Climate, power, and structural reforms: the political economy of international financial institutions and climate-resilient development

• IFIs have strengthened climate integration in their programmes, but implementation remains uneven across institutions and regions. • Transformative change is constrained by systemic barriers, fiscal limits, weak institutional capacity, and complex political dynamics. • Local ownership is key but fragile; context-sensitive, politically informed approaches are crucial for successful climate-aligned reforms. • Expanding concessional finance and climate-linked debt relief is vital to unlock fiscal space for green transitions. • There needs to be some rethinking of the global financial architecture to empower the Global South to advance equitable low-carbon development. As climate change intensifies into a macro-critical risk, embedding climate considerations at the core of macroeconomic planning has become indispensable for fostering both economic and climate resilience. This paper examines how international financial institutions – particularly the International Monetary Fund and multilateral development banks – are supporting Global South countries in this process through budget and balance-of-payments support programmes and related structural reforms. It addresses a key knowledge gap by shedding light on the real-world political economy dynamics that shape programme design and implementation, drawing on 64 policy documents and 12 interviews with stakeholders and leading experts. The findings show that climate integration has advanced – via new climate-informed diagnostics and technical assistance – but remains uneven, often narrowly focused and not treated as a systemic macroeconomic concern. While these programmes create important entry points for climate-aligned reform, they frequently fall short of transformative change amid a complex interplay of domestic politics, institutional path dependencies and global geopolitics. At the country level, fragmented mandates, limited capacity, elite bargains and distributional conflicts constrain implementation – particularly in highly indebted countries where short-term stabilisation eclipses long-term transitions. Internationally, shareholder power, legacy institutional mandates, dominant ideas and lending competition shape the ambition and content of programmes, while deep structural constraints in the global economy limit their transformative potential. Advancing climate and economic resilience in the Global South therefore requires politically informed, context-sensitive approaches aligned with long-term structural transformation − combining deeper climate-informed diagnostics and reforms with serious attention to debt relief, fiscal space, domestic political incentives and political economy structures in the global financial system.