Moderator:

• Niranjali Amerasinghe, Executive Director, ActionAid USA

Panelists:

• Jason Braganza, Executive Director, Afrodad
• Liane Schalatek, Associate Director, Heinrich Böll Foundation
• Bhumika Muchhala: Senior Advisor, Third World Network

Niranjali: This panel will include CSO participation. We did have an IMF participation lined up but we were told there was a last minute conflict so no IMF participation.

Since the pandemic there has been greatly public discourse on global economic architecture and renewed desire for reform. Governments come to the conclusion that multilateral institutions are not fit for purpose.

Many agendas have been put forward: Bridgetown Initiative, Marrakech agenda, the G20 Capital Adequacy Framework review, the World Bank’s Evolution Roadmap, the UN fourth Financing for Development and the outcomes of COP27. All of them touch on some form of reform at the Bretton Woods Institutions (BWIs).

Importance of the way they’re tackled, particularly for developing countries. They all need to reflect the needs of developing countries. The time for colonial powers that represent less than 30 per cent of the world’s countries dictating design of the global economic system has to come to an end.

It is critical that developing countries are heard in these questions. There’s a genuine space for these discussions.

Question to Jason: You work with African economic and justice movements and have engaged in conversations with African governments. How are reforms landing in the communities you work in?

Jason: I would like to start with where we reached this moment in time and the fact that we have an opportunity, at the African union level and ministers of finance, to make some fundamental changes and asks in regards to the reform of the global economic architecture.

Before the pandemic many African ministers of finance spoke about how global economic architecture is not fit for purpose, given how specifically inequalities present themselves in issues such as finance, access to vaccines, etc.

Mechanisms such as the DSSI or the Common Framework, have not been sufficient. Ministers have spoken about how inefficient debt relief mechanisms have been. Specially SDRs, in terms of how they were issued, have done very little to create stimulus packages in terms of social protection.

Today African ministers’ proposals about new debt relief system are very active in their agenda. A lot of the support that is being discussed should be additional to the mechanisms that are out there already.

One realisation is that market-based solutions are not made out to be for many decades. Trying to move everything towards private sector type of finance is not sustainable. Recently, there have been a few more echoes from the continent asking for the reduction of market-based solutions and make more space for governments to take a bigger role, especially in public services

There has been some progress, for instance in the UN framework.

We’re witnessing an important moment: In the context of these conversations, we would like to see stronger statements and messages in the voice of African ministers at the World Bank and Fund side.

Niranjali – Follow-up question to Jason: Could you contrast a bit some of the proposals – including Bridgetown and the Evolution Roadmap – with some of the longstanding proposals made by the tax and debt justice community?

Jason: As African CSOs and governments there may be very tricky political mind fields to navigate.

Bridgetown, at least in the initial interaction, has some progressive language, but there has not been very much uptake in the continent. There is work to be done to understand what Africa actually is in that regard.

We should not lose sight of the fact that some of the proposals are based on private finance. This is very problematic in a context of the current climate, where fiscal space in the continent is very limited. People in the continent may not be too excited about it.

Niranjali – Question to Liane: Could you give an overview of the key principles around climate finance and how the current proposals regarding to climate finance stack up to those principles?

Liane: We need to be aware that climate finance is both negotiated and discussed in the context of climate but also in other contexts.

Climate finance is not development assistance and it is not aid.

This is important when we look.

When talking about the validity of the proposals being discussed here proposal it is important to frame the discussion in the overall understanding of core principles of the climate regime, which I’m sure not too many of the development finance folks are aware of:

• It is a matter of climate justice to mobilise and provide climate finance, as many in the CSO would argue, as a climate debt by developed countries to developing countries to provide support for climate action. It is written under the UN Framework Convention on Climate Change (UN FCCC) and very much clear in Paris agreement, in line with the core principles of historical responsibility and respected capability. And to provide finance in a way that is new and additional.
• Development finance from other development priorities need to be predictable and adequate. Adequate talks about providing means to scale in a form that for example do not aggravate existing inequalities or create additional debt burdens.
• I would like to go onto the principles that should guide access tool and governance of climate finance as well as its delivery. Namely, an equitable representation in climate finance decision making. Transparently provided climate finance, that is accountability and follow human rights-based approach, and supports gender equality with country ownership at the core. This ownership should be not only at the country government level but overcoming existing barriers that enhance particularly access for directly affected communities and people, particularly those already marginalised and disproportionally impacted (indigenous people, women children people with disabilities…). We need to prioritise local ownership and security. Namely providing finance support in an adequate form at the most local level possible.

