© Reuters. French President Emmanuel Macron speaks during the theme of the Alliance for Entrepreneurship, as part of the New Global Financial Compact Summit at Palais Brognniart in Paris, France, June 22, 2023. Emmanuel Dunand/Pool via REUTERS
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Written by John Irish and Lee Thomas
PARIS (Reuters) – World leaders said on Friday that multilateral development banks such as the World Bank are expected to find $200 billion in additional firepower for low-income economies by taking on more risk, a move that could require rich countries to inject more liquidity. .
The leaders, who met at a summit in Paris to disburse financing for climate change and post-coronavirus debt burdens for poor countries, said their plans would secure billions of dollars in similar investment from the private sector.
Now, they said, the overdue pledge of $100 billion in climate finance for developing countries is on the horizon.
However, several attendees during the two-day summit said the World Bank and International Monetary Fund were increasingly ill-suited to addressing the most pressing challenges and needed a broad overhaul.
“We expect a total increase of $200 billion in the lending capacity of multilateral development banks over the next 10 years by improving their balance sheets and taking more risks,” said the summit’s closing statement, obtained by Reuters.
“If these reforms are implemented, the multilateral development banks may need more capital,” she added, acknowledging in a final summit document for the first time that rich countries may have to inject more money.
US Treasury Secretary Janet Yellen, whose country is the largest contributor to the International Monetary Fund and World Bank, said ahead of the summit that development banks should first press for more lending before considering the possibility of raising capital.
The summit’s final document called for every dollar loaned by development banks to be matched by at least one dollar of private financing, which analysts said should help international institutions mobilize an additional $100 billion in private money in developing and emerging economies.
The announcements mark an increase in action by development banks to combat climate change and set a direction for further change ahead of their annual meetings later in the year.
However, some climate activists criticized the results.
“While the Paris roadmap recognizes the urgent need for significant financial resources to advance climate action, it relies heavily on private investment and attributes a large role to multilateral development banks,” said Harjit Singh, Head of Global Political Strategy at Climate Action. international network.
Debt relief
At the summit, the United States and China — which have long been at odds over how debt restructuring should address poor countries — sought to sound a more conciliatory tone after reaching a landmark agreement on Thursday to restructure $6.3 billion in debt Zambia owes, most of it. to china.
“As the world’s two largest economies, we have a responsibility to work together on global issues,” Yellen said at a joint summit meeting with Chinese Premier Li Qiang among other leaders.
However, there are still differences. China – the world’s largest bilateral creditor – has been lobbying for lenders such as the World Bank or the International Monetary Fund to absorb some of the losses, which Western institutions and countries oppose.
“China is willing to engage in debt relief efforts in an effective, pragmatic and comprehensive manner, in line with the principle of fair burden-sharing,” Li said.
Climate pledge
The summit statement said there was a “good probability” that a $100 billion climate finance pledge for developing countries would be finalized this year.
Many of the topics discussed in Paris dealt with proposals from a group of developing countries, led by Prime Minister of Barbados Mia Motley, dubbed the “Bridgetown Initiative”.
Motley said in the closing session of the summit, “There is a political consensus that this issue is bigger than all of us and we have to work together and the multilateral development banks will have to change the way they work and this is acceptable.”
“We leave Paris not simply by speeches, but by the obligation to go into the minute details to make sure that what we agree here can be carried out.”
The pledge of $100 billion falls far short of the actual needs of poor countries, but has become a symbol of the failure of rich countries to deliver on promised climate money. This has led to mistrust in the broader climate negotiations among countries trying to boost carbon dioxide reduction measures.
“If we can’t shape the rules at this time like others before, we will be responsible for what could be the worst reality for humanity,” Motley said.