Some 40 leaders, including about a dozen from Africa, China’s prime minister, and Brazil’s president, will be joined in the French capital by international organizations at the 2023 “Summit for a New Global Financial Pact.”
It aims to boost crisis financing for low-income countries, reform post-war financial systems, and free up funds to tackle climate change by getting top-level consensus on how to progress several initiatives currently struggling in bodies like the G20, COP, IMF-World Bank, and United Nations.
Leaders are set to back a push for multilateral development banks like the World Bank to put more capital at risk to boost lending, according to a draft summit statement seen by Reuters.
In a speech to be delivered on Thursday, new World Bank president Ajay Banga will outline a “toolkit”, including offering a pause in debt repayments, giving countries the flexibility to redirect funds for emergency response, providing new types of insurance to help development projects and helping governments build advance-emergency systems.
While the new World Bank measures are designed to give developing nations some financial breathing space, there was no discussion of multilateral lenders offering debt writedowns — so-called haircuts.
China — the world’s largest bilateral creditor — has been pushing for lenders like the World Bank or the International Monetary Fund to absorb some of the losses.
Those institutions and many developed nations, notably the United States, are resisting, arguing that acceding to Beijing’s demand would be tantamount to a bailout for China. Chinese Prime Minister Li Qiang is due to speak at the summit on Friday.
New vision
Citing the war in Ukraine, climate crisis, widening disparity, and declining progress, leaders said the World Bank and other multilateral financial institutions needed a new vision.
The global financial architecture is outdated, dysfunctional, and unjust, the United Nations Secretary-General Antonio Guterres said.
“It is clear that the international financial architecture has failed in its mission to provide a global safety net for developing countries,” he said.
French President Emmanuel Macron, hosting the summit, said it was time to act or trust would be lost.
The summit aims to create roadmaps that can be used over the next 18-24 months, ranging from debt relief to climate finance. Many of the topics on the agenda take up suggestions from a group of developing countries, led by Barbados Prime Minister Mia Mottley, dubbed the “Bridgetown Initiative.”
The coronavirus pandemic pushed many poor countries into debt distress as they were expected to continue servicing their obligations in spite of the massive shock to their finances.
Africa’s debt woes are coupled with the dual challenge faced by some of the world’s poorest countries of tackling the impacts of climate change while adapting to the green transition.
Wealthy nations have yet to come good on climate finance that they promised as part of a past pledge to mobilize $100 billion a year, a key stumbling block at global climate talks.
Though binding decisions are not expected, officials involved in the summit’s planning said some strong commitments should be made about financing poor countries.
Nearly eighty years after the Bretton Woods Agreement created the World Bank and International Monetary Fund (IMF), leaders aim to squeeze more financing from multilateral lenders for the countries that need it most.
In particular, there should be an announcement that a $100 billion target has been met that will be made available through the International Monetary Fund for vulnerable countries, officials said.
U.S. Treasury Secretary Janet Yellen, whose country is the World Bank’s biggest shareholder, said multilateral development institutions should become more effective in the way they use their funds before thinking of injecting more money into them.
Some leaders are expected to lend their weight to long-stalled proposals for a levy on shipping industry emissions ahead of a meeting next month of the International Maritime Organization officials said.
