Building a New Global Financial Pact for Equality and Climate Resilience

2023-06-19 09:26:18

The international financial architecture inherited from the post-war period is no longer sufficiently adapted to the widening of inequalities, the climate challenge, the erosion of biodiversity and the public health challenges that mark the 21st century. The responses provided by the international community today are fragmented, partial and insufficient. On the one hand, the concessional resources deployed by development institutions do not deliver their full potential, particularly in terms of impact, co-financing and adequacy to needs. On the other hand, the increase in financing conditions and the increase in indebtedness are hampering investment in developing countries and do not give them the means to face the challenges they are facing.

Yet international solidarity is more essential than ever in a context of proliferating crises, which further weaken the poorest and most vulnerable countries. To enable the most exposed countries to emerge from the COVID crisis, to deal with the consequences of Russian aggression in Ukraine on their food and energy security, and to finance the very high cost of climate transition and the consequences of climatic events extremes, a change of scale is necessary.

The international financial system inherited from Bretton Woods is reaching its limits, while two major risks weigh on the future of our planet: first, insufficient support for the development and protection of global public goods, due to a lack of mobilized resources, and above all, a risk of geopolitical fragmentation, at a time when we need effective multilateralism and enhanced cooperation more than ever.

Many G7 and G20 countries, organizations and associations share this observation with France and wish to convey this same conviction: we must act quickly and together to correct the imbalances and injustices caused by these fractures. We are therefore calling today for an overhaul of our software and a funding shock. Together, we must develop our international financial system so that it is more responsive, fairer, and more united, to fight once morest inequalities, finance climate transition and the protection of biodiversity, and get closer to achieving United Nations Sustainable Development Goals.

This is the objective of the Summit for the New Global Financial Pact, which will be held in Paris on 22 and 23 June. This summit aims to be inclusive – each country, each sensitivity, each proposal should be able to express itself.

This summit is part of a positive dynamic: the launch of the reform of the World Bank, the Indian presidency of the G20 and that of Brazil to come, the mid-term review of the objectives of sustainable development, the commitments made during the COP are all reasons for hope to continue this momentum. And tangible solutions have already been initiated: the Paris Club and the G20 have launched a debt treatment initiative, and France plays a pivotal role in the implementation of coordinated solutions within this “Common Framework”. We proposed and obtained the mobilization of $100 billion in special drawing rights from the IMF for the benefit of the most vulnerable countries. All countries that can must now do their part in this effort. Several multilateral development banks have started to respond to G20 requests, implementing initial capital optimization measures to increase their lending capacity.

But today we need to go further, drawing inspiration, for example, from the Bridgetown Initiative, a set of innovative solutions led by Barbados, to deal with the climate vulnerability that affects many developing countries and middle income.

We are going to support a reform agenda for development banks and the IMF to better finance the countries that need it the most, as well as global challenges. It is an agenda for improving existing instruments and capital and promoting innovative approaches and instruments to support the poorest and most vulnerable countries. It is also the desire to mobilize more private financing through guarantee and risk-sharing mechanisms in order to redirect financial flows to these countries in order to support the local private sector and sustainable infrastructure in particular. This presupposes a stronger mobilization of our instruments, new and innovative financing, public and private.

For example, in its partnership with Mauritania, France, with the French Development Agency (AFD), has implemented innovative solutions on each of the main themes discussed at the Paris Summit:

– on private sector financing, with bank guarantees to SMEs offered by Proparco, an AFD subsidiary;

– on the financing of sustainable infrastructure, with the commissioning of the Kiffa hybrid power plant and new projects in the rural electrification and water supply sectors;

– on support in the face of climate change, with significant support for the Great Green Wall project and funding from the Food and Nutrition Crisis Response Fund for vulnerable populations affected by crises linked to climate change.

To be more effective, our international financial institutions must be able to commit even more than they currently do to work better together, while better mobilizing private savings. To be more inclusive, we must, above all, give a greater voice to the most vulnerable countries in international forums.

The Summit for a new financial pact will bring international financial issues to the fore; the presence of many Heads of State and Government will provide the necessary impetus to achieve the necessary changes.

We do not have to choose between the fight once morest poverty, the fight once morest global warming and its consequences, and the protection of biodiversity. Just transition is the only answer.

Alexander Garcia

French Ambassador to Mauritania

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