The post-war international financial architecture is no longer sufficient to deal with growing economic inequalities, climate change, biodiversity erosion, and public health challenges prevalent in the 21st century. The international community's current responses to these challenges are fragmented, partial, and insufficient.
First, concessional resources provided by development institutions are not delivering their full potential in terms of impact, co-finance, and alignment with needs. Second, the expansion of finance conditions and rise in debt are slowing investment in developing countries and do not provide them with means to address the challenges they are facing.
International solidarity has never been more critical amid a growing number of crises that are weakening the poorest and most vulnerable countries to an even greater extent. To help the most exposed countries exit the COVID-19 crisis, deal with the consequences of Russian aggression in Ukraine on their food and energy security, and cover the very high cost of climate transition and consequences of extreme climate events, it is necessary to scale up finance.
The global financial system inherited from the Bretton Woods Conference post World War II has reached its limits at a time when we are facing two major threats to the future of our planet. The first is insufficient support for the development and protection of our global public goods due to a lack of resources. The second is the risk of geopolitical fragmentation at a time when we need effective multilateralism and enhanced cooperation more than ever.
A number of G7 and G20 countries, organizations and associations share this observation with France and wish to promote the same conviction: We have to act fast and join efforts to correct the imbalances and injustices generated by these divides.
We are calling for a review of our international "software." We must together drive change in our global financial system to make it more responsive, just and inclusive, fight inequalities, finance the climate transition, promote biodiversity protection, and move closer to achieving the United Nations Sustainable Development Goals (SDGs).
This is the objective of the Summit for a New Global Financing Pact, which will be held on June 22 and 23 in Paris. The summit intends to be inclusive, with every country, every opinion, and every proposal being able to be expressed.
The summit is part of a positive momentum—the launch of reform by the World Bank, the G20 presidency of India and that of Brazil right after, the SDG midterm review, and commitments made at COP are all reasons for hope to build on this momentum. Tangible solutions have already been initiated: The Paris Club and the G20 launched an initiative for debt treatment, with France playing a pivotal role in implementing coordinated solutions under the Common Framework. We proposed and obtained the issuance of $100 billion in IMF Special Drawing Rights (SDRs) for the most vulnerable countries. All countries in a position to do so must take part in this effort. Several multilateral development banks have begun to respond to the G20's requests and implemented initial measures to optimize capital to increase their lending capacity.
But we must now go even further, following the example of the Bridgetown Initiative, a set of innovative solutions spearheaded by Barbados to address climate vulnerability affecting many middle-income developing countries.
We will promote a reformed agenda for development banks and the IMF to provide more finance to countries facing global challenges. It is an agenda that aims to improve existing instruments and capital, while promoting innovative approaches and instruments to support the poorest and most vulnerable countries. It also aims to mobilize more private finance using risk-sharing and guaranteed mechanisms to redirect financial flows toward these countries to support their local private sector and durable infrastructure. This requires stepping up the use of our instruments and public and private innovative financing mechanisms.
To be more effective, our international financial institutions should be able to do more than they are currently doing to work better together, while better mobilizing private savings.
To be more inclusive, we must above all give a greater voice to vulnerable countries.
The Summit for a New Global Financing Pact will highlight global finance challenges and the many leaders participating will give the impetus needed to carry out the transformations our financial system requires.
We do not have to choose between fighting poverty, tackling climate change and its impact, and protecting biodiversity. A just transition is the only answer.
Laurent Bili is the ambassador of France in the United States.
The views expressed in this article are the writer's own.
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