2023 Global Financial Pact Explained

The 2023 Global Financial Pact and the Bridgetown Agenda - Why it’s Important

The 2023 Global Financial Pact and the Bridgetown Agenda – Why it’s Important. Image Unsplash.

The 2023 Global Financial Pact and the Bridgetown Agenda – Why it’s Important

In June 2023, Paris, France, once again became a gathering place for leaders from around the world. They gathered to discuss a global financial pact that would provide poorer nations with the necessary funds to combat the results of the climate crisis. 

Led by French President Emmanuel Macron, the event focussed on climate finance, green growth and private sector investments. With numerous world leaders in attendance, the summit was intended to rethink current development finance programs and explore new avenues of support for developing countries while fostering environmentally sustainable and socially equitable economic growth. 

A Call for Change:

Macron believes that the existing mechanisms for development finance, including overseas aid and climate finance, have failed to deliver the desired outcomes. A Global Financial Pact is not only needed, but it is also overdue. 

Rightly so, he argues that poverty eradication, food stability, economic decarbonization, and biodiversity conservation are intertwined. To address these challenges in developing countries, Macron emphasizes that substantial investments through a Global Financial Pact are needed, as well as reform of institutions such as the World Bank and the International Monetary Fund (IMF). 

But there is pushback. Leaders of other countries are hesitant to sign anything that would limit their country’s economic growth or jeopardize strength or position in international trade. Helping those in need, with no profit motive, is a tough sell to financiers and others conditioned in a system that values financial profits above all other metrics.

See also: COP27 – 2022 Results and Outcomes.

The Bridgetown Agenda:

Playing a significant role in this summit is Mia Mottley, the prime minister of Barbados. Mottley proposed the Bridgetown agenda, which, as part of the Global Financial Pact, aims to significantly expand funding opportunities for developing nations, particularly those severely affected by the climate crisis. She strongly criticizes the World Bank, IMF, and similar institutions, considering them ill-suited to address the challenges of the 21st century, such as climate change, debt, and poverty. 

Supporters of the Bridgetown Agenda argue that it is a necessary step to address the climate crisis and its disproportionate impact on developing countries. They point to the fact that developing countries already bear the brunt of climate change, even though they have contributed the least to the problem. They argue that the Bridgetown Agenda would provide much-needed financial assistance to developing countries to help them adapt to climate change and transition to a clean energy economy.

Critics of the Bridgetown Agenda argue that it is too ambitious and unrealistic. They point to the fact that developed countries have been reluctant to provide the financial assistance that developing countries need to address climate change. They also argue that the Bridgetown Agenda does not address the underlying causes of climate change, such as overconsumption and unsustainable production patterns.

Barbados is already affected by climate change, and the impacts are expected to worsen. The island is particularly vulnerable to sea level rise, which will inundate coastal areas and displace residents. Climate change has also led to more frequent and intense hurricanes, which repeatedly damage infrastructure and homes. 

Barbados, like so many island nations affected by climate change, must, again and again, borrow funds to repair the damage caused by these events, never fully recovering economically before the next event occurs, each one adding more to their debt burden.

Mottley calls for a fundamental overhaul of the existing systems, seeking comprehensive changes that include substantial investments of $1 trillion in poorer countries, $3 trillion or more for global climate finance, debt relief for highly indebted nations, and long-term financial support for building resilience to climate impacts over the next three decades. 

While it seems like a lot, it’s not such a crazy amount when you look at how much taxpayers are already giving oil companies in subsidies. According to the International Monetary Fund, globally, fossil fuel subsidies were $5.9 trillion or 6.8 percent of GDP in 2020 and are expected to increase to 7.4 percent of GDP in 2025. 

These numbers are especially egregious when considering the record-breaking profits oil companies have enjoyed in recent years. It seems logical to redirect some, if not all, of these funds to groups that actually need them. Conversely, it seems criminal to continue this exploitation, knowing what we do about climate science.

A New Direction for the World Bank?

Calls for reforming the World Bank have been heard from various powerful countries, including the United States, the European Union, and the United Kingdom. Ajay Banga, the new World Bank President, made his first major international appearance at this summit. Banga, a former banker and ex-CEO of Mastercard tried to foster collaborations with private investors while reshaping the bank’s approach to climate-related crises. 

Banga’s reception of Mottley’s proposed complete overhaul was not warm; however, many anticipate a more open stance towards partnerships and climate-focused initiatives. The days of the World Bank independently calling the shots are coming to an end, and organizations like theirs must change how they do business or get left behind.

The rules of international finance currently disadvantage the world’s poor while creating wealth for lending institutions. In a sense, they funnel wealth away from poorer nations in a modern form of economic colonialism. Ironically, the very institutions profiting from current systems are based far away from the humans being affected. These powerful organizations sit in highly developed countries that are largely responsible for the crisis being experienced.

While the Global Financial Pact was not adopted, the 2023 summit was a solid starting point.  It is obvious that current systems of aid and development finance do not work to solve the multiple crises of poverty, climate change, food security, and biodiversity loss. It is obvious this system is broken and must be changed. 

Conclusion:

Ratifying a Global Financial Pact is a significant undertaking, even when all parties are fully supportive. This summit was the first of many on this topic and ensured all parties understood the stakes and requirements for an agreement. 

When the Global Financial Pact is adopted, it is likely to be implemented over a period of several years, with regular meetings to review progress and make adjustments as needed.

Thankfully the call for comprehensive reforms in international institutions is being heard. These talks are the beginning but pave the way for a brighter, more sustainable future.

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