What should be on the global financial agenda?
Ammon News - By: José Antonio Ocampo
For building consensus on global financing issues. The next meeting, set for mid-2025 in Spain, will continue the progress made previously in Monterrey (2002), Doha (2008), and Addis Ababa (2015), and preparations are already underway with the launch of two major background documents. While a 'Zero Draft' will serve as the basis for the negotiations, delegates also will consider a set of proposals from an international commission of experts that I had the honor of coordinating. Both reflect the ambition to build on the Addis Ababa Action Agenda.
The central objective of this process is to support developing countries' growth strategies. The commission of experts emphasized the need to restore and strengthen the transformative role of the state, envisioning it as a key driver of development and structural transformation. That means emphasizing the quality as well as the quantity of resources that are mobilized, and replacing a short-term project-focused agenda with one geared toward collectively defined longer-term goals. Each task calls for strengthening the currently weakened multilateral system and creating new regional platforms.
A crucial issue is public-sector over-indebtedness, which affects about one-third of developing countries, while several others face high debt levels and interest costs. This problem stems from the large fiscal imbalances during the COVID-19 pandemic and the rise in interest rates in recent years. Managing it will require an ambitious short-term renegotiation instrument, which can build on the G20's 2020 Common Framework for Debt Treatments. This time, however, the renegotiation process must be faster, and access should be extended to middle-income countries. In the long term, we need a permanent mechanism for sovereign debt restructuring, which could be housed either in the UN or the International Monetary Fund, provided, in the latter case, that it remains independent of the IMF Board.
Another urgent objective is to reinvigorate development financing. An estimated $4 trillion more is needed annually to fund the UN Sustainable Development Goals. Mobilizing these resources will require official development assistance on the scale that high-income countries committed to decades ago: '0.7 per cent of gross national income to developing countries and 0.15-0.20 per cent of GNI to least developed countries.' Most developed countries have failed to hit these targets, and the funds directed to low-income countries have actually decreased in recent years.
A second priority in this area is to increase the financing available from multilateral development banks (MDBs) and support the expansion of national development banks' activities (or the creation of such institutions in the developing countries lacking them). Such efforts must include more financing in local currencies to mitigate the risks of debt escalation from exchange-rate depreciation, and support for the development of domestic bond markets in these countries. Beyond traditional lending, these institutions also should support developing countries' efforts to provide international public goods such as pandemic preparedness and prevention, climate-change mitigation and adaptation, and biodiversity protection.
Increasing environmentally sustainable financing is crucial. While the recent Conferences of the Parties on climate change and biodiversity agreed to more financing, their targets remain insufficient. This is particularly worrying now that biodiversity losses are mounting and global warming has already begun to exceed the 1.5o Celsius threshold set by the Paris climate agreement. In these areas, and in development financing in general, greater private-sector involvement should be mobilized with the help of credits for environmental investments or complementary mechanisms such as loan guarantees from development banks.
agreements should be revisited to avoid demands against national provisions that protect social and environmental standards.
Finally, several institutional reforms warrant attention. In addition to establishing adequate institutions to manage renegotiation of sovereign debt, oversee international tax cooperation, and bolster international financial cooperation, the world must heed the developing world's longstanding demand for greater 'voice and participation' in the Bretton Woods institutions. That means establishing a fair allocation of capital shares, increasing these countries' basic votes, and creating more open, inclusive processes for selecting each body's leadership.
José Antonio Ocampo, a former United Nations under-secretary-general and a former minister of finance and public credit of Colombia, is a professor at Columbia University, a member of the UN Committee for Development Policy, and a member of the Independent Commission for the Reform of International Corporate Taxation. He is the author of Resetting the International Monetary (Non)System (Oxford University Press, 2017) and co-author (with Luis Bértola) of The Economic Development of Latin America since Independence (Oxford University Press, 2012). Copyright: Project Syndicate, 2024. www.project-syndicate.org
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