Need for new social contract for climate change action, IMF's Jihad Azour says

Younger generation more willing to see massive spending on green issues but some resistance is expected

Gaza war has ripple effect on neighbouring economies, says IMF's Jihad Azour

Gaza war has ripple effect on neighbouring economies, says IMF's Jihad Azour
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Governments and their people need a "new social contract" to be forged if climate change action is to be at the heart of society.

Jihad Azour, the International Monetary Fund's director for the Middle East and North Africa, said "difficult conversations" lay ahead on political decisions such as the cutting of fuel subsidies – on which nations collectively spend $7 trillion a year.

He said there has already been backtracking on climate pledges by some nations, at a time when billions, if not trillions, must be diverted to renewables and mitigation.

We see even advanced economies, including in Europe, that are very much sensitive to climate issues
Jihad Azour, International Monetary Fund

"There are policy issues that would require strong political support," Mr Azour told The National at Cop28.

"We see even advanced economies, including in Europe, that are very much sensitive to climate issues."

Rishi Sunak's UK government recently backtracked on key climate targets as it draws election battle lines, while the Netherlands is in political limbo following a tetchy election campaign in which climate spending was seized on by radical parties.

Part of the challenge will be overcome given that this generation of young people are so climate-minded, Mr Azour said.

"We see some backtracking because, yes, climate would require investment, would require effort ... this is part of the social contract of the future.

"This is a big transformative issue. That has to be at the core of the new social contract."

Speaking about the war in Gaza, Mr Azour, a former finance minister of Lebanon, said he was concerned about the economic impact of the conflict, which has already hit the economies of some neighbouring countries.

"First of all, we need to think about the humanitarian toll of this war in Gaza, the impact on people, impacts on life, impact on the future.

"Economically, of course, there are several levels that you need to look at ... the immediate impact on the epicentre, but also there are ripple effects on the outside the main adjacent countries – Lebanon, Jordan, Egypt.

"But also you have larger waves of impact of this crisis. What are those implications? Of course, in terms of economic activities, you see a lot of destruction of infrastructure, destruction of output, which will bring the economy to negative growth in Gaza."

But turning to the oil markets, Mr Azour said the Gulf and the Middle East no longer sees the shocks caused by geopolitical turmoil that it once did.

Prices remained steady last month, even as Israel's war in Gaza threatened to spill over into surrounding countries, while the long war in Ukraine – which affected gas and food prices – has little impact today on crude prices.

"We are discovering that geopolitical events have a limited impact on the oil market. Yet what we see today is the high level of uncertainty.

"And this high level of uncertainty is not only impacting the short term, but it could have an impact on the long term, especially in a world that is fragmented.

"And especially that those fragmentations are being coupled by a number of conflicts and danger."

Updated: December 04, 2023, 1:43 PM