IMF team keeps an eye on linkages between environment and macroeconomic policies


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Next year in Johannesburg, world leaders will revisit the issues raised at the 1992 Rio Earth Summit on sustainable development and the protection of the environment.

For more than a decade, IMF staff have been looking at the links between the environment and the macroeconomy.Michael Keen and Muthukumara Mani, Advisor and Economist, respectively, in the IMF's Fiscal Affairs Department and the current environmental team, explain why they are looking at the impact of climate change and resource depletion and how they are preparing for the Rio+10 Summit.

IMF SURVEY: To ask the first and most obvious question, why does the IMF-with its macroeconomic mandate- have an environmental team?

MANI: Environmental factors can affect macroeconomic performance, and macroeconomic policies can affect the environment.A country that has not dealt appropriately, and quickly, with serious environmental degradation, for example, risks harming its economic performance and growth. Degrading natural resources at an unsustainable rate can jeopardize export prospects, posing problems for the trade balance. Severe air and water pollution can drive up public health expenditures, with ramifications for the fiscal position.And tourism can suffer major setbacks from, say, coastal erosion.

IMF SURVEY: What prompted the IMF's interest in environment issues?

MANI: In 1991, the IMF's Executive Board allocated staff to work on environment-related issues. Growing environmental awareness in the mid- to late 1980s raised serious issues about the impact of economic growth on the environment. That prompted governments and international organizations to take a closer look at the link between economic growth and the environment.

When a United Nations commission in the late 1980s concluded that development strategies could indeed conflict with environmental sustainability, a number of international organizations, including the IMF, began looking at these linkages in greater detail.

In the IMF, we took steps to increase staff awareness of environmental issues and the research being done outside the IMF.

We do not deal with environmental issues as directly as, say, the World Bank. The Bank's project loans can often have a direct impact on the environment and thus require environmental assessments.

The IMF set up its environmental team chiefly to act as a resource for the rest of the organization.

IMF SURVEY: Isn't an issue like climate change, for example, well beyond the...

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