At the invitation of France and its President Emmanuel Macron, heads of state from northern and southern countries, financiers, climate experts, civil society organizations… meet from Thursday, and for two days, at the Palais Brongniart, in Paris, to find voices and means to rebuild the world financial system, created almost 80 years ago within the framework of the Bretton Woods agreements, and today seriously questioned. Because more and more fragmented and less and less adapted to the needs of the countries of the South, which need to respond to the development challenges facing them. Two themes, on the one hand the fight against poverty and on the other hand climate change, will serve as a common thread for the discussions, which promise to be tough in a context of geopolitical fragmentation.
A stakeholder in the debates, the NGO One has been working for many months on often technical subjects, such as special drawing rights, climate funds, new innovative financing – essential to redirect attention to the most vulnerable countries. France Director of One, Najat Vallaud-Belkacem returns for Le Point Afrique to the challenges of this unprecedented meeting and warns of the need for northern countries to keep their commitments to southern states. Interview.
Le Point Afrique: what do you expect, concretely, from the summit “for a new global financial pact?” which opens this Thursday in Paris, at the initiative of President Macron?
Najat Vallaud-Belkacem: Since President Macron announced this summit in Sharm el-Sheikh last November, at the time of COP27, we have been following very closely, within One, with a few other large NGOs , preparations and content. We want to weigh in on any conclusions that may emerge and make this summit as useful as possible. To provide some context: this summit comes after several States have finally agreed on the idea that, in the face of climate change, a fund should be created to compensate vulnerable countries in the South, due to the losses and damages they have suffered given the industrial activities of the North, responsible for a large majority of greenhouse gas emissions. As we can see, in recent years, the South has suffered the full brunt of the most catastrophic consequences of climate change.
The fact remains that once the decision has been taken, concrete answers were awaited, in particular to know how to proceed, who was going to contribute, with what distribution key… Emmanuel Macron therefore had the idea of ??bringing together decision-makers at the highest level. politicians, heads of state, heads of institutions, civil society to continue the debates. A personality has been decisive in the reflection of the French Head of State, it is Mia Mottley, the Prime Minister of Barbados, very committed to climate issues and who has brought her country out of many difficulties. She is behind the Bridgetown initiative, which aims to change the rules of the Bretton Woods institutions to finance infrastructure adapted to climate change in vulnerable countries. It must be said that nearly 80 years after the creation of the Bretton Woods institutions, International Monetary Fund and World Bank, it is clear that the rules of operation of international financing are no longer adapted to the nature and convergence of the crises that face our world.
What should civil society contribute to these debates?
We wanted to contribute both to the agenda of the summit and once it was acted on the substance of the measures: for us, for example, it was essential that the issues sometimes perceived as rivals of climate change be addressed together on the one hand and development on the other. It should not be believed that the development issues are less important today when in recent years, with the Covid, inflation, repeated climate change, extreme poverty is at its highest level for 30 years. , hunger affects more and more millions of people and around fifty countries are once again gripped by the throat of the weight of their indebtedness.
What are your expectations in terms of funding announcements?
Concretely, we expect this summit to lead to truly transformative financing. The amounts needed to achieve this are estimated to be in the order of 2% of global GDP per year, or $2 trillion. These are amounts that may seem high, but you have to bear in mind, for example, that it is more than 10 times this amount that has been spent to deal with Covid on a global scale. The question is: do we prefer to make the right structural investments in good time, or wait until after disasters to devote a lot more money to bailing out? Watch what the damage caused by the El Niño weather phenomenon is and will cost: over $3 trillion
Africans, Asians, Latin Americans, Europeans, the framework is quite new, but can it guarantee major progress for the most vulnerable countries?
For us, it is a good thing that this summit is taking place. Because this is the first time that Heads of State from all over the world will be around the table, both from the North and the South, whereas generally, in the major international bodies G7, G20, Club de Paris …, it is the States of the North which take the decisions and those of the South which wait for the fulfillment of the commitments made (and are often obliged to note that not much is happening). So the idea that the States of the South can be associated with the discussion is something very important, because the answers to our global problems are to be found both in the North and in the South. Several heads of institutions will also be represented, starting with the World Bank and its president, Ajay Banga, who has just taken office, and will be one of the first to speak. We hope that he too will come with solutions in his pocket.
And then finally, what is important for us is that this summit succeeds, both on strong decisions presented in the final declaration, but also on steps that can be continued in other international moments that are coming, such as COP 28, the next G20, or the annual meetings of the World Bank and the IMF which will take place in October. In this sense, it can also be an exercise in accelerating global conversation, in particular to define together what we consider to be global public goods, and thus feed into more formal bodies.
What reforms can be undertaken in terms of international financial solidarity so that the countries of the South pursue their development while striving to respond to climate challenges. How not to oppose development and climatic requirements?
This is the pitfall that must be avoided. I was saying it: we don’t want to see these two issues compete or rival each other. Because tsunamis, floods, bush fires, the frequency of droughts in sub-Saharan Africa which has tripled since the 1970s, all these events have a direct impact on access to food, poverty, the resurgence epidemics and the development of a country. In fact, the two are unfortunately intertwined. This summit must therefore be able to understand the needs of both intermediate countries and the most vulnerable countries. However, with the current global financing architecture, we can clearly see that the most vulnerable countries do not have access to a certain number of essential financings.
