Together, let us build a new and better global financial system

Together, let us build a new and better global financial system

Together, let us build a new and better global financial system
Residents stand in the remains of their homes in the aftermath of a Russian attack on Kramatorsk on June 14, 2023. (AFP)
Short Url

A summit for the New Global Financial Pact will be held in Paris on June 22 and 23, attended by numerous heads of state and government including Saudi Crown Prince Mohammed bin Salman.
The postwar international financial architecture 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 fragmented, partial and insufficient. First, concessional resources provided by development institutions are not delivering their full potential in terms of impact, co-finance and alignment with needs. Second, the expansion of finance conditions and rise in debt are slowing investment in developing countries and do not provide them with means to address the challenges they are facing.
International solidarity has never been more critical amid a growing number of crises that are weakening the poorest and most vulnerable countries to an even greater extent. To help the most exposed countries exit the COVID crisis, deal with the consequences of Russian aggression in Ukraine on their food and energy security, and cover the high cost of climate transition and consequences of extreme climate events, it is necessary to scale up finance.
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 our global public goods due to a lack of resources. The second, even more crucial, is the risk of geopolitical fragmentation at a time when we need effective multilateralism and enhanced cooperation more than ever.
A number of G7 and G20 countries, organizations 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 UN Sustainable Development Goals.
That is the objective of next week’s summit. It intends to be inclusive, with every country, every opinion and every proposal able to be expressed.
The summit is part of a positive momentum. The launch of reform by the World Bank, the G20 presidency of India and then Brazil, the SDG mid-term review and commitments made at COP are all reasons for hope to build on this momentum. 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 the 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 optimize capital to increase their lending capacity.

We do not have to choose between fighting poverty, tackling climate change and its impact, and protecting biodiversity. A just transition is the only answer.

Ludovic Pouille

But we must now go even further, following the example of the Bridgetown Initiative, a set of innovative solutions spearheaded by Barbados to address climate vulnerability affecting many middle-income developing countries.
We will promote a reform agenda for development banks and the IMF to provide more finance to countries in the most need. It is an agenda that aims to improve existing instruments and capital and to promote innovative approaches and instruments to support the poorest and most vulnerable countries. It also aims to mobilize more private finance using risk-sharing and guarantee mechanisms to redirect financial flows toward these countries to support the local private sector and durable infrastructure. This requires stepping up the use of our instruments and innovative and new financing mechanisms, both public and private.
To be more effective, our international financial institutions must do more than they are currently doing to work better together, while better mobilizing private savings. To be more inclusive, we must above all give a greater voice to the most vulnerable countries in international forums.
Next week’s summit highlights global finance challenges, and the many leaders participating will give 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 just transition is the only answer.

Ludovic Pouille is France’s ambassador to Saudi Arabia

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News' point of view