Focusing on Bridgetown: At least in terms of the original version, from the point of view of climate justice it falls short. I understand there’s a new version coming up that may be even more problematic.  It is very problematic in 2 main areas:

1. Adequacy of climate finance provision and quality of climate finance: Increased reliance of the use of debt even for adaptation. Bridgetown focuses a lot on the increasing of climate finance provision, including by increasing seats for developing Small Island States that have been excluded in a lot of access to concessional finance because it is not based in climate vulnerability but on income levels. But that means that the already poor quality of climate finance provided under the MDBs is not only not corrected but will be expanded.
   • This is very fundamental because climate justice and debt justice go hand in hand. They reinforce each other, there is no one without the other.
   • To illustrate the vicious circle between climate and debt, according to an AAUSA report, 93 per cent of the 63 countries considered most vulnerable to the climate crisis are either in debt distress or significantly at risk of debt distress. Paying already more than 12 per cent of their income in debt service, which is paid in foreign currencies, make countries commodity dependent and is usually taken, among other, from public services. This is incompatible with not only a tax justice transition but a feminist just transition.
2. Governance of climate finance decision making: It does not propose a reform in governance at the MDBs or IMF, which is undemocratic and stuck in a colonial mindset. For instance, the gentleman’s agreement: no gender, no equity, no democratic ownership, and neocolonial.

The climate disasters only in 2022 almost costed as much as the total official amount of climate finance provided. From a climate justice point of view, even while Bridgetown proposes for example reconstruction funds to deal with Loss and Damage, the suggestion is to include natural disaster clauses in all debt instruments, but only for two years. There is no comprehensive debt cancellation, including by shifting the power on debt workout from the IMF to a UN-based sovereign debt restructure mechanism. World Bank and MDBs need to play a bigger role in debt relief. The Bank has not participated in debt relief, using its creditor preferred status and under the argument to retain its AAA creditor status.

The role of the BWIs in providing policy advice and conditions has become problematic, and this is not reduced in Bridgetown, at least in the initial version. Even in climate, with the increased role the IMF has taken in climate under the RST. It does not address the role of the IMF as a lender of last resort and its work in reinforcing debt repayments (undermining social protection, and the dismantling of public services provision)

Example: Pakistan and CSOs have put a letter forward to the IMF executive board released this past week, detailing the detrimental impact of the 9^th ongoing review of Pakistan’s EFF program. And the importance of this on the country effort to move forward with climate adaptation and energy transition due to the conditionalities imposed by the IMF in its lending program. Choose clear failure on integrating Pakistan efforts in climate adaptation in the country’s DSA.

Regarding the Loss and Damage fund: After COP27 CSOs have been calling for a new Loss and Damage fund. Given the failure of IFIs to provide climate finance, CSOs have been calling for a new Loss and damage Fund that is guided by the core climate finance principles, where developed countries provide their own fair shares and with a governance structure that is equitable and puts developing countries and communities at the table. That fund should be central to the emerging global Loss and Damage agenda, and that is not compatible or equitable to place Loss and Damage funding as a “climate donor fund” how it has been at the Bank or related to the IMF.

Niranjali – Question to Bhumika: could you take a few steps back and give us a big picture perspective of what’s happening and why this is a pivotal moment in the development and global finance discourse?

Bhumika: New step into the systemic coherence of financialisaton in development finance and global economic governance. This builds a coherence into the IFI and institutional lenders, meaning commercial banks and asset management companies, reshaping  and restructuring domestic policy regimes in the Global South (GS).

