Climate change is no longer a peripheral issue in global economic and financial matters or, indeed, at the country level. The rapid changes in the climate are now being called an emergency. Some six years ago the International Monetary Fund (IMF) recognised that climate and related risks were beginning to impact the global economic system and national economies, and would thus have to be considered in its work. The IMF’s primary aim is to promote global financial stability. It provides support to its member states through surveillance (Article IV consultations) and technical assistance, and is the global lender of last resort for countries facing balance-of-payments difficulties. Physical, transition and spillover risks emanating from the need for economies to transition away from fossil fuels all have both short- and longer-term impacts on governments’ macroeconomic fundamentals, hence the IMF’s acknowledgement of the need to integrate climate change into its work. In 2021 the IMF published the Comprehensive Surveillance Review on Integrating Climate Change into Article IV consultations. The IMF’s move into this area is not without controversy or opposition. This relates to the IMF’s neoliberal policy conditionalities over many decades, which have been unable to deal with the issues of inequality, social exclusion and poverty that characterise many developing countries. South Africa is among the top 20 global fossil fuel emitters, has the highest Gini coefficient of inequality, and has high poverty and unemployment rates. Its energy challenges related to Eskom’s coal footprint and debt of some ZAR 400 billion ($26 billion) are expected to make the transition to cleaner energy economically and socially very difficult. The just transition concept has been part of the South African debate for over a decade, but recently the government’s Presidential Climate Commission has been engaging with it more robustly, bringing multiple stakeholders into the dialogue. South Africa’s transition risks are significant. Ensuring a just transition for workers in the multiple affected sectors of the economy, as well as surrounding communities and vulnerable groups, will be costly in the medium term, require international support, and necessitate effective institutional implementation and management. Not all aspects of the just transition fall within the competency of the IMF, and many civil society actors interviewed argued strongly against any IMF involvement. However, given that the IMF is exploring its potential contribution to climate change risks and has indicated that it will focus on the top 20 emitters, this report highlights issues that will need to be considered.
