The UN Secretary-General Antonio Guterres has said that Paris summit is an opportunity for “governments to come together, re-examine and re-configure the global financial architecture for the 21st century”.
The UN chief hailed The Bretton Woods institutions, the World Bank and International Monetary Fund (IMF), which will celebrate their eightieth birthday this year for their commitment in global finance.
Erected to help countries rebuild after the devastation wrought by World War II, the multilateral development banks are central cogs in a system of international finance that is increasingly viewed as unable or unwilling to address the threat of climate change by global leaders, he said.
“Consider this: over three-quarters of today’s countries were not present at the creation of the Bretton Woods institutions … It essentially reflects, even with some changes, the political and economic power dynamics of that time,” Guterres said in his opening remarks to the delegates in Paris.
He added, “Nearly 80 years later, the global financial architecture is outdated, dysfunctional and unjust. There will be no serious solution to this crisis without serious reforms.”
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In a letter published ahead of the summit, 13 world leaders, including Joe Biden, Rishi Sunak, Olaf Schulz, and Ursula von der Leyen, described the meeting as a “decisive political moment” to “forge a new consensus” on global development finance.
The Summit for a New Global Financing pact, co-hosted by French President Emmanual Macron and Barbados Prime Minister Mia Mottley in Paris last week, did not reinvent the global financial system. But it did notch several long-awaited wins on the climate finance front, leaving many delegates with a sense of optimism often absent from climate finance negotiations.
The World Bank announced it will allow countries struck by natural disasters to pause debt repayments, but only for new loans. This financial breathing room in the wake of floods, droughts and storms meets a key demand set out by Mottley in the Bridgetown Initiative – a set of development finance reforms first presented at the UN climate summit in Egypt last year that provided the impetus for Macron to host the Paris summit.
On the climate finance front, an additional $100 billion will be made available to climate-vulnerable countries through the IMF’s special drawing rights instrument (SDR), a reserve currency. The SDR funding is separate from the historic loss and damage fund agreed upon at COP27 to finance climate adaptation efforts in low- and middle-income countries, which is expected to be finalized at COP28 in Dubai later this year.
In another first, the outcome statement said the World Bank and IMF would unlock an additional $200 billion in “lending capacity” over the next ten years, subsidized by new investment by rich countries.
The conference statement also mentions the prospect of finding “new avenues for international taxation”, reflecting momentum built on the sidelines of the summit for a tax on international shipping to fund climate efforts. This tax will be debated at the International Martime Organization meetings next month.
