Climate change presents a major threat to long-term growth and prosperity, and has a direct impact on the economic wellbeing of all countries. The IMF has an important role to play in helping its members institute fiscal and macroeconomic policies to help address these climate-related challenges. We are mainstreaming climate-related risks and opportunities into our macroeconomic and financial policy advice. Climate considerations are now embedded in our bilateral and multilateral surveillance, capacity development, and lending. We also increasingly collaborate with other organizations on climate issues.
Through our analytical work we have examined policy issues such as an international carbon price floor, the transition to a green economy, border carbon adjustments, scaling up private climate finance in emerging market and developing economies, strengthening climate information architecture, fiscal policies to support adaptation, and green public investment and public financial management.
Delivering on global climate goals requires a shift to renewable energy and other green technologies. The main challenge for developing economies is securing funding for this transition. With limited fiscal space and low financial development, foreign direct investment (FDI) and official lending are crucial. This high-level panel discussed market reforms and financial sector policies to attract official financing, the impact of climate policies on FDI in low-carbon technologies, and the conditions needed to attract it.
Sleepwalking to a Cliff Edge: A Wake-Up Call for Global Climate Action
Policies to Foster Green FDI: Best Practices for Emerging Market and Developing Economies
Destination Net Zero: The Urgent Need for a Global Carbon Tax on Aviation and Shipping
Focus Area: Fossil Fuel Subsidies
Staff Climate Notes
IMF Climate Change Strategy
Closing the gender gap in science, technology, engineering, and math would accelerate the green transition while making it more inclusive
Easing the burden on lower-income households is not only socially fair, but also economically efficient
New books offer fresh perspectives on climate, China, and John Maynard Keynes
Data Gaps Initiative helps policymakers better understand the environmental impact of economic activities and the effectiveness of climate policies
Our biggest challenges—from global warming to demographic and technological transformations—cannot be resolved by countries acting alone.
Meeting the continent’s emission reduction targets could enhance energy security metrics by 8 percent by 2030—and that would be just the start
An IMF team conducted a Public Investment Management Assessment including the module on Climate Change in Paraguay. The team identified strengths related to the recent reforms in the National Public Investment System (SNIP) and several weaknesses along the investment cycle that affect its efficiency. It identified ten high-priority recommendations that could improve PIM processes.
Paraguay's economic activity remained strong in 2024. GDP growth is anticipated to reach 4 percent with some upward potential due to favorable performance of financial intermediation, services, and manufacturing. Inflation is firmly under control and expectations are well anchored. Monetary policy is close to its neutral stance. As projected, the current account has shifted into a wider deficit this year reflecting the post recovery adjustment in trade and higher imports. Fiscal consolidation is continuing with the deficit expected to reach the budgeted 2.6 percent of GDP. In the second part of the year, Paraguay has obtained an investment grade status from Moody’s for the first time in history.
The authorities’ implementation of the home-grown Economic Recovery and Transformation (BERT 2022) plan and their ambitious climate policy agenda remain strong, supported by the IMF’s Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF). Economic growth in 2024 has been robust and inflation has continued to moderate, on the back of easing global commodity prices and lower domestic service prices. The external position continued to strengthen, and international reserves rose further to US$1.6 billion at end-September 2024, supporting the exchange rate peg. The near-term outlook remains positive. While Hurricane Beryl caused significant damage to the fishing sector and some coastal infrastructure, the macroeconomic impact is expected to be relatively moderate, in part reflecting its occurrence during the off-peak tourist season. Nevertheless, the shock once again demonstrated Barbados’ vulnerability to climate change and natural disasters. In this regard, the authorities remain committed to improving the fiscal position and maintaining debt sustainability, while creating fiscal space to increase needed investment, including to boost climate resilience. At the same time, the government is continuing to advance structural reforms to achieve more inclusive, sustainable growth.
