Development finance system needs urgent reforms, more money, to stave off disaster

The statement, signed by Woochong Um, head of the Asian Development Bank, former British Prime Minister Gordon Brown, Dr. Rajiv Shah, president of the Rockefeller Foundation, and Andrew Steer, president of the Bezos Earth Fund, calls for major changes to help developing countries deal with massive debt burdens, climate change, COVID-19 and myriad other crises.

“The standard models are not working,” they said in a joint statement issued after convening 60 senior government officials and development finance experts in Washington for a three-hour dialogue on the sidelines of the spring meetings of the International Monetary Fund and World Bank.

“We call on governments and the private sector to mobilize development finance at the pace and scale needed to respond to these compounding crises. That is the only way we can put the world on track to achieve the Sustainable Development Goals (SDGs) and the Paris Climate Agreement,” they said.

The IMF on Tuesday slashed its forecast for global economic growth by nearly a full percentage point, noting that Russia’s war in Ukraine had fueled inflation and threatened to widen the divergence between rich and poor for years to come.

The war in Ukraine, COVID-19, cascading debt burdens, accelerating food and fuel crises, and extreme weather events are reversing more than 80 years of growing prosperity and global convergence, the statement said.

Russia’s war in Ukraine was also stoking global food insecurity by driving up the prices of wheat, corn, soybeans, fertilizers and sunflower oil, they said.

The needs were huge, but public finance was “increasingly scarce and inequitable,” and private finance was increasingly risk-averse, they said.

To help, the Group of Seven advanced economies and the larger Group of 20 major economies should deliver on their pledged support for South Africa’s energy transition, and push Indonesia to reach a deal on an energy transition partnership.

Major economies should also use guarantees and other innovative instruments, such as the proposed International Finance Facility (IFF), and channel their IMF Special Drawing Rights (SDRs) reserves to developing countries, they said.

Boosting funding from multilateral development banks and creating facilities to attract more private capital would enable developing countries to take climate action, address the pandemic and manage the compounding food, fuel and debt crises.

“If we don’t solve these problems, we are going to have much more instability, and much less faith in the public finance and development system, to the point where it will no longer be credible,” said Eileen O’Connor, a strategic adviser to Shah at the Rockefeller Foundation.

(Reporting by Andrea Shalal; editing by Diane Craft)

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