With Inequality Deepening, Reform of Global Financial Architecture Key to Overcome Multidimensional Crises, Speakers Stress as Financing for Development Forum Opens
Amid a backdrop of multidimensional crises exacerbating inequalities and pushing the world’s poorest, most vulnerable countries deeper into debt, the Economic and Social Council opened its annual Financing for Development Forum today with speakers debating how to reform the international financial architecture to effectively close the rich-poor gap and achieve the Sustainable Development Goals.
Lachezara Stoeva (Bulgaria), Council President, opened the Forum, noting that the urgency of addressing these issues has reached unprecedented levels, as sustainable development prospects continue to diverge, with developing countries falling farther behind. “We are at a crossroads. Without swift action, financing divides will become sustainable development divides,” she said, emphasizing the need for immediate steps to foster debt sustainability, scale up investment and boost climate finance for adaptation, among other measures. Underscoring the importance of laying the groundwork for a reformed international financial architecture with the developing countries at its core, she said the Forum is the opportunity to come up with bold solutions in this regard.
Recognizing that the “February dialogues” in Washington, D.C., between the Council’s Bureau, United Nations Member States’ Permanent Representatives and the Executive Directors of the World Bank and the International Monetary Fund’s (IMF) Liaison Committee yielded important proposals for deepening cooperation between the United Nations and the Bretton Woods institutions, she said the institutions could collectively do more to boost liquidity and stimulus spending. The Financing for Development Forum’s conclusions and recommendations will inform financing discussions at the High-level Political Forum in July and the 2030 Sustainable Development Goals Summit, she added, while also forming the basis for financing aspects of the Summit of the Future in 2024 and the Fourth International Conference on Financing for Development in 2025. “We cannot afford to come up short. Too much is at stake,” she stressed, encouraging Member States to change course and meet the commitments of the Addis Ababa Action Agenda of the Third International Conference on Financing for Development “before it is too late”.
António Guterres, United Nations Secretary-General, said a multidimensional crisis is turbocharging inequalities and producing a devastating impact on the poorest and most vulnerable. The 2030 Agenda for Sustainable Development is turning into a mirage of what might have been, as communities and Governments struggle to meet immediate needs. Countries are facing the scars of the COVID-19 pandemic, the war in Ukraine is contributing to a global cost-of-living crisis and climate disasters are becoming more frequent, deadly and expensive. “One in three countries is at high risk of a fiscal crisis and more than 40 per cent of people in extreme poverty live in countries afflicted by severe debt problems,” he said.
The 2023 Financing for Sustainable Development Report reveals a yawning finance divide that will quickly turn into a development deficit for many countries and a crisis in global trust and solidarity, he said, warning that delays will only exacerbate this problem. “We have no time to lose,” he said, pointing to his proposal to the Group of 20 (G20) countries for a Sustainable Development Goal stimulus plan to scale up affordable, long-term financing for all countries in need, by at least $500 billion a year.
Outlining the plan’s three main areas, he said it aims to boost liquidity for investments in the transformational areas required to achieve the Global Goals: renewable energy, sustainable food systems and the fourth industrial revolution. All sources of financing must be scaled up and multilateral development banks should transform their business models and accept a new approach to risk, including by massively leveraging their funds to attract greater private finance flows into developing countries. Member States should increase the capital bases of these institutions and support a more efficient use of their balance sheets while establishing better lending terms. Moreover, eligibility criteria for concessional financing should be expanded, so it is available for vulnerable middle-income countries and the least developed economies.
He also called for an ambitious debt relief initiative that enables countries in distress to exchange short-term debt for longer-term instruments at lower interest rates. Mechanisms are needed to encourage private creditors to participate, alongside official creditors in debt restructurings. As the only organization with universal membership, the United Nations is ready to facilitate inclusive dialogue on sovereign debt and bring together discussions happening in different forums, he affirmed.
Contingency financing must also be expanded, he said. Last year, the IMF allocated $650 billion in Special Drawing Rights (SDRs) — the main global mechanism to boost liquidity during crises. Based on current quotas, developed countries received 26 times more than least developed countries, and 13 times more than all the countries of Africa combined. “Something is fundamentally wrong with the rules and governance system that produced this outcome,” he said. SDRs should be channelled to countries that need them, including through multilateral development banks, he said, adding that the African Development Bank’s proposal is a welcome step. He also called for an SDR contingency mechanism to ensure that in future crises, the rights are issued promptly and automatically.
