George Soros, the American billionaire financier, has identified a new way in how to solve the financing gap between what poor nations say they urgently need for clean energy projects and adapting to climate change, and the $10 billion per year that developing countries seem willing to provide.
According to Mr. Soros’ idea, suggested at the Copenhagen climate summit on Thursday, the International Monetary Fund can use $100 billion of its gold reserves, held in the form of Special Drawing Rights (SDRs), to back green loans from rich to poor nations.
Mr. Soros, who acknowledged that the SDR’s normally serve as a source of liquidity, but in this case would be used as a financing tool, believes rich countries should hand over their SDRs as loans to help poorer nations to invest in carbon-cutting projects.[Telegraph]“Developed countries’ governments are laboring under the misapprehension that funding has to come from the national budgets but that is not the case,” Mr. Soros said.
“They have it already. It is lying idle in their reserves accounts and in the vaults of the IMF”.
Soros’ proposal aims to tap into $283 billion of IMF money which is kept in reserve in case developed nations need cash injections during financial crises. These instruments are considered a“virtual currency” with a value set by a basket of real currencies.
UK’s Prime Minister, Gordon Brown, has proposed a $10 billion emergency fund for developing nations, rising to $100 billion a year by fiscal 2020.
But China and other emerging economies want up to 1% of global GDP, or $600 billion a year starting as soon as possible – causing tension at the summit.
“The $10bn fund is more than nothing but not much more because of the magnitude of the problem,” Mr Soros said, criticising Mr Brown’s proposal.
“It’s not sufficient and it’s already becoming apparent that there’s a gap between the developed and developing worlds on this issue that could actually wreck the conference.”[Aljazeera]”The IMF directors are not keen to use it [the gold reserve]. If you’re on the board of directors you like to have this nice substantial reserve to sit on so they won’t actually do this of their own free will,” Soros said, adding political will was needed to drive his initiative.