Use IFM reserves for green loans — Soros

By: G M Mourtoza on December 12th, 2009

COPENHAGEN–Global financier and philanthropist George Soros urged the world’s richest nations to use $100bn of reserves of the IMF to back green loans from rich to poor nations.

“I do believe that developed countries should hand over their ‘special drawing rights’ – international foreign currency assets distributed by the IMF – as loans to help poorer nations tackle climate change,” said Soros, a billionaire investor, on the sidelines of UN climate talks here in the Danish capital.

Developed countries have not offered sufficient money to help out developing countries,  the Hungarian-born economist said, claiming that he has “found a way to bridge the gap.”

“Developing countries would pay interest and eventually the whole loan, but in the event of a default, the sum would be backed by the IMF’s gold reserves,” he suggested, saying it is a different approach to help the poor countries which now rely on contributions from the balance sheets of developed countries.

Greenpeace international welcomed the Soros’s proposal made at the UN Climate saying money is one of the keys to a good outcome in Copenhagen.

“We need at least $160 billion a year for the poorest countries to beat climate change, protect forests and save lives. Every world leader should study Soros’ proposal,” said Greenpeace Executive Director Kumi Naidoo.

“But no matter what industrialized countries decide, they must put the money on the table by the end of next week,” she said.

She said using the IMF gold reserves as Soros suggests could work if it was combined with a levy on international aviation and shipping, and a small tax on financial transactions.”

There is real tension at the summit over money, with big gaps existing between what the developing world wants and what the developed world is offering.

For instance, British Prime Minister Gordon Brown announced a proposal for a $10bn emergency fund for developing nations, rising to $100bn a year by 2020. Meanwhile, China and the 137 developing economies are asking for 1 percent of global GDP – or $600bn a year — to support developing countries.

Developed countries’ governments are laboring under the misapprehension that climate funding has to come from the national budgets but that is not the case, Soros said.  “The fund already exists and it is lying idle in their reserves accounts and in the vaults of the IMF,” he said.

Soros said they did some informal discussion on the issue with US officials, but they are reluctant to consider such a plan because it would need Congressional approval.

He suggested that the best use of the money is to look at reducing emissions from agricultural, forestry and land use, because they offer the highest potential for cuts.