Csaba Kőrösi, President of the General Assembly, noted that “as the saying goes, when it rains, it pours”. The international community is painfully aware of the interconnected crises the world is facing — from the COVID-19 pandemic to environmental degradation and deep-seated economic inequality. The lack of a coordinated international response has led to a significant decline in global economic growth, in rising inflation, and a looming debt crisis which is heavily impacting developing countries. More than half of these States are in debt distress due to declining revenues, even as debt repayment dues and interest rates rise and borrowing costs soar. Calling for urgent coordinated efforts from public and private, domestic and international creditors, as well as Governments, he cited major deficiencies of the international development system.
First, the international financial architecture is deeply unjust, as the way of allocating funds is not supporting enough the agreed transformation to sustainable development — meaning the strategic direction is still the one that contributed to the crises. While the world is approaching tipping points on some global common goods, the various impacts of project financing are still not measured as they should be. He noted that learning from past mistakes could increase the efficiency of spending while significantly reducing the negative externalities of capital spending. Ensuring accessible, affordable financing for developing countries requires bolstering the lending capacity and operational efficiency of multilateral and public development banks, as well as inducing them to provide robust financial buffers for use in times of need. It is also crucial to boost domestic resource mobilization.
To this end, the international community should enhance and accelerate systemic reform in the field of international finances — requiring rethinking of priorities and a change of the business models, too. Development, he affirmed, can only be sustainable — otherwise there will be no development. While there is no shortage of ambitious goals, “we often struggle to meet our targets”, he said, requiring strong political will. This Forum is a critical step on the journey towards a year of transformation. As this week’s discussions will contribute to the political declaration for the Sustainable Development Goal Summit and set the tone for the Financing for Development High-Level Dialogue in September, he stressed “it is time to honour our commitments and to redouble our efforts to implement the 2030 Agenda”.
Janet Yellen, Secretary of the Treasury of the United States, speaking via pre-recorded video message, said transboundary challenges — climate change, pandemics, fragility and conflict — are disproportionately affecting the poorest and most vulnerable populations. Pointing out that the multilateral development banks are a key pillar of the development financing system, she said her top priority was to evolve these banks to act on global challenges. To this end, a coalition of shareholders was created — across borrowing and non-borrowing, low- and middle-income countries — to press for reforms on the vision and mission, incentive structures, operational approach and financial capacity.
She went on to say that the World Bank’s operational approach was being updated to remove institutional constraints, including modifying its approach to diagnostics, country strategies, and incentives for private capital and domestic resource mobilization. More so, the additional financial capacity is being generated by stretching the Bank’s balance sheet in a financially responsible manner. “Yet there is more work to be done,” she said, spotlighting the ambitious workplan of the United States and other shareholders, leveraging major international gatherings to drive progress.
Opening the afternoon session, Li Junhua, Under-Secretary-General of the Department of Economic and Social Affairs, presented the 2023 Financing for Sustainable Development Report of the intergovernmental task force, noting that almost eight years since the adoption of the Addis Ababa Action Agenda and halfway to the 2030 deadline, progress on the Sustainable Development Goals “is nowhere close to being on track”. The convergence of the global shocks, the COVID-19 pandemic, the impacts of the war in Ukraine had a magnified impact on developing economies. Delaying investment in sustainable transformation is not an option, he said, while underscoring the urgency of international reform and institutional change.
To this end, the Report calls on the international community to finance the timely realization of Sustainable Development Goals through action on green industrial transformations; scaling-up international concessional financing and aid; and taking advantage of the biggest rethink of the international finance, monetary and tax system since the 1940s to make it fit the purpose. To tackle the financial divide, he encouraged States to chart their national paths to achieving the Sustainable Development Goals, while urging the international community to scale-up development cooperation and meet their official development assistance (ODA) commitments. “The Financing for Development Forum can be the momentum needed,” he said, urging States to make the most of the current moment to reform the international financial architecture.
The Forum also held three panel discussions today, on “Coping with cascading crises and investing in sustainable development: How to make the right policy choices?”; “Remaking the international financial architecture to achieve the Sustainable Development Goals”; and “Development cooperation: Long-term resilience and the role of multilateral development banks”.
The Forum will reconvene again at 10 a.m. on Tuesday, 18 April, to continue its work.
Panel I
The Forum’s first panel discussion, “Coping with cascading crises and investing in sustainable development: How to make the right policy choices?”, was moderated by Hanan Morsey, Deputy Executive Secretary of the Economic Commission for Africa (ECA); and included panellists José Antonio Ocampo, Minister of Finance of Colombia; Klemen Boštjančič, Minister of Finance of Slovenia; and Jutta Urpilainen, Commissioner of International Partnerships of the European Union.
