New York: The UN Secretary-General Antonio Guterres and the Prime Minister of Barbados Mia Amor Mottley joined forces under the Bridgetown Initiative to address the immediate needs of countries facing debt distress and liquidity challenges, proposing a large-scale Sustainable Development Goal (SDG) stimulus package to invest in the 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 per cent 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.
Convened at the UN headquarters in New York by Guterres and Mottley, participants included experts from academia, civil society and national governments. They considered concrete actions to advance immediate game-changing steps and longer-term reform.
“The world is running out of time to fix its international financial system that is broken, outdated, infested with short termism and downright unfair.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 Prime Minister Mottley.
Deliberations 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.
As a result, the world now faces two options: either we proceed with the status quo, which will lead to a decoupling of the international financial system from developing economies, or we can adapt the current system to the present world.
Against this backdrop, discussions centred around six key action areas designed to leverage concrete steps to support all developing countries: Provide immediate liquidity support, including re-channelling, at least $100 billion of unused Special Drawing Rights through the IMF and multilateral development banks; restore debt sustainability today and in the long-term and support countries in restructuring their debt with long-term low interest rates.
Dramatically increase official sector development lending to reach $500 billion annual stimulus for investment in the SDGs (SDG Stimulus); Mobilise more than $1.5 trillion per year of private sector investment in the green transformation; transform the governance of international financial institutions to make them more representative, equitable and inclusive; create an international trade system that supports global green and just transformations.
In July 2022, Prime Minister Mottley convened a high-level retreat in Bridgetown, Barbados, 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.
Since then, progress has been made on multiple fronts, including agreement to establish a loss and damage fund during the UN Climate Change Conference (COP27) held in December in Egypt, for which modalities are to be agreed at COP28.
The recently concluded Financing for Development Forum 2023 also welcomed the Secretary-General’s call for the SDG Stimulus.
