The first part of this blog focuses on some of the challenges of global development finance ahead of the next global development conference in mid-2025. This second part examines some of the proposals are now available to deal with these problems. None should be viewed as a panacea, or alone. Some work better than others. And many are reprints of previous proposals that have taken on new urgency due to the current influx of global disasters.
One of the first major decisions facing development donors ahead of next year’s conference will be how much to provide in the World Bank’s financial assistance, the International Development Association’s International Association (IDA), will hold its last meeting in the current series. December in South Korea. The bank is seeking about $30 billion from donors to cover the 2025-28 IDA21 commitment period, which allows it to use an additional US $70 billion from its lending and other funding sources. . While the IDA is not perfect, a top-up of this size (a real 10% increase in the past) could provide much-needed support for low-income countries cut off from bond markets, are feeling the effects of China’s slowdown. they borrow, and are struggling with the high cost of servicing private debt. It will also help to fulfill the Bank’s expanded mission, which now includes a clear component on climate change – “creating a world without poverty. in the living world” (emphasis added).
There is also an opportunity for shareholders to continue to promote the development of other areas of the Bank to release more funds for development and global public goods. This includes decisions on the use of “capable capital” – a commitment from the Bank’s shareholders to step in and help the lending bank to meet its bond and guarantee obligations under the conditions of excess – and how to make the most of the new integrated warranty window. present a real “add” when it comes to mobilizing private sector investment in risky markets. Similar reforms are underway at other multilateral development banks (MDBs), and US government officials have indicated the project will be a major focus of the second-led administration. are Democrats to win the November election.
The more drastic change, outlined by experts at the US Council on Foreign Relations, would see the Bank use its shareholders’ special drawing rights (SDRs) – a type of reserve currency issued by the Treasury. International Monetary Fund (IMF) – issuing bonds. to finance development loans. These SDRs are currently held in accounts managed by the IMF, but the Fund recently approved their use as a form of “hybrid capital” by MDBs, up to an SDR-equivalent limit of approximately US$20 billion. . According to its supporters, increasing this limit, and adding long-term, SDR-linked bonds to the mix will “enable a significant increase in the Bank’s climate finance without put any pressure on the current financial system. It can be combined with it equally [other] hybrid currency to support the Bank’s expansion of good lending to fragile and conflict-prone countries…”. It can also contribute to the financing of IDA21 by improving the Bank’s ability to provide low-cost loans by issuing low-interest bonds.
Although prospects for a major overhaul of the world’s fragmented debt structure remain dim, Barbados Prime Minister Mia Mottley is advocating modest but significant IMF reforms as part of the broader Bridgetown Plan on finance. of development. This focuses on the adjustment of the Fund’s supplementary payments for middle-income countries seeking assistance in dealing with financial crises. Mottley argues that “the IMF cannot argue that its lending programs have debt enforcement at its heart when its loans to middle-income countries cannot be considered sustainable”. He and others have argued that these payments should be tied to interest rates or canceled.
Although the focus is on international financial institutions, bilateral donors also have the opportunity to change the way they organize ODA programs, budgets and governance to strengthen confidence in the credibility of these efforts. These recommendations range from the improvement of stability and transparency in the reporting of private sector resources and “beyond ODA” development funds – equity, guarantees, foreign trade loans and the like – distinguish clearly between ODA that focuses on the development needs of low-income and minority countries. countries and funds for real contribution to the provision of public goods worldwide in areas such as environment and health.
Discussions about this latest discrepancy are ongoing in the United Nations debate on a controversial plan called a “new target” for global climate finance. The previous goal of US $ 100-billion-by-2020, which was reached after 2022, was found by another study that did not produce any financial effort on the part of the donors regarding the size of their economy. Another group of experts has proposed a new objective approach that maximizes the total number of both climates and sources of development. They argue that a common goal – would include a clear recognition that all development spending must be “climate fit” and could include specific adaptation targets for vulnerable countries of weather conditions – will be reported in the same amount as the grant. an independent technical working group that may report to the OECD, the UN, or the G20. Described as an increasing part of the donor economy, “it will clarify the financial efforts involved and avoid inflation that destroys the value of the funds provided”. The new target would focus on public funding – which is often more transparent than private funding and over which donors have control – and could also include a “fair share” of climate finance contributions. for large and rich foreign economies such as China and the Gulf countries. , while liberating low-income, lower-middle-income, underdeveloped, and small-island developing countries.
A group of climate scientists and development economists also presented a plan to extend and align the 2030 Sustainable Development Goals with the 2050 net-zero emissions timeline under the agreement. The Paris of climate change. This will be supported by development budget reform, mission-based development and climate approaches aimed at bringing together different stakeholders, and methods such as international peer review of process. Although the proposed plan does not deal with important obstacles such as national ownership, the division of many countries and political competition, it will probably be a point that will be discussed at the UN Conference on the Future in September. And there are proposals based on methods such as Tobin’s tax and methods of global public finance in financial development, which will undoubtedly be part of ongoing international discussions.
Australia’s position will not be decisive in these discussions. US policies under Trump’s second presidency, the political leverage of governments in other major G7 donors such as France, Germany and Japan, and China’s decision to face its economic headwinds will all be important information. But neither Australia nor its neighbors can afford to be spectators. Australia can and should be a positive and active participant. Participating in this program is consistent with previous statements by Foreign Minister Penny Wong about “constructive international cooperation” in foreign policy and emphasizing the international development strategy of Australia’s role in producing collective action on global problems.
In addition, Australia is a G20 country that is keen to host a global climate change summit in just two years and is seeking a seat on the UN Security Council for five years as a sign. of its support for a “rules-based multilateral order”. Therefore, there will be a fair international assessment of Australia’s position when it comes to these important discussions. And it will not be they lack global opportunities for Australia to demonstrate how development is “at the heart of its innovation” in the lead-up to the next funding for development summit.
Read Global development finance – outlook and prospects: Part 1
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This research was conducted with the support of the Gates Foundation. Opinions are the author’s only.
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