In opening the panel, Mr. MORSEY said many issues, including the pandemic, the conflict in Ukraine and the climate crisis, have produced global shocks for countries around the world, even those with strong fundamental economic conditions. As the international community approaches the deadline for achieving the 2030 Agenda for Sustainable Development, much of the progress made so far has stalled or regressed. As the ECA addresses the crisis, these events, particularly the pandemic, have pushed 60 million people into poverty in just one year and 18 million will have joined poverty by 2022, she noted. The international community is facing a real danger of eroding the overall fiscal policy space, she warned, stressing the increasing need to mitigate the social and economic consequences of these crises.
Mr. OCAMPO cited cascading multidimensional crises, representing a major challenge for the United Nations and the world in general. The legacy of high levels of debt inherited from the pandemic makes managing public sector debt levels a major challenge. More recently, the war in Ukraine is generating worldwide inflation, including rising prices for food, fertilizer, oil and coal. As a reaction to inflation, central banks have been increasing interest rates, driving a slowdown in gross domestic product (GDP); the IMF has lowered its prospects for the short and medium term. He further pointed to the food crisis in Africa and elsewhere, and climate effects, including floods in Pakistan and his own country. Also highlighting the trade crisis due to increasing restrictions, he noted supply shocks have not been adequately managed — as all Latin American ministers recently pointed out to the IMF. Monetary policy on its own could speed up the recession, he warned, while the legacy of debt must be taken into account in the fiscal policy of all States. He noted Colombia has instituted tax reform to deal with issues including climate change, calling for enhanced tax cooperation and action on intellectual property rights.
Mr. BOŠTJANČIČ underscored the importance of national policymaking and intersectoral coordination at the national level, as well as a strong microeconomic policy framework, adaptable to changing circumstances. Countries with well-designed fiscal and monetary policies have better responded to shocks and mitigated their negative effects on the economy, he added. To address recent crises, Slovenia has adopted response measures to alleviate the consequences for households and companies, he said, noting that it has also reached an important agreement and set up a common fiscal response on the European Union level — a Recovery Assistance for Cohesion and the Territories of Europe, known as REACT-EU. This instrument provides funds to stipulate recovery and growth. More so, the countries that invested in safety nets and other measures to protect vulnerable populations also better managed the respective shocks, he stressed. Turning to the climate crisis, he underscored the need for investing in a transition to low-carbon economies; welcomed the discussion on the World Bank’s climate finance reports; and called for investment in the green transition. Recalling that the European Union remains the largest donor of international development aid, he said Slovenia also has increased the level of its humanitarian assistance.
Speaking via video, Ms. URPILAINEN said the multiple global crises are taking a heavy toll on the international economy and risk overturning years of progress towards the Global Goals. Financing from all sources must be expedited, she said, adding that the European Union is undertaking a range of actions to improve the fiscal space and provide sustainable financing at the national and international levels. For example, the Global Gateway Initiative is a strategy meant to use economic partnerships and mobilize additional financing to bridge the financing gaps so countries can achieve the Global Goals. The bloc will provide €300 billion in investments by 2027 in priority areas, such as climate and energy, digitalization, education and research. The Initiative combines hard infrastructure with soft skills to help countries make a transition. It will provide support through guarantees and lending to spark investments in high-risk markets. The Initiative supports sound macroeconomic policies and works to support countries’ domestic revenue mobilization.
The European Union is also promoting partnerships to help countries achieve efficient tax administration systems so Governments can collect more and spend more efficiently, she said. It is working with partners to help Governments manage their debt. Stressing that the Secretary-General’s report contains useful insights, she said the bloc aims to step up implementation of the measures already developed. It also supports the reform of multilateral development banks. She noted that middle-income countries need support, but this should not be made at the expense of low-income countries.
Ms. MUCHALA said the origins of the financing for development initiative are rooted in the systemic asymmetries that define the international and monetary architecture — systemic risks that cannot be resolved on national terrain, revealing steep social and economic costs in recurrent crises. Citing global inflation averaging over 9 per cent over the past year, interest rate hikes by the United States Federal Reserve, and currency depreciations in at least 90 countries, she highlighted the resulting global cost-of-living crisis, pushing millions into poverty. Capital has been flowing out, she observed, and sovereign debt — much of it foreign-denominated — has compelled developing countries to spend $379 billion from their reserves to defend their currencies in 2022. International institutions must revisit the need for capital account regulations on both outflows and inflows, not as a temporary measure but a permanent tool. She noted that over 90 per cent of developing countries used their Special Drawing Rights (SDRs) for health and welfare needs such as vaccines. If allocated by need, SDRs could provide a counter-cyclical liquidity boost towards a global safety net, she noted. She called for the voice of developing countries to be heard in macroeconomic decision-making in the IMF Executive Board.
