Together let’s build a more responsive, just and inclusive global financial system

The post-war 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 currently frag­mented, partial and insuffi­cient. Firstly, concessional resources provided by devel­opment institutions are not delivering their full potential in terms of impact, co-finance and alignment with needs.

Secondly, 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.

Yet 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 very 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, which is 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 United Nations Sustainable Devel­opment Goals (SDGs).

This is the objective of the Summit for a New Global Financing Pact, which will be held on 22 and 23 June in Paris.

This Summit intends to be inclusive, with every country, every opinion and every proposal being able to be expressed.

This Summit is part of a positive momentum. The launch of reform by the World Bank, the G20 Pres­idency of India and that of Brazil right after, 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.

But we must now go even further, following the exam­ple of the Bridgetown Ini­tiative, a set of innovative solutions launched in 2022 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 as well as global challenges.

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 towards these countries to support the local private sector and durable infrastructure.

This requires stepping up the use of our instruments and public and private innovative and new financing mechanisms.

For instance in Tanzania, France and Tanzania have agreed in 2023 to launch a joint roadmap for the energy transition which aims at sup­porting Tanzania to reach its electrification goals through renewable energies.

The French Development Agency (AFD) has been tasked by the French government to pro­pose an innovative solution to facilitate the development of Public Private Partnership solution for Independent Energy Operators willing to enter the Tanzanian market.

This “Public Payment Guar­antee” will benefit both the government as PPPs contrib­ute to avoid an increase of the public debt, and the operator as its liquidity risks are mit­igated through a framework involving an international donor.

In the agricultural sector, AFD is also partnering with the public bank in the agricultural sector (TADB) through a significant credit line.

This project harness­es the advantages of both actors with AFD providing an advantageous funding solu­tion to the Tanzanian insti­tution while TADB leverages its expertise to reach out to more finance stakeholders and increase the support to small farmers.

To be more effective, our international financial insti­tutions should be able to 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 fora.

The Summit for a New Global Financing Pact 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.

Nabil Hajlaoui, Ambas­sador of France in Tanza­nia