Assessing the IMF’s Climate Facility: The First Two Years

The IMF’s Resilience and Sustainability Facility (RSF), which provides financing for climate change mitigation and adaptation, has been in operation for two years. Since its inception, the RSF has initiated programs in 20 countries, two of which—Costa Rica and Jamaica—have been completed. In this piece, we review whether the RSF is achieving impactful reforms. While the programs are generally meeting their stated objectives, they have often lacked ambition, making it difficult to deem the programs successful. A key aim of the RSF is to catalyze climate finance; while this is expected to take time, there has been no apparent progress so far. The RSF is also intended to support pandemic preparedness, but none of the 20 participating countries have sought assistance in this area. This may change following the recent agreement between the International Monetary Fund (IMF), World Bank, and World Health Organization (WHO) on pandemic preparedness.

1. Are RSF programs facilitating impactful reforms?  

The RSF programs are meeting their agreed objectives. Twenty-nine reviews of RSF programs have been completed across 18 countries,^[1] with 79 reform measures (RMs) implemented. At this time, only six RMs have been delayed (around seven percent of the total).^[2]

Where delays have occurred, they are largely due to extenuating circumstances. Five of the delayed RMs were in Niger, where a coup d’etat last year disrupted government progress on reforms and delayed the IMF’s provision of technical assistance (TA). This TA is now in place. The other RM was in Paraguay, where an initiative on energy efficient standards was delayed due to the need for extensive consultations with the private sector. The Barbados program also experienced some delays but caught up, with these RMs now achieved.

It is difficult to conclude that the programs are successful, as most of the RMs implemented so far have a low depth, meaning they do not bring about immediate, transformative change but serve as incremental steps within broader reform efforts (Figures 1 & 2). This pattern emerged in part because programs typically achieve greater depth RMs later in the arrangement but also because many of the RSF’s programs to date have been dominated by low-depth measures (see here, here, and here). The IMF has taken steps to address this issue. New guidance issued late last year aims to make newer programs more ambitious, containing more medium- and high-depth measures that deliver significant, lasting changes.

Figure 1. RMs achieved, by depth.

Figure 2. RMs not achieved, by depth.

Sources: Various RSF documents.

2. Is the RSF catalyzing climate finance? 

Reforms targeting climate finance are being implemented., We categorize RM’s broadly into  four  thematic areas: Climate Adaptation, Climate Mitigation, Climate Finance and Public Financial Management. We estimate thirteen climate finance RMs have been implemented across four of the RST’s five pilot countries: Bangladesh, Costa Rica, Jamaica, and Rwanda. However, all these RMs have been low depth. Relatively fewer RMs related to climate adaptation have been achieved, because adaptation RMs are more common in recently announced programs, with completion dates typically scheduled further out.

Figure 3. Number of RMs by theme in 20 RSF programs

Sources: Various RSF documents.

RSF programs do not appear to have an initial “halo effect” in catalyzing climate finance. The IMF’s June 2024 Interim Review of the RSF is limited in its evaluation of the catalyzation of climate financing, only highlighting examples of coordination of climate finance between the recipient governments and development partners, noting how the RSF has “complemented” these efforts. An evaluation by the Taskforce on Climate and Development and the IMF found that “both Barbados and Jamaica had not attracted any private climate finance flows” in their initial periods.

Reform measures in this space take time to yield results. At this early stage, it is understandably difficult to assess the RSF’s impact on catalyzing climate finance given that two thirds of the relevant RMs are still being undertaken, and even once completed will likely take time to show results—the Interim Review highlights that these RMs are best evaluated at least two years after completing the arrangement. However, it should be noted that there is considerableskepticism as to whether this sort of programming can mobilize private financing at an impactful level.

3. What has happened in completed RSF programs?

Costa Rica and Jamacia had relatively short and unambitious programs, each lasting around 18 months. Given their short duration, and status as pilot programs, the level of ambition was relatively low—both programs implemented 12 RMs, which were largely low-depth. Additionally, both programs utilized 150 percent of their IMF quota, fully drawing on the maximum resources available to them under the RSF.

These programs claim to have built upon previous efforts and positioned the countries for further reforms. Further evaluation is needed after more time has passed. There are some early indications of success. For example, the Costa Rica final review highlights that since new regulations to facilitate private participation in the generation of electricity from renewable sources have been put in place, more than 50 operators have joined the sector. However, most RMs were aimed at the first stage of longer-term projects, and their full impact is not expected for several years. Neither of the final reviews discussed the objective of catalyzing climate finance in great detail. Both reviews make passing reference to some RMs “being expected to” or having the “potential to catalyze climate financing going forward.”

4. Could we soon see a pandemic preparedness RM?

New guidance makes it more likely. One reason the initial 20 RSF programs excluded RMs for pandemic preparedness was the lack of clear guidelines on health priorities. This gap has now been addressed with a new guidance from the IMF, World Bank, and WHO announced on October 4 which outlines the respective roles of each organization and how they will cooperate. This makes it more likely that RSF resources and the limited number of RMs for each program may be shared between climate transition and pandemic preparedness, depending on country preferences. However, there may be a number of other barriers to countries taking up pandemic preparedness RMs—for a full discussion see here.  

Conclusion

It is important to acknowledge that the RSF is still relatively new, and achieving results through reform program takes time. The IMF’s early focus on low-depth measures has not helped in demonstrating tangible outcomes. Moving forward, the IMF should prioritize demonstrating an impact of reforms and measuring whether it is catalyzing climate finance. Additionally, the Fund should carefully consider how to allocate RMs effectively between climate transition and pandemic preparedness in countries seeking assistance to also strengthen their health systems.