As the floor opened for discussion, several delegations pointed to the importance of domestic resource mobilization and strengthening policies, while supporting the Governments of developing countries in improving domestic capacities for tax and other revenue collection. However, the representative of Bangladesh said domestic resource mobilization in developing countries, particularly the least developed, is “easier said than done”, while noting costlier imports, diminishing exports, increasing debt levels and more expensive commodities in these countries. In this regard, he asked what policy interventions could be used for domestic resource mobilization.
While the representative of Slovakia spotlighted the importance of digitalization to promote transparency and accountability in tax systems, Paraguay’s representative said statistical databases are essential for policy implementation. Using this information, it was possible to reduce extreme poverty in his country, he added. Noting that Paraguay is a landlocked developing country, he underlined the need for differentiated efforts to attract investment, while highlighting the importance of free international trade for the economic growth of landlocked developing countries. To this end, the representative of the Global Policy Forum — echoed by the representative of Germany — recalled that many crises originate in the Global North, while noting that the respective solutions on climate, food crisis or interest rates, among others, should also be provided by these countries. More so, he called for more regulation in the banking and asset management industry, among other financial actors.
Similarly, the representative of the Food and Agriculture Organization (FAO), emphasizing the importance of reinforcing relevant financing mechanism to assist countries dealing with surging import costs and prevent food security and macroeconomic crises, pointed out that his organization has proposed a Global Food Import Financial Facility to support countries suffering from soaring prices of imported food and to improve access to food at the country level. Several delegations also underscored the importance of international cooperation, policy coordination and innovation.
Also speaking were representatives of South Africa, United States, Indonesia, Germany, Seychelles and Zambia, as well as of the Rural Development Center.
In closing remarks, Mr. OCAMPO stressed the importance of a good debt restructuring mechanism with a framework that includes middle-income countries. Regarding the food crisis, he agreed with the proposal of the FAO and said a framework is needed to manage the effects of the climate crisis on the agriculture sector. This is especially important for the food production in tropical countries.
Mr. BOSTJANCIC said action is necessary, and he thought the Secretary-General’s estimate, made during the United Nations Conference on the Least Developed Countries in Doha, that the amount of development aid needs to triple was conservative. Development aid must increase along with international cooperation. Good financial management is basic for sustainable development, and Governments must manage their resources well to foster economic growth.
Ms. URPILAINEN said she was delighted to know that there is strong support for changing the framework of the international financing architecture to meet future challenges. The challenges should be met with cooperation between the multilateral development financial institutions, as well as private and public creditors, to find solutions to financial problems. She found South Africa’s proposal interesting. She added that it is important to improve coordination and synergies among all partners.
A representative of the European Network on Debt and Development called for debt restructuring and debt cancellation, disagreeing with Mr. Ocampo on a long-term goal, as “this is an urgent goal”. The longer the delay, the worse it will be for the Global South.
A representative of the African Union Commission said the only right policy choice is the implementation of commitments. Noting the need to accelerate structural transformation in developing countries to prevent them from falling back into debt, he called for ensuring those countries achieve sustainable growth, posting 7 to 10 per cent growth in coming decades. Those States must further shift away from being net importers of raw materials.
Panel II
The Forum then held its second panel discussion, focused on the theme of “Remaking the international financial architecture to achieve the Sustainable Development Goals”, moderated by Achim Steiner, Administrator of the United Nations Development Programme (UNDP) and featuring panellists: Patrick Njoroge, Central Bank Governor of Kenya; Nick Dyer, Director General of Humanitarian and Development, Foreign, Commonwealth and Development Office of the United Kingdom; Markus Berndt, Managing Director of EIB Global; Amar Bhattacharya, Senior Fellow of the Brookings Institution; and lead discussant Mae Buenaventura, Asian Peoples’ Movement on Debt and Development.
Mr. NJOROGE, detailing the projections of global growth of some African countries, said the numbers are “anaemic”, while recalling that some regions suffered the worst drought in 40 years. “The outlook is truly dire,” he said, while citing Vladimir Ilych Lenin: “There are decades where nothing happens; and there are weeks where decades happen.” To this end, he stressed the importance of States’ convening as one voice to deal with such challenges, adding that “when the music changes, so must the dance”. Spotlighting the opportunity to deal with Sustainable Development Goals at the upcoming September Summit, he said the Bretton Woods institutions should quickly assist the frontier economies as a global financial safety net, while also expanding their catalytic role. In this regard, he underscored the importance of reforming the IMF and the World Bank, while adding that the financial system must leverage digital technologies to put people in the “driver’s seat” of their finances to enable them to invest in themselves, their communities, countries and the planet. Paraphrasing Ellen Johnson Sirleaf, he said: “We are no longer asking for serenity to accept the things we cannot change, but instead for the courage to change the things we cannot accept.”