While progress in addressing pandemic-induced macroeconomic imbalances continues, challenges remain, with inflation proving persistent. Labor and housing markets are exhibiting resilience. Australia remains vulnerable to geoeconomic fragmentation risks and faces a critical transition to net-zero emissions. Fostering competition and a smooth adoption of digital technologies could boost productivity.
Economic output and livelihoods in Pacific Island economies (PIEs) rely greatly on ocean-related sectors and products, known as the ”Blue Economy”. Yet, marine ecosystems are under mounting pressure of climate change and human degradation, exposing PIEs to very large risks, while they have only limited technical and financial capacity to mitigate them. This paper aims: first to estimate the size of the Blue Economy in PIEs, based on comprehensive international input-output tables; and second to simulate the impact of selected shocks in PIEs, so as to provide insights on the resilience of the Blue Economy to shocks, including from climate change.
Sierra Leone faces important development challenges. This includes dealing with the impacts of climate change such as rising temperatures, more frequent extreme hot days, and increasingly erratic rainfall patterns, with intensified single-day precipitation events. This is especially important given the country’s strong dependence on agriculture and hydropower. Climate change also requires improved Disaster Risk Management (DRM) and more forward-looking risk assessments. On the mitigation side, competing development needs have led to rapid urbanization and deforestation requiring a more integrated approach to land policy, planning, and forest protection. The country also needs substantial investments in its electricity, water, and waste sectors but private investment is lacking. The mission reviewed the current fiscal policies supporting climate action and provided recommendations to support the long-term climate resilience in Sierra Leone, while aligning with its overall development objectives.
An IMF team conducted a Public Investment Management Assessment including the module on Climate Change in Paraguay. The team identified strengths related to the recent reforms in the National Public Investment System (SNIP) and several weaknesses along the investment cycle that affect its efficiency. It identified ten high-priority recommendations that could improve PIM processes.
Paraguay's economic activity remained strong in 2024. GDP growth is anticipated to reach 4 percent with some upward potential due to favorable performance of financial intermediation, services, and manufacturing. Inflation is firmly under control and expectations are well anchored. Monetary policy is close to its neutral stance. As projected, the current account has shifted into a wider deficit this year reflecting the post recovery adjustment in trade and higher imports. Fiscal consolidation is continuing with the deficit expected to reach the budgeted 2.6 percent of GDP. In the second part of the year, Paraguay has obtained an investment grade status from Moody’s for the first time in history.
The authorities’ implementation of the home-grown Economic Recovery and Transformation (BERT 2022) plan and their ambitious climate policy agenda remain strong, supported by the IMF’s Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF). Economic growth in 2024 has been robust and inflation has continued to moderate, on the back of easing global commodity prices and lower domestic service prices. The external position continued to strengthen, and international reserves rose further to US$1.6 billion at end-September 2024, supporting the exchange rate peg. The near-term outlook remains positive. While Hurricane Beryl caused significant damage to the fishing sector and some coastal infrastructure, the macroeconomic impact is expected to be relatively moderate, in part reflecting its occurrence during the off-peak tourist season. Nevertheless, the shock once again demonstrated Barbados’ vulnerability to climate change and natural disasters. In this regard, the authorities remain committed to improving the fiscal position and maintaining debt sustainability, while creating fiscal space to increase needed investment, including to boost climate resilience. At the same time, the government is continuing to advance structural reforms to achieve more inclusive, sustainable growth.
While progress in addressing pandemic-induced macroeconomic imbalances continues, challenges remain, with inflation proving persistent. Labor and housing markets are exhibiting resilience. Australia remains vulnerable to geoeconomic fragmentation risks and faces a critical transition to net-zero emissions. Fostering competition and a smooth adoption of digital technologies could boost productivity.
Economic output and livelihoods in Pacific Island economies (PIEs) rely greatly on ocean-related sectors and products, known as the ”Blue Economy”. Yet, marine ecosystems are under mounting pressure of climate change and human degradation, exposing PIEs to very large risks, while they have only limited technical and financial capacity to mitigate them. This paper aims: first to estimate the size of the Blue Economy in PIEs, based on comprehensive international input-output tables; and second to simulate the impact of selected shocks in PIEs, so as to provide insights on the resilience of the Blue Economy to shocks, including from climate change.