I would like to spotlight the risks to the GS to equity, sovereignty, policy space to development…

The World Bank’s evolution roadmap is a continuation of the 2008 Maximising Finance for Development paradigm, now extrapolated to incorporate climate change. The roadmap is about “mobilising private capital through the de-risking state providing co-financing loan guaranties, political risk insurance and public equity co-investments that transfers risk investors face to public actors” – it is about enabling private capital and domestic resources mobilisation (but different from what CSOs talk about, like progressive taxation or redistribution of wealth)

This is the Doing Business indicators through the back door in a much fleshed out manner, through the de-risking state, enabling the environment for private investment.

What is an enabling the environment for private investment? This also connects to the Bridgetown agenda, which is centered in an investment trust bond for private investments for climate change and sustainable environment projects.

We are de facto talking about the private investment of global private goods. What does this mean for the estate? Is the state scoring global finance into investable assets and bankable projects with green and sustainable credibility? Is private investment of global public goods leading to a fundamental contradiction? Are there underlining motives for private financing?

There is a long history of privatisation across the GS, starting with the 1980s Structural Adjustment Programs and various loan programs. The question is how do we counter this contradiction? How do we counter how financialisaton entails a focus on risks on private investors  at the expense of obscuring the multiple risks to social equity, environment and policy space for development. What about the risk to social equity, resilience of public systems and state account to its citizens?

I want to highlight 6 ways in which de-risking state for private sector reverses and erodes the role of state:

1. Financialisation of climate finance – reduces simplifies structural economic development models in a desperate quest for monetary financing.
2. Marginalisation of policy space to implement regulations and requirements of private investments for domestic development.
3. Securitising the transition – this causes an extremely important risk for developing countries. Enabling environment for finance deepen developing countries exposure to international capital markets and its inherent volatility, generating enormous risks for the domestic private sector.
4. Private capital facilitation essentially hardwires austerity into domestic policy frameworks through the centrality of sovereign debt to market-based finance. Internalisation of fiscal austerity that reinforces market-based finance.
5. In the absence of debt workout mechanisms – mobilising private finance introduces new creditors and new debt instruments that further compounds debt restructuring and resolution, and undermine a just transition. When countries prioritise the needs of private investors and financiers rather than elected officials and citizenship we see a rather fundamental encroachment of the democratic estate.

We need to look in this agenda to this coherence we see towards constructing an enabled environment for the private sector. What among longstanding campaigns, advocacy and movements around debt justice, is that we really need to focus on to achieve a transformational movement.

The question here is: Who and what is really at risk and what really needs to be de-risked?

Question and answers:

Rep. Global Refugee-led network: Thanks to Liane for your comments on accountability and addressing gender. I attended COP27 and women were forgotten. People affected are not really included in all these debates. How much are we involving affected communities? We are isolated, no one is talking to us and nobody in the ground knows what’s happening. How much are we willing to do that and how we can do that?

Liane: Very glad you spoke up. In these venues there’s lot of technical discourse finance becoming the purpose, instead of what we need to achieve. The tools should be people, and they’re often forgotten within the equation. We’ve seen some considerations into gender but they are integrated into the polluters stream metaphor, but not to rethink equities and injustices. This happens in a lot of financing mainstreams.

What can we do? This is why civil society is not that excited but at least hopeful that for example a new Loss and Damage, provides an opportunity that acknowledge that there are affected communities and people that are suffering from loss and damages and take the experience of what has not worked in finance provision and really think what really needs to be done. For instance, equitable representation for decision making in provision finance, is the core start for this. Particularly on the Loss and Damage fund there’s a committee set up to discuss, there’s a lot of push from those CSOs to open up the space for participation, for instance in technical expertise.

Kyle Ash (BIC): To Liane – thinking strategically about climate finance and scaling climate finance, and thinking about comments on Bridgetown and debt, and the fact that MDBS are considered the largest source of climate finance. Regarding additionality, do you consider that to be climate finance? How do you square the issue of co-benefits?

To Bhumika: I love you’re linking to the issue of trade and ISDS. Some of us have been pushing for the Bank to increase the quality of climate finance. Is there anything promising in the evolution roadmap, like including inclusivity and resilience in sustainable development? Anything promising in getting away from the neoliberal issue of this, which is I think is the main philosophical obstacle that you are getting at?