Mr. DYER said the global economic outlook is very gloomy. The pandemic, slowing economic growth and the spillover from climate change have all contributed to this outlook. There is a sense of frustration that not enough is being done by international financial institutions to unlock more financing. “We need to be bolder and braver,” he said, referring to the financing provided by the World Bank and IMF. He stressed the importance of deploying financial resources and called for details, including such options as stretching balance sheets and hybrid capital options. There should be more shock-responsive facilities and very specific activities must be developed to fulfil countries’ financing needs, he said, also stressing the need for more technical assistance. Small island developing States also require greater attention. The adaption commitments made during the last session of the Conference of the Parties to the United Nations Framework Convention on Climate Change must be unlocked, he said and called on the international community to tap into the opportunities coming up this year in that regard.
Mr. BERNDT agreed that the situation is gloomy, but that must lead to concrete action. The creation by the European Investment Bank of EIB Global last year allowed more efforts beyond the European Union, increasing activity by 50 per cent compared to the previous year, across all regions. Climate action and prosperity are not contradictory but complementary, he stated, adding that his organization is also spearheading innovative risk-sharing structures. It is crucial to work as multilateral development banks, but the sheer scale of investment needs requires unlocking significant private sector capital, and over half of what EIB did last year was with and through the private sector. He called for full deployment of the current toolkit to leverage scarce budgetary resources and unlock lending, along with such innovative financing as green bonds. The EIB is working with the IMF in Barbados and Rwanda to crowd in the private sector, but multilateral development banks must do much more, he stressed.
Mr. BHATTACHARYA, noting that the financial architecture should address economic vulnerabilities, the Sustainable Development Goals and the climate crisis, underscored the need for a system that provides resources and builds resilience. Turning to the architecture for long-term affordable finance, he outlined three key pillars, including the centrality of the development finance system — with the multilateral development banks at the forefront as “agents and champions of scaling up” — underscoring the need to find ways to work with the private sector and practical measures to raise financing. More so, multilateral development banks would need to triple their financing in the next five years, he said, adding that the World Bank must become a trillion-dollar bank. “That’s the kind of ambition we need to think about,” he stressed, while pointing to political difficulties in doubling the Bank’s capital. To this end, he spotlighted the importance of constructing a “new highway” for private finance that is about scale and the cost of capital. States would need to find predictable ways of expanding concessional finance to tackle the challenges of loss and damage and of adaptation and resilience, he said.
Ms. BUENAVENTURA said the global financial outlook is becoming more dire for the Global South, which was in crisis long before the pandemic. The situation is becoming more desperate and massive financial resources are required for them to achieve the Global Goals. The international financial architecture is broken and was created in a world that no longer exists, she said, adding that it is unfit to deal justly with the immense challenges facing the world. She called for the democratization of the global economic governance system and for reform of international financial institutions, led by the World Bank and IMF. A fair, transparent and binding multilateral framework, under United Nations auspices, is needed to resolve the debt crisis, as well as cancelling the illegitimate debt of countries in need. Countries must be guaranteed financial sovereignty, she said, stressing that Governments need control over their currencies. She advocated for the regulation of the asset management industry and of credit rating agencies, and for creating an international public sector rating agency under the auspices of the United Nations. Further, she called for measures to stop speculative trading, particularly in food and water and other essential commodities. Action must be taken so the Global South does not lose another decade, she stressed.
When the floor opened for discussion, the representative of Cuba observed that current financial and fiscal standards are developed behind closed doors, as in the Group of Twenty (G20), which excludes most countries. Citing the Bridgetown Initiative as an excellent plan to redesign the international political and economic order, he called for demolition of the current financial system to its foundations.
The representative of Nepal, speaking on behalf of the least developed countries, said they are in dire straits, with only 6 donor countries meeting the target of 1.5 per cent above gross national income in 2021, down from 10 donor countries in 2011. He emphasized the need to avoid debt spirals, echoing the call to make the World Bank a trillion-dollar institution, to help rechannel unused SDRs more quickly, provide quick debt relief and return stolen assets.
The representative of Morocco, speaking on behalf of the Like-Minded Countries Supporters of Middle-Income Countries, noted poverty, hunger and inequality are on the rise and the international architecture must allow for revamped international cooperation. The SDG stimulus brings changes to address alarming financing gaps and limited fiscal space facing middle-income countries. He echoed the Secretary-General’s call to mobilize at least $500 billion per year for countries in need.
