The Bridgetown Initiative's time has come. Photo shows French President Emmanuel Macron greets Barbados Prime Minister Mia Mottley at the Elysee Palace ahead of a dinner held during the New Global Financial Pact Summit22 June: French President Emmanuel Macron greets Barbados Prime Minister Mia Mottley at the Elysee Palace ahead of a dinner held during the New Global Financial Pact Summit. [Photo by Tomas Stevens/ABACAPRESS.COM Credit: Abaca Press/Alamy Live News]

The Summit for a New Global Financing Pact took place last week but most people would be forgiven for not knowing the crucial conference had happened at all. Organised by France, and hosted at the Palais Brongniart in Paris, it drew about 40 world leaders. But only Germany’s Olaf Scholz joined the French president, Emmanuel Macron, while the other G7 leaders – of the US, UK, Japan, Italy, Canada and Australia – were missing.

The aim of the summit was to align various agendas, such as climate, development and debt, and try to unlock the funds to enable low-income countries to make the necessary transition to a carbon-free future. The funds required are substantial: according to the World Bank, the world will need to invest about $93tn in infrastructure by 2030 to adapt infrastructure and cut emissions.

Last year, Avinash Persaud, a financier and close adviser to Mia Mottley, the prime minister of Barbados, warned that ‘a silent wave of financial stress is running through world markets and will soon crash onshore … In the most indebted region in the world – the Caribbean – over 50% of the increases in debt prior to Covid stemmed from mopping up after natural disasters.’ After the extraordinary spending on the Covid-19 pandemic, the disruption to world trade from Russia’s war on Ukraine, and the astronomical costs of climate-led natural disasters such as Pakistan’s devastating floods, it is not surprising that the UN concluded last year that human development had gone into reverse in 90% of countries.

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‘Green and just’

Amid these disturbing findings, it seemed like the Bridgetown Initiative might have its moment in the sun. This plan for the reform of international development finance, which Mottley presented to the UN general assembly last year, calls for rechannelling at least $100bn of International Monetary Fund (IMF) special drawing rights; restructuring debt with low interest rates; increasing official lending to $500bn for investment in the UN’s sustainable development goals; pushing the private sector to invest $1.5tn a year in the shift to a green economy; making international financial institutions more inclusive and equitable; and creating an international trade system that supports a ‘green and just’ transformation.

But instead of a growing consensus of the need for change, there was evasiveness by the three richest Commonwealth member states. Rishi Sunak, the British PM, was urged to attend by a coalition of civil society organisations, which told him: ‘Your presence at this summit would demonstrate serious intent to deliver upon your government’s rhetoric and commitments. The UK must signal that it is still very much a reliable and trusted international partner.’

‘A meaningful and just transition’

His Canadian counterpart, Justin Trudeau, was also urged to take part by Climate Action Network Canada, which said: ‘Canada needs to be a loud voice for substantial change.’ Neither of them were there, nor was any senior figure from Australia. Britain’s envoy was Andrew Mitchell, whose portfolio of development and Africa does not even have the rank of a cabinet minister, and who failed to persuade his own government to reverse its cuts in aid.

Speaking in Paris about the Just Energy Transition Partnership, an international agreement in 2021 to help South Africa abandon its reliance on coal and move to cleaner energy, the South African president, Cyril Ramaphosa, was scathing about the paltry amounts committed by the US, UK and EU, the fact that they come as loans, and the west’s reluctance to transfer technology and skills. While South Africa’s high levels of corruption, theft and incompetence undoubtedly carry much of the blame for the country’s routine 10-hour blackouts, it is certainly true that wealthy countries expect those without resources to somehow fund their own way out of poverty.

‘The current commitment of $8.5bn from our partners is less than a tenth of what will be needed in the next five years for a meaningful and just transition,’ Ramaphosa told the summit. ‘Grants need to form a substantial portion of financial support, and any debt-related terms should be more attractive than what the country could secure in capital markets.’

As Mottley said at the 2021 Glasgow climate summit, the sword to ‘cut the Gordian knot’ already exists: the west’s central banks had spent $25tn on quantitative easing in the previous 13 years, with $9tn of that in the previous 18 months during the pandemic. ‘Had we used that to purchase bonds to finance the energy transition, or the transition of how we eat,’ she told delegates, ‘we’d be reaching that 1.5C limit.’

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‘International financial architecture has failed’

But, though daunting, there is a sound business case to be made for the huge investments that are needed. The money can be recouped: transitioning to a green economy, the World Bank found, can unlock new economic opportunities and jobs. An investment of $1 in more resilient infrastructure yields $4 in benefits, on average. And for every one dollar invested in climate-resilient infrastructure, six dollars are saved, according to the UN.

However, far from funds being directed to poor countries, they actually have to pay far more to access finance. What has been described as the legacy of colonialism is seen in how debt is structured under the 1944 Bretton Woods agreement, which led to the creation of the IMF and the World Bank: wealthier countries borrow at interest rates of 1-4%, while poor countries must pay about 14%. As the UN secretary-general, António Guterres, said in Paris last week: ‘It is clear that the international financial architecture has failed in its mission to provide a global safety net for developing countries.’

Not only is the west failing to channel investment to the poorer countries, it is also failing to invest in its own economies. The European Union’s own auditors warned that it was not on course to meet its 2030 climate change targets because of uncertainty over whether sufficient funds are being invested in the transition to a low-carbon economy. And a scathing report from the British government’s own climate advisers concluded that the UK was failing to meet any of its own targets. Alok Sharma, the former Tory minister who was president of Cop26 in Glasgow, said: ‘In the global race to attract green investment, jobs and growth the UK risks falling behind without a material response to initiatives from other countries like the US’s Inflation Reduction Act.’

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‘Multilateral institutions with shrinking clout’

There were a few modest successes at the Paris summit. Moves to tax shipping emissions made some progress. More encouragingly, Zambia agreed a deal to restructure $6.3bn in debt owed to other governments, especially China, after defaulting on its sovereign debt in 2020. The agreement in Paris reschedules Zambia’s debt over more than 20 years with only interest payments due for three years.

Nevertheless, it is hard to disagree with the Economist’s rueful conclusion that the summit had failed to deliver. ‘Rich countries were unwilling to do much more than talk,’ it said. ‘Plenty of top officials showed up from Africa and Asia to demand cash; few of a similar standing showed up from the countries that are supposed to be paying.’

In a profile of Persaud last year, Foreign Policy was sympathetic about the co-architect of the Bridgetown Initiative, calling him: ‘An embattled internationalist attempting to work through multilateral institutions with shrinking clout, promoting global public goods in a world increasingly fragmenting into rival blocs.’ It is a description that aptly sums up the vast scale of the challenge facing him and Mottley.

‘The actual commitments were small [and] the promises made at the conference are a drop in the ocean,’ the Economist said. It quoted one attendee as saying: ‘Our expectations were low […] they have been met.’

Oren Gruenbaum is a member of the Round Table editorial board.