The problem is money…
Hence the need to mobilize 2% of global GDP and we can mobilize them. It’s not about getting all that money from the coffers of the northern states. We are well aware that the budgets of our countries are not infinitely expandable. National territories also have their priorities. Official development assistance must obviously remain among the priorities, but that is not the main thing. Above all, we must be able to make better use of the global financial system, starting with the World Bank, the IMF, the multilateral development banks, which today have the means to do much more than what they are doing. To be more reactive, to take more risks, even if it means reviewing their ratio of loans to equity, to better target the countries that most need their support. It is estimated that with new rules, the World Bank could triple its funding for vulnerable and middle-income countries to $1.2 trillion. And then these intuitions could also do more and better to encourage private investment to be made in countries that need it (for example to ensure their energy transition) by providing guarantees that rebalance the low rating of these States, which sort of “de-risk” it. This is how you can free up money. At One, our slogan is “Free the funds”. Because that money, we know it exists. What better use could he find than to come and offer fiscal space to countries that are, right now, facing such severe crises?
Faced with these crises, the most vulnerable States no longer have budgetary space and often no longer have access to the financial markets because they are very heavily indebted. Would you say that these countries, especially in Africa, have once again fallen into the debt trap?
The numbers speak for themselves. We have some 120 million more people who have fallen into extreme poverty. There is an absolutely major food crisis right now in the Horn of Africa. Many countries find themselves again in the situation in which they were at the beginning of the 2000s. Yes, caught in the debt trap. There are those, like Ghana or Zambia, that are on the precipice of default. It is an extremely serious situation, when a country is in default of payment, that means that it can no longer borrow on the financial markets, so overall, it can no longer do anything. And then there are those who, without having come this far, are faced with this unbearable dilemma: pay the interest on the debt or pay its civil servants? Last April, Kenya ended up sacrificing its civil servants for the benefit of its debt…
If we want to go to the end of the reflection on the overhaul of institutions and international financing, the rating agencies must be included in the discussions. If we fail to do this, it will always feel like a vicious circle: we saw it in the spring of 2020, when the G20 adopted the common framework initiatives for restructuring the debts of the poorest countries, those who have decided to seek this framework to have their debts restructured have been sanctioned by the rating agencies.
China is heavily involved and will be around the table, what about other actors, especially private ones, what is your reflection on what should be their part in the face of these colossal challenges?
It seems obvious to me that we can no longer deal with these subjects without placing the private sector before its responsibilities. When you have debt relief measures that are adopted only by creditor states, that means that the country that is going to benefit from them will certainly no longer have to pay the interest on its debt to them, but it will still have to pay the interest on its debt to the private sector, which has not made the same effort. In other words, what the creditor states give up ends up in the pockets of the private creditor…
Many countries, especially in Africa, regret that promises are not always kept. The most recent example concerns the special drawing rights of the International Monetary Fund. Two years ago, at the summit on the financing of African economies in Paris, Emmanuel Macron had promised the countries of the South some 100 billion dollars per year, thanks to a reallocation of SDRs.
This is an absolutely major issue at the summit. We are at a time when globally, the countries of the South have ended up getting used to the commitments made in these meetings not being respected. You have just mentioned the reallocation of SDRs, announced two years ago for a target of 100 billion dollars which has still not been reached. We could also cite the commitment made in 2009 in Copenhagen to finance a climate fund of 100 billion for vulnerable countries and which is still not respected 13 years later. If you count the arrears, that’s a lot of delays and money. Finally, we are talking about the debt of the countries of the South, but the countries of the North also have a debt. One of our campaigns at One challenges the world: “Who owes whom? If we don’t fulfill our commitments, that means we owe others a debt. It will be a very important issue for this summit to begin by paying off these debts in order, in a certain way, to regain credibility and then be able to work more calmly, in a reciprocal and finally respectful partnership.
Your NGO is advocating for the implementation of a financial transaction tax, not everyone is convinced, what is your approach to this debate?
Concretely, in terms of “innovative financing” (meaning new pockets in which to find some of this money that we need), there are three options that have been discussed in recent months, a tax on shipping companies, a tax on fossil mining and a tax on financial transactions. At One, it is the latter that is our preference and that we have brought into the debates, because it is the one that could bring in the most, up to 400 billion dollars a year if it were applied at scale. of the G20 and including on intraday trading and high frequency trading….
France very quickly positioned itself…
Indeed, France is well advanced on the subject of international taxes. Since 2009, under the presidency of Nicolas Sarkozy, a so-called Tobin tax on financial transactions had been adopted quickly, in just a few months. Last year it brought in around 2 billion euros.
What we would like is for this type of tax to be extended to at least the level of the G20 countries, because clearly, stock market and financial transactions have benefited the most from globalization, even in times of crisis. … I should say especially in times of crisis as it is true that crises, including the most dramatic, are accompanied by their share of speculation. If its adoption were extended, the proceeds that would be obtained could be used to finance international solidarity, to fight against climate change and for development.
Among the most promising innovative financing, there is much talk of a tax on maritime transport, which should be at the heart of the next meeting of the International Maritime Organization. What do you think ?
The current discussions seem to be heading more towards this solution, it is a path for the future, because it has the potential to be universal. Afterwards, the question is to what extent are the shipping companies, with such revenue, really going to support international solidarity? Because we could also imagine them, with these recipes, choosing to finance their own ecological transition. As is often the case, the devil is in the details… and that is perhaps one of the indispensable roles of our NGOs: coming to unearth the devil (smile).