The representative of Iran called for an environment offering access to resources to all United Nations Member States. Stressing that the immediate needs of developing countries cannot wait for reforms to be initiated, he asked what solutions can balance States’ immediate needs with eventual reforms.
The representative of the African Union noted the urgent need to make resources available to African States and further ensuring fair and transparent allocation of SDRs — whereas African countries received just 5 per cent. He noted that sub-Saharan Africa received less than $1 billion in IMF resources in 2020, compared to other States that received $4.5 billion.
A representative of the Global Policy Forum called for multilateral development banks to champion State-contingent debt instruments, as it is not acceptable that countries having suffered shocks must continue to service multilateral debt. He called for a new multilateral debt relief initiative and effective multilateral action to address illicit financial flows.
Also speaking were the representatives of Honduras, Spain, Bangladesh, Germany, Netherlands, Canada and Indonesia, as well as of the FAO and the Society for International Development.
In closing remarks, Mr. BHATTACHARYA spotlighted the importance of tangible deliverables by the end of 2023, starting with reform of the multilateral development banks; ramping up on SDRs; and meeting loss and damage adaptation resilience.
Mr. BERNDT, recognizing the importance of long-term reforms, encouraged States to act on immediate reforms. He underscored the need for developing further risk-sharing instruments, including SDRs, while outlining the importance of concentrating on instruments, targeting the crowding-in of private sector instruments, to support investments without indebting partner countries, and ensuring a clear focus on Sustainable Development Goals and sustainable investments.
Mr. DYER spotlighted the importance of using existing resources to leveraging resources from elsewhere and noted that this process requires new instruments and new guarantee opportunities. He went on to say that the 2023 Sustainable Development Goals Summit is not only about money but also about how it is used, while underscoring the importance of the Sustainable Development Goals’ agenda in its entirety.
Mr. NJOROGE, noting that multilateral development banks should be reformed, spotlighted the essential role of governance. Turning to the role of the private sector and official development assistance (ODA), he recalled that these constitute less than a third of remittances in Africa. To this end, he suggested leveraging the remittances for more effectiveness, including those pushed by the private sector. Outlining the key role of financing, he said: “It is a large cheque, […] but we need to begin making those ‘mortgage’ payments. So, we’d better start.”
Mr. STEINER then summarized the morning session, underscoring the importance of the ongoing discussions and panel presentations.
Panel III
In the afternoon, the Forum held its third panel discussion: “Development cooperation: Long-term resilience and the role of multilateral development banks”. Opening with a keynote address delivered by Sheikh Hasina, Prime Minister of Bangladesh, via a pre-recorded video statement, the panel was moderated by Mariangela Parra-Lancourt, Chief of Strategic Engagement and Policy Integration Branch of the Financing for Sustainable Development Office (FSDO) of the United Nations Department of Economic and Social Affairs. The panellists included Francisco André, Secretary of State for Foreign Affairs and Cooperation of Portugal; Jürgen Zattler, Director General for International Development Policy and United Nations, 2030 Agenda, Social and Environmental Transformation and Climate at the Federal Ministry for Economic Cooperation and Development of Germany; Patrick Zimpita, Principal Secretary for the Ministry of Finance of Malawi; Carsten Staur, Chair of the Development Assistance Committee of the Organization for Economic Co-operation and Development (OECD); and Stephane Guimbert, Director of Operations Policy in the Operations Policy and Country Services Vice-Presidency of the World Bank, who also spoke via a pre-recorded video statement. Vitalice Meja, Reality of Aid Africa, participated as the lead discussant.
Ms. HASINA said that in the current complex global context, development cooperation has become extremely crucial to build the resilience of the international community’s vulnerable segments and address multidimensional crises. Multilateral development banks can play an important role in bringing about positive change. Their financing can help foster multiparty dialogues to address pressing global issues and advance policies to ensure financial support for the Global Goals. This meshes with the mandate specified in the 2015 Addis Ababa Action Agenda. The banks are uniquely positioned to provide technical assistance and knowledge to developing countries, including the least developed countries. Noting that Bangladesh became a lower-middle-income country in 2015, she said it qualified for graduation from least developing country status to developing country status. “Our goal is to attain the status of an upper middle-income country by 2031, with the ultimate vision to make a prosperous, developed and knowledge-based SMART Bangladesh by 2041,” she said. Yet the country’s development journey has been impeded by the current geopolitical crisis, economic uncertainty and climate change impacts. “The world community should come forward to help countries like us overcome the crises,” she added. Today’s challenges are multifaceted and require a collective response.
