies to support member countries’ climate objectives in the context of the RSF, ii) capacity development to support the implementation of the RSF and iii) building programmatic approaches to mobilize climate finance.

By strengthening their collaboration in these areas, the IDB and the IMF staff will enhance their support for designing economic policies and policy reform programs in common member countries, as well as mobilize climate finance more effectively. This includes working with country platforms to attract additional funding for climate action.

In this context, climate finance roundtables recently convened in Barbados, Jamaica, and Costa Rica, brought together authorities, development partners, and private investors. These initiatives helped explore solutions to the countries’ climate finance needs and provide faster and broader access to financing and capacity development.

“Our enhanced partnership with the IMF is a very significant step towards better supporting our member countries tackle climate change more effectively and seizing the opportunities that the green transition can offer and foster sustainable growth. We see a lot of synergies between the work of both institutions, and I look forward to amplifying our impact thanks to this closer collaboration,” said Ilan Goldfajn, President of the Inter-American Development Bank.

“We are committed to enhancing our collaboration with IDB to deliver tangible results for people, businesses and institutions throughout Latin America and the Caribbean. We do this by leveraging our respective expertise to tackle challenges posed by climate change,” said IMF Managing Director Kristalina Georgieva.

Demonstrated Success

This new stage in the partnership between the two institutions builds on a long history of successful collaboration, including most recently in Paraguay, Jamaica, Barbados, and Costa Rica, in the context of the IMF’s RST.

• Paraguay. The IDB’s and the IMF’s joint work includes public financial management, revenue administration and mobilization, and governance. The collaboration was recently broadened to include climate initiatives under the Resilience and Sustainability Facility (RSF) arrangement and the Policy Coordination Instrument (PCI). The IDB is actively supporting the implementation of RSF reform measures such as the development of a green taxonomy, the expansion of the country’s clean energy matrix, and waste management. The IDB’s support to Paraguay’s Ypacaraí Lake's sanitation project complements the RSF reform matrix and creates performance incentives for better water/wastewater management using IDB CLIMA, the IDB's results-based financial tool that incentivizes faster progress on adaptation and mitigation. In addition, the IDB is contributing to the implementation of reforms under the PCI to enhance public financial management, including on public investment.
  
  
• Jamaica. The partnership between the IDB and the IMF played a critical role in designing and implementing reforms under the RSF arrangement to incorporate climate adaptation and mitigation elements in fiscal management, as well as to launch initiatives aiming at greening the financial sector. The IDB provided extensive and timely capacity development for several areas in the authorities’ reform agenda, which included the inclusion of climate requirements in public-private partnerships policy frameworks, the definition of a methodology to conduct climate impact assessments in public investment, the introduction of investment projects selection criteria (including climate change elements), the development of an electric vehicle policy, new guidelines for energy efficiency in public buildings, and the establishment of a framework for green-bond issuance.

• Barbados. Collaboration between the IDB and the IMF has played a critical role in the successful design and implementation of the current RSF arrangement. The IDB has supported the enhancement of the public financial management framework by integrating climate elements into the Procurement Act. This includes designing and approving guidelines for a green procurement framework, developing standard procurement contracts that incorporate climate change requirements, and implementing green budget tagging to inform policymakers and the public about the quantity and use of on-budget climate finance. Furthermore, the IDB has coordinated the design and execution of innovative financial instruments, such as the 2022 Debt-for-Nature conversion.

• Costa Rica. Collaboration between the IDB and the IMF facilitated the successful completion of the RSF arrangement in June 2024. The IMF, through its convening power and expertise in macro policy, contributed to prioritizing and sequencing of reform measures, while the quality and granularity of the design as well as the implementation of reform measures benefitted from active inputs from development partners, particularly the IDB. In particular, the IDB supported the Ministry of Finance and Ministry of Planning (MIDEPLAN) in meeting several of the RSF policy commitments through technical assistance, in key areas like the design of a new budget classification system that will allow for the estimation and evaluation of climate-related expenditures, and the development of tools and guidelines to prioritize capital projects including a range of clime change criteria. In addition, the Costa Rican authorities are strengthening the legal and regulatory framework for public-private partnerships with support of IDB, which is an important step toward the establishment of a Project Preparation Facility that can unlock private sector financing for climate investments.

Looking ahead, IDB and IMF staff will continue to partner in the design and implementation of policies and programs to support the structural transformation the countries in the region need to reach their strategic climate goals. This will include exploring options to advance green fiscal policies and enhance financing alternatives for climate resilience investments through a combination of different financial tools.

The staff of IDB and IMF are also working closely together with the World Bank to support the ambitious climate reform agenda of other member countries.