UNITED NATIONS – United Nations Secretary-General António Guterres and Barbados Prime Minister, Mia Mottley have joined forces under the Bridgetown Initiative to address the immediate needs of countries facing debt distress and liquidity challenges.
They are proposing a large-scale SDG Stimulus package to invest in the Sustainable Development Goals (SDGs), while stressing the need for reform of the international financial architecture.
According to the 2023 Financing for Sustainable Development Report, 52 low- and middle-income developing economies are either in debt distress or at high risk of debt distress, accounting for more than 40% of the world’s poorest people.
“The international financial architecture is short-sighted, crisis-prone, and bears no relation to the economic reality of today,” said Guterres.
Prime Minister Mottley told the delegates that included experts from academia, civil society and national governments that the world is running out of time to fix its international financial system that is broken, outdated, infested with short termism and downright unfair
“Too many countries are being prevented from fighting the climate crisis and from creating decent opportunities for billions of people – their citizens. If countries cannot access the finance they need at rates they can afford, the world will lose the battle, not simply the countries.
“What is good for the North is good for the South, East and West! This is the best development strategy for the people of the developing world. This is the best development strategy for the planet,” said Mottley.
The deliberations on Thursday highlighted an international financial system that is not fit for purpose, with developing countries facing debt overhangs, higher borrowing costs and limited access to liquidity in times of crisis.
In turn, developing economies cannot fund progress on the SDGs, including climate adaptation, if they are borrowing at up to 14 per cent while also paying more than 20 per cent of revenue for debt servicing.
The meeting noted that as a result, the world now faces two options: either proceed with the status quo, which will lead to a decoupling of the international financial system from developing economies, or adapt the current system to the present world.
Against this backdrop, discussions centered on six key action areas designed to leverage concrete steps to support all developing countries.
They provide immediate liquidity support including re-channeling at least US$100 billion of unused Special Drawing Rights through the IMF and multilateral development banks as well as restore debt sustainability today and in the long-term and support countries in restructuring their debt with long-term low interest rates.
The meeting also felt there was need for dramatically increasing official sector development lending to reach $500 billion annual stimulus for investment in the SDGs (SDG Stimulus) as well as mobilize more than $1.5 trillion per year of private sector investment in the green transformation and transform the governance of international financial institutions to make them more representative, equitable and inclusive.
They called for the creation of an international trade system that supports global green and just transformations.
The participants emphasized the importance of a continuing dialogue about the Bridgetown Initiative and other related efforts in order to strengthen the Initiative and advance shared goals.
The meeting also advanced preparations for key finance events in 2023, including in June, the Paris Summit on a “New Global Finance Pact”; September, the Group of 20 Leaders’ Summit, the SDG Summit, and High-level Dialogue on Financing for Development during the UN General Assembly high-level week; in October, the Annual Meetings of the International Monetary Fund-World Bank Group; and the UN Climate Change Conference (COP28) in December.
They said that these events will ultimately feed into the Summit of the Future and the Biennial Summit on the global economy in 2024 and inform the Fourth Finance for Development Conference in 2025.
In July 2022, Prime Minister Mottley convened a high-level retreat in Bridgetown, which resulted in the Bridgetown Initiative, a set of strong asks to address immediate financial needs while also starting to address systemic issues requiring transformation of the financial system.