Ms. PARRA-LANCOURT said this session aims to look for ways to reduce disaster risks and build climate-resilient and sustainable infrastructure, promote gender equality and promote social protection. Multilateral development banks can play a role in helping the international community achieve these goals.
Mr. ANDRÉ said multilateral development banks should take bolder action to scale up financing and make better use of their balance sheets to optimize lending, while preserving ratings and financial sustainability. More so, they should improve their effectiveness and efficiency, while taking on more risks and using innovative solutions to bridge financial divides, including among the least developed countries. Additionally, these banks should work in a complementary way based on comparative advantages, promote ownership and foster dialogue with partner countries, including by supporting their technical capacities. In crucial areas, technical assistance needs to be delivered in tandem with increased financial support. Further, banks should strengthen their capacity to stimulate and scale-up private sector mobilization to complement ODA, by promoting conditions for private sector investment along with flexible and innovative toolboxes. Portugal has been promoting private sector investment to implement the Sustainable Development Goals, he said. To this end, a Lusophone Compact was created in partnership with the African Development Group and the Portuguese-speaking countries in Africa with €400 million committed in guarantees. “Only with resolute, bold and concrete joint action we will be able to deliver on the 2030 Agenda,” he stressed.
Mr. ZATTLER, stating that World Bank reform is the most important process in town, said Germany gives much importance to this process and has been pushing for it for years. The situation has now changed as the world is confronted with so many crises. There is more awareness now that the World Bank has to get out of its silo and account for global challenges. Progress was made in Washington, D.C., at the Bretton Woods spring meeting and decisions will be made at the annual meeting in October. He advocated for comprehensive reform that will change the objective of the Bank. More emphasis must be placed on accounting for public goods and resilience must be addressed. While shared prosperity is a World Bank goal, it’s not taken as seriously as poverty reduction and this must change, as must the Bank’s operational model. While the country-focused model is fine, global issues, such as the pandemic and climate change, must be dealt with, he stressed. The Bank’s analytic work must be updated so it accounts for social inclusion. Financing must be addressed, such as in stretching the balance sheet and mobilizing the private sector in a comprehensive, systematic way.
Mr. ZIMPITA, recalling that Malawi experienced the worst cyclone in history which displaced 650,000 people and killed more than 1,000, said such cyclones are causing an annual loss of 1.7 per cent of the country’s GDP, while also hindering its chances of attaining the Sustainable Development Goals. Underscoring the importance of concessional financing, he pointed to the decrease of ODA and noted that it pushes small countries to extend loans from their capital markets. Higher expenses trigger a rise of domestic and international debt, which becomes a burden on small countries’ economies. Turning to the ongoing negotiations with the IMF, he said the model for measuring progress used by international financial institutions focuses on GDP growth and macroeconomic stability. Welcoming the development of the multidimensional vulnerability index, which shows real poverty levels, he encouraged financial institutions to use it along with GDP when allocating aid. “It is a better measure of the poverty profile,” he added. He further pointed to high transaction costs of donor contributions, while welcoming the creation of a donor platform to ensure the reduction of transaction costs and respective synergies in that regard.
Mr. STAUR said there are many crises facing the world today, from the pandemic to the Russian Federation’s invasion of Ukraine. Yet the donor community as a whole has stepped up to the multiple challenges. The challenge now is to increase the levels of ODA. There is much momentum in the international financial community to focus on the trading of shared public goods, he said, also pointing to the importance of concessional financing and ensuring any shift of ODA to middle-income countries does not hurt the least developed countries. To optimize the delivery of ODA, the international community must look at ways to improve its effectiveness and the fragmentation of its delivery. Support from the United Nations is necessary in this regard, he said.
Mr. GUIMBERT, speaking via video message, said in 2020-2022 the World Bank Group committed $272 billion in supporting countries to address global challenges. In the past three years the funding has tripled, he said, adding that the Group is a leading climate finance provider to developing countries, with $32 billion provided for this cause in 2022. To this end, he emphasized the importance of resilience and inclusion in tackling poverty, while also outlining support for addressing global challenges; optimizing the impact achieved with resources available; engaging on regional and global levels; and strengthening operational capacity for crisis response. To extend its financing capacity and address the gap between a country’s needs and resources, the World Bank has endorsed delivery of a $50 billion financing increment over the next decade. The Group is also working on its plan of action that includes enhanced investment in the organizational knowledge and deepening partnerships. More so, it continues to focus on financial innovations.