Sierra Leone faces important development challenges. This includes dealing with the impacts of climate change such as rising temperatures, more frequent extreme hot days, and increasingly erratic rainfall patterns, with intensified single-day precipitation events. This is especially important given the country’s strong dependence on agriculture and hydropower. Climate change also requires improved Disaster Risk Management (DRM) and more forward-looking risk assessments. On the mitigation side, competing development needs have led to rapid urbanization and deforestation requiring a more integrated approach to land policy, planning, and forest protection. The country also needs substantial investments in its electricity, water, and waste sectors but private investment is lacking. The mission reviewed the current fiscal policies supporting climate action and provided recommendations to support the long-term climate resilience in Sierra Leone, while aligning with its overall development objectives.
Article IV consultations will cover macro-critical issues triggered by climate change and/or the need to contain it. These include countries’ contributions to the global mitigation effort, especially by large emitters; domestic policy challenges that arise in the context of achieving countries’ nationally determined contributions under the Paris Agreement; macroeconomic policies to adapt to and build resilience to climate change; and challenges presented by a global transition to low-carbon energy.
Financial Stability Assessment Program (FSAP)
FSAPs are paying increasing attention to climate risk analysis for the financial system. Recent FSAPs have looked at the implications of transition risk in Norway, South Africa, Chile, Colombia and the UK, and physical risk in the Philippines. Where relevant, climate risk considerations are also being embedded in FSAP reviews of financial supervision and regulation.
The IMF already supports member countries through capacity development in countries vulnerable to climate change and natural disasters.
Adaptation
Guidance on building financial and institutional resilience to natural disasters and extreme weather events, and infrastructure investments to cope with rising sea levels and other warming-related phenomena.
Mitigation
Advice on measures to contain and reduce emissions through policies—such as increasing carbon taxes, reducing fuel subsidies and improving regulation—and providing tools to help countries achieve their Nationally Determined Contributions.
Transition to a low-carbon economy
Advice on measures to contain and reduce emissions through policies—such as increasing carbon taxes, reducing fuel subsidies and improving regulation—and providing tools to help countries achieve their Nationally Determined Contributions.
Data
The IMF's Climate Change Indicators Dashboard provides a platform for disseminating climate change data for macroeconomic and financial stability analysis. The dashboard helps users assess the linkage between economic and financial activities and government policies on the one hand, and climate change (and environment more broadly) on the other—either on a country-level or cross-country basis—by analyzing a standardized set of comparable data.
The IMF’s Resilience and Sustainability Trust (RST) helps low-income and vulnerable middle-income countries build resilience to external shocks and ensure sustainable growth, contributing to their longer-term balance of payments stability. It complements the IMF’s existing lending toolkit by providing longer-term, affordable financing to address longer-term challenges, including climate change and pandemic preparedness.
Panelists discuss how to enhance partnerships and cooperation to scale up adaptation financing for EMDEs and explore the role various stakeholders play in n attracting private capital for adaptation investments.
anelists discuss how specific countries benefited from the Resilience and Sustainability Trust (RST) and the lessons learned in the process.
This session assesses the question: Is the world on track to net zero? Building on updated IMF research, it will explore how to equitably close the global gap in climate ambition to achieve the Paris Agreement goals.
Delivering on global climate goals requires a shift to renewable energy and other green technologies. The main challenge for developing economies is securing funding for this transition. With limited fiscal space and low financial development, foreign direct investment (FDI) and official lending are crucial.
The world is sitting on a razor's edge, and the deciding factor between future prosperity and potential runaway climate disaster is a single number-- 1.5.
To hit net zero by 2050, emerging and developing countries will need substantial amounts of additional renewable energy investment--because domestic financial resources are limited, foreign direct investment, or FDI, is key.