Liane: At the Bank there’re huge issues around accountability and transparency of what really is climate finance. However, the problem there is that the Bank claims the MDBs have a methodology for mitigation and adaptation finance to score what they attribute to the climate finance goal, but they do not release activity-level datasets. There are reports, for instance Oxfam’s report that estimates Bank’s data on climate finance may be as much off as 40 per cent.

David Williams (Luxembourg Rosenberg Foundation): To Liane – regarding adequacy in quality and governance issues around Bridgetown. Where do you think the energy of the movements are to overcome this? Which are the pressure points we need to activate? Is Bridgetown the right space to look into for new policies and overcome barriers?

Liane: Bridgetown is something that tries to work within the existing set of institutions without really assessing the larger issues of them not being fit for purpose. They’re trying to squeeze in the climate change but without addressing some of the fundamental core idiosyncrasies of the economic development paradigm. There’re several inconsistencies. Regarding pressure points, CSOs should point out the gentleman’s agreement should not stand; when talking about new allocation of SDRs we should talk about the new allocation of voting rights and participation. A civic space and CSOs space and participation that are meaningful. The fact of an IMF representative cancelling their participation to today’s panel for example shows that lot of this engagement is just window dressing and not substantial engagement.

Ninjrala: Before I go to Bhumika I would like to highlight Jason was covering for Mr Okanda, who could not make it because of a Visa issue, just noting the issues with CSOs participation.

The pernicious nature of the advice that is given by the BWIs in locking developing countries into fossil fuel dependency, and making them extractive economics is very real.  BWP and Action Aid paper found that the IMF (this was before they took the point about transition risks) in more than 50 per cent of countries, was advising governments to build fossil fuels infrastructure, after the Paris agreement. At least in 30 per cent it was advising privatisation of the energy sector. This refers to what Bhumika was talking about in terms of state-investors agreements. Bringing the private sector to lock in these agreements, when countries want to move away from these contracts, they face billion of dollars in ISDS.  This underscores why they are no fit for purpose at this point.

Bhumika: There’s an imperative need to revive a coherent advocacy framing on regulating investors. Big companies such as BlackRock talking about billions of investment in green transition is just greenwashing. Climate financing requires vast scale (climate reparations, colonial legacy of climate debt, polluters need to pay). It is not humanitarian assistance, it is reparations.

Financing to scale is required but we need to remember the unwillingness and intransigency of rich countries (US veto vote and colonial governance of BWIs and G20), not willing to use public financing resources. These resources were there to launch domestic stimulus packages during Covid.  Silicon Valley bank and Credit Swiss were bailed out in a blink of an eye. These resources are not there for black and brown humanity.

We really need to get at the underlying logic of what matters and who matters and how that is really linked to the dictating of policies.

Yesterday I attended a Bretton Woods Committee discussion, called “Enabling private engagement in debt restructuring”: One of the themes that was very clearly coming from them was that when it comes to the private financing of climate finance, what the private sector is really keen on is ensuring that they have a say in shaping the regulations, the laws and the environment. They need to make sure that an enabling environment is created for their money to come in. They clearly said that the money is there, but that they need to ensure their clients that they can risk proof it and climate proof it.

It is not about saying no to private finance, it is about being able to have the sovereignty, the integrity and the autonomy and respect to regulate the private money, that it benefits climate finance.

This is all about bringing back a nuanced and very cohesive argument towards regulation.

I was asked to talk about the real systemic issues: taxation (ie. longlasting global financial transactions tax), long calls for a UN based taxation mechanism; capital controls and regulating capital flows; monetary tightening (90 developing countries have seen their currency depreciated).

These systemic areas, where on the structural level, the South financing the North through the systemic design of the international financial architecture, monetary policy, global reserves, tax evasion and avoidance are all hidden ways where we do not see all these various mechanisms where resources are extracted.

This year is the 50^th anniversary of the NIEO, which was a very coherent platform, calling for a self-reliance and autonomy of domestic production centres.

Grégoire Niaudet (CCFD-Terre Solidaire): Central Banks are independent of political actors, but they’re dependent of financial actors they’re supposed to supervise. You have former bankers at the heads of many of these central banks. They don’t think about public goods or citizenship. We are talking about regulating the financial sector, but these are not regulated. They can raise huge amounts of debt. We want now to bring them back by de-risking as we need some capital adequacy increasing and to avoid all these risks and increase activities.