Mr. MEJA welcomed the multidimensional vulnerability index, noting that many countries have been denied resources based on their income levels. Outlining development challenges on the national levels with regards to global public goods, he expressed concern about the decrease of ODA in comparison with the humanitarian expenditure. Noting that most of such commitments remain in the donor countries, he underlined the importance of mobilizing concessional resources and avoiding diverting these funds towards financing refugee causes. He reiterated the need for a reform of the multilateral development banks, while encouraging the World Bank to leverage the private sector. To this end, the instruments must be right, and the voices of poor partner countries heard to make such reform inclusive, he stressed. To achieve development effectiveness, he suggested using the principle of democratic ownership; ensuring development agendas’ transparency and accountability; and enabling civil society and other organizations to take part in establishing development agendas.
As the floor opened for discussion, several delegates mentioned the importance of multilateral bank reform to ensure the financial institutions can meet global challenges beyond poverty reduction, while accommodating the development agendas of individual countries. Delegates also cautioned that the banks’ central role of poverty eradication must not be lost while partnerships with the private sector should be expanded.
Stressing the key role that multilateral banks play in financing development, the representative of Morocco said bank reform must ensure the financial institutions can respond to current risks, such as climate preparedness and addressing the needs of middle-income countries. He urged revisions in lending terms to provide for longer-term loans that carry lower interest rates. The achievement of the Global Goals should be included in all phases of the lending process.
The representative of South Africa agreed that changing the operational and financial model of the banks is very important, yet any changes must be aligned with the development agendas of individual countries. She warned that if financing is narrowed only to issues such as climate change, the overall achievement of the Global Goals could be placed at risk. She also advocated for improved lending terms, such as long-term loans of 30 to 50 years, more significant grace periods and lower interest rates for low- and middle-income countries.
The representative of Argentina noted that the banks must commit to expanding their resource base as they broaden their lending mandates. Yet financing for climate change and other public goods should not hurt financing for education and fighting poverty.
The Philippines’ representative joined the call for reliable and predictable concessional financing that is aligned with the priorities and national development plans of individual countries. A dependable approach is needed. He urged the banks to provide technical support, to work with each other and to reduce the cost of borrowing for individual countries.
The representative of the European Union, in its capacity as observer, noted that the bloc’s Global Gateway Initiative stands ready to help countries meet their expanding technology and digital needs. He agreed with other delegates that the mobilization of concessional financing should not come at the expense of low-income countries, and he urged the banks to update their operational models. Canada’s representative said her delegation supports efforts to reform the banks so they can use their capital more efficiently and address global challenges. Noting that sources of new capital in the private sector remain untapped, she urged the international community to expand efforts to mix private and public sector financing models.
An observer for the African Union said the global community requires a financial system that has adequate resources to rapidly meet countries’ urgent needs. Interest rates have to be at acceptable rates. A twenty-first financial model is vital. The African Union’s Agenda 2063 is meant to help countries meet their financial needs.
Also speaking today were representatives of Spain, Honduras, Sudan, Paraguay and the Minister of Planning and International Cooperation of Guinea, as well as representatives of the FAO, African Network for Environmental and Economic Justice, Save the Children and the Virginia Bildersleeve International Fund.
In closing remarks, Mr. ANDRÉ, underscoring the importance of the reform of the multilateral development banks said: “We have the momentum, and we need to seize it.” Crises are hurting the most vulnerable, he said, adding that the amount available to finance such needs is insufficient. Noting that national or isolated answers do not provide solutions, he highlighted the need for enhanced cooperation and dialogue.
Mr. ZATTLER, voicing support for increasing the resource base, said joint investment in global public goods increases the readiness of the people to raise funds for aid. Noting that Germany has increased its ODA beyond 0.8 per cent, he encouraged States to use concessionally for investing in global public goods. The funding gap of the alleged $4 trillion raises the need of mobilizing private sector in a systematic way, he added, stressing: “We need to look on the challenges in a holistic way.”
Mr. ZIMPITA said small countries do not have time to wait for long discussions to find solutions, thus encouraging States to seek answers in a timely manner. “Time is something we do not have,” he stressed.
Mr. STAUR, noting that the only way to go from “billions to trillions” is to focus on domestic resources mobilization, underscored the importance of wise and targeted use of ODA. To this end, he highlighted the need for social protection nets, health investment and education.
Mr. GUIMBERT stressed it is time to declare a state of emergency on the Sustainable Development Goals and underscored the importance of urgent action. Recalling that during the COVID-19 pandemic the global challenges were most efficiently tackled through national social protection systems, he said such issues should be addressed on a country level.
Ms. PARRA-LANCOURT, summarizing the afternoon session, thanked delegations for bringing questions and solutions to the panel.