Working together to build a more responsive, fairer and more inclusive global financial system

We must together drive change in our global financial system to make it more responsive, just and inclusive, fight inequalities, finance the climate transition and 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 22 and 23 June in Paris

The international financial architecture inherited from the post-war era is no longer sufficiently adapted to deal with the growing inequalities, climate change, biodiversity erosion and public health challenges prevalent in the 21st century. The international community’s responses are currently fragmented, partial and insufficient. On the one hand, concessional resources provided by development institutions are not delivering their full potential in terms of impact, co-finance and alignment with needs. On the other hand, rising finance conditions and increasing indebtedness are holding back investment in developing countries and preventing them from meeting the challenges they face. 

President Wickremesinghe, addressing the Presidential Environment Awards ceremony at BMICH, noted that countries suffering under a high level debt have limited resources for climate change mitigation and that we should aim to change this situation. Indeed, international solidarity is more vital than ever, amid a growing number of crises that are weakening the poorest and most vulnerable countries to an even greater extent. To enable the most exposed countries to emerge from the COVID 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 financial resources. Unfortunately, the global financial system inherited from Bretton Woods 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 development and for the protection of global public goods due to a lack of resources. The second, which is even more crucial, is the risk of geopolitical fragmentation, at a time when we need effective multilateralism and enhanced cooperation more than ever. Many G7 and G20 countries, organisations 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 therefore, now calling for a review of our software and for a shake-up of finance. We must together drive change in our global financial system to make it more responsive, just and inclusive, fight inequalities, finance the climate transition and 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 22 and 23 June in Paris. This Summit intends to be inclusive, with every country, every opinion and every proposal being able to be expressed. This Summit is part of a positive momentum. 

We need to draw on the experience and proposals of Sri Lanka, whose voice is particularly relevant to the agenda of the Summit for a New Global Financing Pact. We will promote a reform agenda for development banks and the IMF to better finance the countries that need it most, as well as global challenges. It is an agenda that aims to improve existing instruments and capital and promote innovative approaches and instruments to support the poorest and the most vulnerable countries. It also aims to mobilise more private finance using risk-sharing and guarantee mechanisms to redirect financial flows towards these countries to support the local private sector and durable infrastructure

The launch of World Bank reform, the G20 Presidency of India and that of Brazil right after, the SDG mid-term review and commitments made at COP are all grounds for hope that this momentum will continue. Tangible solutions have already been initiated: the Paris Club and the G20 launched an initiative for debt treatment, and France plays a pivotal role in implementing coordinated solutions under this “Common Framework”. We have proposed and obtained the issuance of $100 billion in IMF Special Drawing Rights 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 have implemented initial measures to optimise capital to increase their lending capacity. But we must now go even further, taking inspiration, for example, from the Bridgetown Initiative, a set of innovative solutions spearheaded by Barbados to address climate vulnerability affecting many middle-income developing countries. 

And we need to draw on the experience and proposals of Sri Lanka, whose voice is particularly relevant to the agenda of the Summit for a New Global Financing Pact. We will promote a reform agenda for development banks and the IMF to better finance the countries that need it most, as well as global challenges. It is an agenda that aims to improve existing instruments and capital and promote innovative approaches and instruments to support the poorest and the most vulnerable countries. It also aims to mobilise more private finance using risk-sharing and guarantee mechanisms to redirect financial flows towards these countries to support the local private sector and durable infrastructure. This requires stepping up the use of our instruments and public and private innovative and new financing mechanisms. To be more effective, our international financial institutions should be able to do more than they are doing currently, to work together better, while mobilising private savings better. To be more inclusive, we must above all give a greater voice to the most vulnerable countries at international fora. France is committed to this goal. The Summit for a New Financial Pact will bring international financial issues to the fore, and the participation of heads of state and governments will provide the impetus needed to carry out the transformations our system requires. We do not have to choose between fighting poverty, tackling climate change and its impact and protecting biodiversity. A fair transition is the only answer.

The writer is the Ambassador of France to Sri Lanka and the Maldives