Penny: I would like to raise the issue of guarantees, which we have seen raise as financial instruments, for instance in African financial transition initiatives. These guarantees are brought by MIGA and the Bank itself All have the hook back to governments. I’m really concerned we’re moving into a green and just transition frameworks principles that are going to be hard to move away from. De-risking instruments as part of climate finance. We need to look in a much more holistic fashion. The comment about currency exchange, it is fundamental to the change we need to steam moving forward. We cannot move forward without currency exposure. There’s a fundamental impact of currency on the impact of debt in developing countries. The cost of finance is up to 7 times more than in developed countries, and this is because of currency exchange. We really need to focus on this and join forces. I would like to hear your comments on guarantees.

David Hillman (Stamp out Poverty): FfD in the context of Bridgetown and Macron Summit. To reflect on how important it is for us to acknowledge Loss and Damage fund we secured at COP27. How can Bridgetown help us with Loss and Damage. In Paris there will be space for ideas like financial transaction tax to come back up. Bridgetown is not a panacea, but currently is used for certain areas that we want to advance that’s how we can be smart. Polluters should pay, it is time. Why are we not using the resources to finance the climate transition. We can look at Bridgetown and try to find ways to use bits of it for what we want to see.

Emma Burgisser (Christian Aid): What we are re-learning in this Bridgetown is the importance of setting a bar, which in some ways is what Bridgetown is doing. Bridgetown is not a decision-making process. More broadly, it’s easy to get cynical when we talk about global architecture reform and get said over and over that this not going to happen. But in this moment, we suddenly did massive progress, such as the tax body at the UN. Change does not happen until it suddenly does, it’s important to stick to our guns now more than ever.

Roos Saalbrik (ActionAid): I wanted to add on the importance of tax in this conversation. We have seen enourmous growth in big companies, using the excuse of inflation to justify more and more growth. The role that tax can play in redistribution and also regulation are key.

Susana (Oxfam): The fact why Bridgetown is falling short is that we are not talking about where the money is. We’re not talking about how we can get the money. There is no political will to find out. Neither initiative have talked about any of that. Unless we put structural changes on tax restructuring and justice on top of these agendas they will keep falling short.

Jon Sward (BWP): One of the issues with the roadmap is the incredibly technical discussion with balance sheet optimization. There is no real appetite within this process to revaluate whether the billions to trillions agenda did not work. Going beyond privatisation, it tries to securitise MDBs investments and sell those securities to institutional investors. Focusing on private sector has taken most of the air in the discussion. Regarding mobilising public finance, that is where the emphasis of pure advocacy should be. How green transition could be a revenue generator for estates. There’s no appetite to take a deeper look into the development paradigm.

Representative from CDO: The estate has no capacity to engage on all these issues part of the conversation. How can CSOs help estates at that level of capacity to tax regulates. It is not about the fragile at the global level but also the integrity at the level these organisations or companies work. But it is about how to regulate these industries at the local level.

Grégoire Niaudet (CCFD-Terre Solidaire): About taxation. I don’t think you find any terms like, taxation, biding, sanctions… in any of these initiatives’ documents. We need these key words in the narrative.

Liane: On energy transition. Penny: We see a few indicators and appetite for guarantees. The question is what the guarantees are used for. How private sector take the risk. JETPs: It is another approach to wrap in massive private sector leverage. It is climate finance provision that comes from developed country, but not going to the Green Climate Fund, not going to the UNFCCC. In bilateral provision, with no focus on the just part of the energy transition, not only because they are loans but also because of the promise of helping communities. They need to get out of the fossil fuels with a just transition, with an alternative livelihood socially supported, which is lacking.

Bhumika: Private financing, public financing and the systemic drain of financial resources from South to North. In public financing there is an obscure marginalisation of the imperative of public financing. We need to keep remembering what’s been hidden here (taxation, for example). When it comes to fossil fuels levies, we have to be careful about, if we are, are we then marginalising the call for decarbonisation of the business model if we allow the pollutes to keep paying because they have enormous resources?