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In less than two weeks, leaders will convene in Paris with the aim of building a more responsive, fair, and inclusive international financial system. It’s an ambitious and timely agenda. This week, we highlight what to expect and why it matters. |
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Top newsReaching the summit: Against the backdrop of the climate crisis, conflict, hunger, and economic alarm bells, France is hosting the Summit for a New Global Financing Pact on 22-23 June. The summit is part of a wider (and long overdue) reckoning over the failure of global financial institutions to meet the development needs of low- and middle-income countries. Hit the phones, Emmanuel: There are growing concerns that the summit will be heavy on promises and light on concrete action (i.e. the same as every other recent high-level convening). A leaked document suggests that many of the specifics remain undecided, including whether to even issue a final outcome statement. The leaked document does hit the key notes: reform the World Bank and other similar institutions, increase climate finance, unlock new mechanisms for rechanneling Special Drawing Rights (SDRs), and address the debt crisis. President Emmanuel Macron has two weeks to turn this from what looks like a stocktaking exercise into an event that delivers progress toward actual economic transformation. Don't worry, President Macron, the ONE Campaign and hundreds of other civil society organisations are here and ready to help make the summit successful. Read on for our ideas. 👇 A little more flexibility please: African leaders have a new proposal that could transform the financing landscape. But it’s being held back by Europe. The African Development Bank put forward a proposal for channelling SDRs, leveraging them on capital markets at a ratio of 1:4, and generating new low cost loans for climate and development. If it works, other multilateral development banks could adopt it to unlock the US$375 billion in unused SDRs sitting in advanced countries (for arithmetic buffs: that could leverage US$1.5 trillion). But the European Central Bank’s over-cautious and inconsistent application of “monetary financing rules” could kill the idea. Macron could advance the proposal at the summit. Former Executive Director for the AfDB Mimi Alemayehou and ONE’s David McNair explain how Macron can do this at no cost. Meeting demand: One of the more concrete proposals in the leaked draft is the call for US$100 billion per year in foreign exchange guarantees for low-income countries. That money could help assuage the concerns of potential investors, who may otherwise see the devaluation of those countries’ currencies as too much of a risk. The mechanism could help mobilise US$1.5 trillion to help countries reduce carbon emissions. That proposal appears alongside iterations of past US$100 billion promises – for climate finance and reallocated SDRs – that remain unmet. And therein lies the true test of the summit: moving beyond admiring the problems to doing something about them. Time keeps on slipping: The summit presents another opportunity for world leaders to agree on much-needed MDB reforms that could leverage up to US$1 trillion in additional funding to address development and climate needs. Thus far, the World Bank and some donor countries have signalled less ambition than the moment calls for. New World Bank President Ajay Banga has his work cut out for him in reforming the lender to efficiently help countries fight poverty *and* transition to climate resilient and low-carbon economies. To do that, the World Bank (and other MDBs) will need more money. Time is not an ally: this year’s El Niño could cost the global economy US$3.4 trillion. For context, that’s more than the combined GDP of all 54 African countries. Tick tock, leaders. ⌛ A taxing problem: More than 70 international economists are supporting the push for an international tax on financial transactions ahead of the summit. They say it could raise as much as €260 billion a year if applied to all G20 countries. That’s enough to meet the climate adaptation needs of all low- and middle-income countries. It’s just one of the new sources of global finance being proposed. Others include a fee on oil imports, a carbon tax on shippers and airlines, and a levy on fossil fuel extraction. Promises, promises: Also on the summit agenda: what to do about debt? One in five people globally live in a country in- or at high risk of debt default. It’s a problem that’s been in need of a solution for years. And it’s getting worse: The world’s poorest 28 countries now spend twice as much on debt interest payments as they did a decade ago. One stopgap measure that would help provide heavily indebted countries with much-needed fiscal space: rechannelled SDRs. Rich countries have pledged to rechannel US$98 billion in SDRs. But there’s a BIG caveat: US$21 billion of that is a US pledge that faces stiff congressional headwinds. Oh, and very little of that pledged money has actually been delivered to countries in need (Rwanda is the only country thus far to receive it). Note to leaders: It's too soon for an SDRs victory lap. 🏁👀 From the ONE Team
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Quote of the week
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What you should read, watch, and listen to:
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A look ahead12 June: World Day Against Child Labour. 13 June: Foreign Policy’s Global Health Forum in Washington, DC and online. 14 - 15 June: The UNEP Finance Initiative Regional Roundtable for Africa and the Middle East in Windhoek, Namibia. |
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The ONE Campaign’s data.one.org provides cutting edge data and analysis on the economic, political, and social changes impacting Africa. Check it out HERE. |
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