Paris Finance Summit, promises or dilutions?, by Adefolarin A. Olamilekan
At the just concluded June 2023 Paris Finance Summit, hosted by the French President, Emmanuel Macron, with the theme:
“A New Global Financing Pact”, drawing participants and gathering of over 40 World leaders, including a dozen from Africa, with China’s Prime Minister and Brazil’s President in attendance, and arrays of multilateral institutions such as the International Monetary Fund ( IMF), World Bank Group (WBG), World Trade Organization (WTO), European Union Development Bank (EUDB), African Development Bank (ADB), Islamic Development Bank (IDB), Asian Development Bank (ADB) and many others alongside top global private corporations and business leader’s from around the world.
In his opening welcome address, the French President, Emmanuel Macron said it was “time to act or trust would be lost”. This statement reechoed, the evidence that most poor countries are already looking elsewhere for friends that could be trusted, just as the BRICS Olive’s branch spreads across the globe.
While the Summit aims to give impetus to a new global finance agenda, in addition, the Summit target is to create a roadmap for the next 18-24 months, ranging from debt relief to climate finance. Instructively, the French President’s speech did set the tone, that letter formed the bridge between many of the topics on the agenda. With a call-up for suggestions from a group of developing countries.
However, pertinent issues have always been raised since this yearly initiative Summit started a few years back. On top of each meeting’s discussion are debt, climate financing, ease of financing, boosting capital lending, and others. And this year’s meeting was very much alive to previous meetings’ promises and mouth-watering announcements. Interestingly, promises aiming to “boost crisis financing for low-income states and ease their debt burdens were top; followed by reform for post-war financial systems and free up funds to tackle climate change; seeking commitment by getting top-level consensus on how to promote a number of initiatives”.
Sadly, there was a charge against international bodies like G20, COP, IMF-World Bank, and United Nations struggling to make an impact through their various development initiatives. It was not surprising leaders at the Summit admitted that some bodies are outdated to tackle current global economic challenges, chiefly IMF and World Bank were called out. For instance, U.S. Treasury Secretary, Janet Yellen and French Finance Minister Bruno Le Maire were of the view that the “World Bank and other multilateral financial bodies needed a new vision”. They however backed their views by citing the ongoing war in Ukraine, lending, climate crisis, tasking and widening disparity and declining global economy progress, and ineffective leadership.
Consequently, all these centred on the Summit rallying discussion thrust. Hence, a look at global economics, macroeconomics, and the burden of inequality.
As suggested, the must-haves of these multilateral institutions are failing. Making us ask what is in Paris Finance Summit. What solution formula is it providing for global economic problems? What about underdeveloped and emerging but struggling nations? How has the Paris Summit helped them to survive tough economic times?
And we are not in this alone, the Prime Minister of Barbados Mia Mottley, leading a group of developing countries under the banner “Bridgetown Initiative”, called for a “push for multilateral development banks like the World Bank to put more capital at risk to boost lending”. As if that was not enough, Antonio Guterres, the United Nations Secretary-General was very critical while calling the global financial system outdated, dysfunctional, and unjust.
He said, “It is clear that the international financial architecture has failed in its mission to provide a global safety net for developing countries”.
On his part, the Ethiopian Prime Minister, Abiy Ahmed was of the view of demanding a boost to below-market financing and more grants. He added that “a robust and predictable financial safety net. A situation that African countries are facing as an unprecedented funding squeeze which has aggravated its vulnerabilities”.
The global community cannot forget in a hurry how the coronavirus pandemic pushed many poor countries into debt distress as they were expected to continue servicing their obligations despite the massive shock to their economy and finances. Equally, is the challenge of revenue crisis that is worsened by corruption and inefficient leadership. Although Africa’s debt woes are coupled with the dual challenge faced by some of the world’s poorest countries of tackling the impacts of climate change while adapting to the green transitions, this however, falls short of Wealthy nations’ mouth-watering promises on climate finance that they announced as part of a past pledge to mobilise $100 billion a year, a key stumbling block at global climate talks.
At the Summit, the World Bank President, Ajay Banga, announced the global lender’s latest policy “toolkit”, that stand to “offering a pause in debt repayments, giving countries the flexibility to redirect funds for emergency response, providing new types of insurance to help development projects and helping governments build advance-emergency systems”. Accordingly, the World Bank in the word of her president is a measure “designed to give developing nations some breathing space”.
Curiously what this would eventually become, especially, is that as the burden of debt sadly reverses the gains of these poor countries’ development tracks, subsequently, they would be expectations on discussions around multilateral lenders offering ‘debt write-downs or what is referred to as ‘haircuts’. And in clear terms, the Chinese government being the world’s largest bilateral creditor, in recent times has been pushing for lenders like the World Bank or the IMF to absorb some of the losses which the institutions and rich countries oppose. Meaning that the debt of poor countries can be let go because more debts are incurred in the name of servicing old debts.
The Summit also wants more engagement from the private sector participation in global financing spray to poor countries.
Nevertheless, this year’s Summit ushered in other promises from a coalition of countries that said it would provide 2.5 billion euros ($2.7 billion) to Senegal to help it achieve its target of 40% of installed capacity from renewable energies by 2030. Macky Sall, President of Senegal disclosed the agreement his country signed with Just Energy Transition Partnership (JETP). Although JETP has had similar deals with Indonesia, Vietnam, and South Africa in 2021.
Also, it was cheering that the likes of Zambia’s debt restructuring proposal were ready after more than two years of negotiations has her creditors ready to sign a deal.
Having said that, President Bola Tinubu participated in the Summit and held high-profile sideline meetings. Where the President pushed out his “advocacy for widening the fiscal space, economic justice for Africa as the world accelerates the pace of energy transition, and the urgency of addressing the pressing issues of poverty and climate change”. We believe this was well received by fellow heads of state and governments, global business leaders, and chief executives of leading multilateral and development finance institutions from around the world. We hope some of his meetings’ resolutions would be made public going forward.
The Summit may have ended, while the questions we asked earlier in this piece are not new. They have been asked before and what was lacking is concrete answers. Although, this itself is not enough compared to expectations that Summits of this nature are never lacking. But more difficult is the strategy and tactics capable of ensuring the linking of finance to the actual challenge of today’s situations.
What is to be done?
What we are talking about is centred on the road we take to finance reforms, multilateral or bilateral. Except development and finance becomes more effective in the way they are used, it will lead only to incorporating more poverty into the global system.
Adefolarin A. Olamilekan is a political economist. He can be reached via adefolarin77@gmail.com
Tel: 08107407870
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