Barbados and France call for a new global financial system

Source: Barbados Today
Each international meeting allows discussions, ambitions, and commitments, reflecting a real and shared desire to make progress. But in the end, there is always the same stalemate: insufficient funding for developing and vulnerable middle-income countries.

Who can ignore the terrible injustice before our eyes? Who can ignore that the poorest countries, because of their vulnerability to climate change, find themselves on the front line of a war they did not start? Who can ignore the fact that funding is currently insufficient to meet the exponential needs of these countries, which must finance their economic development, their ecological transition and their climate resilience all at once? And, who can ignore the fact that the economic, energy and food security consequences of Russia’s aggression against Ukraine affect these vulnerable countries first and foremost?

The countries of the South – notably Barbados – are constantly reminding us of these injustices. They also remind us that the responses of the international community are fragmented, partial, and insufficient.

On the one hand, developed countries continue to scatter their resources in ad hoc funds that proliferate on all subjects, without, however, managing to mobilise the necessary funding. On the other hand, increasing interest rates, reaching predatory levels for the least developed countries and vulnerable middle-income countries remove any prospect of economic recovery and accentuate the risks of a debt crisis.

These failures of our international financial system inherited from Bretton Woods pose two major risks for the future of our planet: first, insufficient protection of global public goods, due to a lack of sufficient resources, and second, a risk of further fragmentation of the world. This is when we need more than ever global morals, strategic leadership, effective multilateralism and reinforced cooperation.

France and Barbados, of the “North” and “South” respectively, share the same conviction: that we must not be resigned to injustice or fragmentation.

We are, therefore, calling today for a major reform of global financial architecture. Together, we must work to build a more responsive, fairer and more united international financial system that will make it possible to fight inequalities, finance the climate transition and move our countries closer to the attainment of Sustainable Development Goals.

The time for action is now.

The Indian presidency of the G20, the mid-term review of the Sustainable Development Goals, the positive momentum generated by the COPs, the democratic election of leaders on the continents of Africa and South America, the willingness of the US administration and the consensus to change the World Bank’s leadership are all grounds for hope for ambitious reform.

Some solutions have already been initiated. As early as 2020, France launched debt treatment initiatives and then implemented the common framework that is now being rolled out in several countries. At the summit of the financing of African economies in May 2021, France proposed the reallocation of IMF special drawing rights to the least developed countries. Today, 20 percent of France’s SDRs have already been reallocated and France has committed to increasing its commitment to 30 percent. Other countries have followed. All countries must do their part in this effort.

But we must all now go further, taking inspiration from the Bridgetown Initiative, an ambitious yet achievable set of solutions sponsored by Barbados and, of which France fully shares the objectives.

To make an impact, we now need a surge of long-dated, low-cost finance to help drive public and private investment. This new stimulus could help finance mitigation in large emerging countries and social and economic resilience in developing countries more broadly. It must come alongside additional grant funding for the poorest countries and loss and damage in climate-vulnerable countries.

To be more effective, we must also modernise our intervention instruments, notably through the structural reform of development banks, so that they can lend substantially more than they currently lend to governments and do more to mobilise private savings. To be more inclusive, we must, above all, give developing countries a greater voice in international forums.

This is the objective of the Summit for a new global financial pact, which will be held in Paris on 22 and 23 June this year.

This Summit is intended to be inclusive. Every country will have a voice and every perspective will be represented.

This Summit will place the international financial issues at their rightful level: that of the Heads of State and Heads of Government, who will drive the necessary transformations as we head into COP-28 later in the year.

This Summit will aim to unite the world around an ambitious but urgent objective: to build an international financial system adapted to the challenges of the 21st century and fit for purpose.

The challenge is immense.

France, a country that is deeply committed to fair and effective multilateralism, and Barbados, a voice for the most vulnerable countries and equally committed to fair and effective multilateralism, are determined to play their full part in this collective effort.

At stake: our planet, our human civilization.

Mia Amor Mottley is the Prime Minister of Barbados and Minister of Finance and Economic Affairs and Investment.

Chrysoula Zacharopoulou is the French Minister for Development, Francophony and International Partnerships.

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