Relieve Developing Countries from ‘Shackles’ of Debt Traps, Lack of Representation at Global Institutions, Speaker Urges at Summit of Future Dialogue

The international financial architecture, established in the mid-1940s, has become obsolete and must be reformed to address the challenges of developing countries, speakers emphasized during an interactive dialogue at the Summit of the Future today, calling for more equitable access to affordable financing and the creation of a fair, open global trading system.

Introducing the session, titled “Transforming global governance and turbocharging the implementation of the 2030 Agenda for Sustainable Development,” Nepal’s Prime Minister said:  “We are meeting in a critical juncture in history”, when poverty, hunger and inequality are on the rise and only 17 per cent of Sustainable Development Goal (SDG) targets are on track.  Stressing that States gathered “to cease a once-in-a-generation opportunity” to enhance cooperation trough multilateralism, he urged: “Let’s work closely together for the well-being of people and the planet.”

Global governance reform and sustainable development - the theme of this morning's dialogue - are two of the five main pillars of the Pact for the Future, an intergovernmentally negotiated, action-oriented outcome adopted today at the Summit of the Future.

What speakers call for:

• reform of Bretton Woods international financial architecture
• debt relief and access to affordable financing for sustainable development
• fair open trade, access to global markets, investment in green transition 

“We cannot build a future we want without trade,” said Ngozi Okonjo–Iweala, Director-General of the World Trade Organization (WTO) calling for an end to protectionism.  Eradicating poverty and ensuring food security “cannot be achieved without open global trade in goods and services”, she said, also adding that to lift more people out of poverty, “we need more trade not less trade.  But we need better trade.”  She also urged that subsidies be reformed to release billions of dollars in finance for the SDGs, and to remove their trade-distorting and environmentally damaging impacts.

For his part, Ajay Banga, President of the World Bank, reported that his institution “stretched its existing balance sheets” to enable $120 billion of additional lending over the next 10 years.  Stressing that the organization is “on a path to deliver greater scale and impact,” he detailed its projects that include bringing electricity to 300 million Africans by 2030; deploying 45 per cent of funds towards climate by 2025; and providing quality affordable health care to 1.5 billion people by 2030.  In August, the World Bank announced a dedicated initiative aimed at generating jobs, led by Presidents of Singapore and Chile.

While the world economy has been remarkably resilient to multiple shocks of recent years, “prospects for growth are at their lowest levels in decades and low growth means fewer jobs, lower incomes”, said Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF). Although the global growth is estimated at around 3 per cent over the next five years, elevated debt pressures in many countries mean “the world is at risk of falling into a low-growth, high-debt trap.”  Noting that States can harness higher green growth and jobs if they reshape the economies and if artificial intelligence is deployed properly, she added:  “What we do in this decade would be absolutely critical.”

The least developed countries cannot speed up “while their hands and legs are being tied” by “four shackles”, said Malawi’s President, citing the punitive lending terms for them, lack of their representation at multilateral organizations, the monopolization of technology by developed countries, and the international community’s failure to enforce commitments on remedial financing from the economies that cause climate change and territorial compliance from those that cause armed conflicts.  Given this backdrop, he proposed several measures, including the establishment of a dedicated Global Green Fund to exclusively finance clean energy projects in developing nations and a UN-mandated sovereign debt restructuring criteria and mechanism.

The forthcoming fourth International Conference on Financing for Development is the “last opportunity” to secure funding to meet SDGs by 2030, Kenya’s President observed.  While the prevailing multilateral institutional architecture is dysfunctional and cannot provide solutions, countries are turning to innovative, home-grown approaches, he added.

In this vein, Cuba’s Foreign Minister underscored the need for clear guidelines to reform the international financial architecture and access to financing for developing countries, including a multilateral mechanism for renegotiation of sovereign debt with fair treatment focused on development.  He also called for reform of international value chains allowing developing countries to industrialize their products.

Calling the global financial system “morally bankrupt”, Tunisia’s Foreign Minister said that developing countries are obliged to borrow from financial markets at “exorbitant interest rates” — sometimes double those given to developed States — and sometimes must borrow just to pay their debt.

Meanwhile, Tuvalu’s Deputy Prime Minister underscored that his country “faces the reality that we will either drown in debt or be drowned by the sea”.  Underscoring the need for international cooperation to establish global governance frameworks for meaningful ocean protection, he stressed that mitigation and adaptation efforts against climate change must go hand in hand.

Stressing the need to eradicate poverty and inequality, create decent jobs and combat climate change, Namibia’s President said the world must transition to renewable energy.  “The stakes are too high and the cost of inaction is far too great,” he added.

Building on that, the Prime Minister of Uganda, speaking on behalf of the “Group of 77” and China, underscored that the UN remains “the most inclusive and legitimate forum for advancing the Sustainable Development Goals”.

“We need to collectively do more,” said the Commissioner for International Partnership of the European Union, pointing to the bloc’s Global Gateway investment strategy that invests in clean energy, among others. While the Group of 20 (G20) supports multilateral development banks to unlock more than $300 billion in additional lending in the coming decade, the Union has created a green bond market with an upcoming green bond standard.

Pointing to the need for a redistribution of resources that are increasingly concentrated in fewer hands, the representative of the Interparliamentary Union (IPU) called for putting pressure on international corporations that avoid tax payments.  Also observing that fossil fuel subsidies can be cut to make savings in multiple areas, she also said that military budgets “need to be brough in line” with current high levels.

The representative of Luxembourg reported that his country’s stock exchange is a leader in the listing of green bond and it helps to leverage public finance for the SDGs. Underscoring the importance of public-private partnerships, he welcomed the efforts of the International Monetary Fund (IMF) and the World Bank in reforming the global economic governance, adding:  “They deserve all our support.”

Offering a different perspective, Undersecretary of State at the Chancellery of the President of Poland, speaking on behalf of the Group of Friends of UN-Habitat, Sustainable Urbanization and the New Urban Agenda, observed that by 2050, nearly 70 per cent of the world’s population will likely live in urban areas.  Stressing the need to strengthen cities and prioritize the localization of the SDGs, he stated:  “The future is undeniably urban.”