Summit for a New Global Financing Pact
What is at stake?
The Summit for a New Global Financial Pact is around the corner and the stakes are as high as the expectations. The international financial system is failing to deliver on its promises of sustainable development and the summit is an opportunity to take concrete actions on key issues regarding climate finance, SDR rechanneling, the increasing pressure of public debt and innovative sources of finance. Particularly concerning is their inability to deliver the massive amounts of investments to achieve critical development and climate objectives. At the same time, developed countries are struggling to find new funding solutions as they are dealing with growing social and political tensions at home, at a time of rising interest rates and falling ODA budgets amid the war in Ukraine and post-COVID economic recovery.
Over the past eight months, the Finance for Development Lab has set out several proposals to strengthen the ability of developing countries to manage their debt pressures and to accelerate investment in the climate transition.
Affiliated Events of the Summit for a New Global Financing Pact - organised by FDL & its partners.
#NewGlobalFinancingPact
- Friday 23rd June | 7:30 am-8:30 am | Hybrid event
"Emergency Coalition for Debt Sustainability and Climate Prosperity"
- Friday 23rd June | 10:30 am-12:00 pm | Hybrid event
"An African Action Agenda for Global Financial Reform"
OUR WORK
1. Defining priorities
Very early in the process, on January 6th, during a webinar organised by the Finance for Development Lab, French Secretary of State for Development Chrysoula Zacharopoulou, and OECD Ambassador Amélie de Montchalin announced the summit’s objectives: 1. Restore fiscal space to countries facing difficult short-term situations, including the most indebted countries; 2. Foster private sector development in low-income countries; 3. Encourage investment in “green” infrastructure for the energy transition in emerging and developing countries; and 4. Mobilise innovative financing for countries vulnerable to climate change.
- Policy Note: "PRIORITIES FOR THE PARIS SUMMIT"
- Policy Note by Ishac Diwan, Brendan Harnoys-Vannier and Martin Kessler: "IDA IN THE DEBT CRISIS"
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Short Note by Ishac Diwan, Martin Kessler and Emanuele Properzi: “IDA IN THE POORER COUNTRIES' DEBT CRISIS"
- Project Syndicate Op-Ed by Philippe Le Houérou and Ishac Diwan :"GROWING OUT OF THE DEVELOPING-COUNTRY DEBT CRISIS"
2. A grand bargain for debt and concessional finance for poor countries
Financing low income economies is facing a double challenge. First, debt resolutions are in stalemate whilst calls to the World Bank to increase its participation in the financing of debt distressed countries have led to acrimonious negotiations. Second, the World Bank’s IDA fund is the world’s largest provider of grants and concessional loans to the world’s poorest but its effectiveness and sustainability have become under threat.
In a series of papers, FDL proposes to boost lending from the World Bank’s concessional arm (IDA) in situations of debt distress, and to allocate each actors’ financial effort in a radically new way.
3. Financing the fight against climate change
The world has reached a climate crossroads and a revolution in climate finance is long overdue. Given the growing needs of developing countries, creating a new institution that can count on the institutional backing of all countries, free from donors’ political interference, and with direct involvement of the private sector and civil society, has become a necessity. It would raise funds by selling carbon credits, outcome-based bonds and fiscal resources to buy-down interest costs.
- Policy Note by Hafez Ghanem: "EIGHT REASONS TO SUPPORT A NEW INTERNATIONAL GREEN BANK"
- Policy Note by Stephen Paduano (LSE): ”SDR Rechanneling and ECB rule”
- Policy Note by Hannah Ryder, Etsehiwot Kebret and Huiyi Chen (Development Reimagined): ”Options for channeling China’s SDRs to Africa”
4. Mobilising unused SDRs
Another key priority of the Paris summit is to find ways to deliver on the long overdue promises to rechannel SDRs to low- and middle-income countries. In 2021, African countries only received 5% of the total $650 billion allocation of SDRs due to the IMF’s outdated quota system.
G20 countries committed to recycle $100 billion but the IMF can only absorb 60% of the pledges and the accounting is rather dubious. The One Campaign is keeping track here. New routes urgently need to be made operational to ensure that the funds effectively reach those who need it.