The annual meetings of the World Bank and the International Monetary Fund (IMF) in Morocco demonstrated the urgent need to review the budgets of these organizations and redefine their criteria to ensure a fair balance between North and South. But not a single signature or major announcement to date has materialized this imperative. And yet, the next Conference of the Parties (COP), which takes place in a few weeks' time in the United Arab Emirates (UAE), should have been a new beginning for climate financing on a global scale.
The summer and autumn of 2023 will have been two key seasons for the international agenda. Several high-level meetings followed one another to discuss galloping inflation, natural disasters and food insecurity, but above all whether it’s time to: f reform development finance institutions (DFIs)? The question has come up time and again at the world’s most recent major gatherings. First at the summit for a New Global Financial Pact organized by France in June 2023, at the BRICS meeting in South Africa in August, then at the first-ever African Climate Summit (ACW) held from September 4 to 6 in Nairobi, Kenya. This was also the case at the G20 Summit hosted by the Indian city of New Delhi, just before the United Nations General Assembly (september) in the United States of America, and at the Annual Meetings of the World Bank Group and the International Monetary Fund (IMF) in Morocco.
The Marrakech meeting closed on October 15 with the future of the Bretton Woods institutions still up in the air. These various meetings made it clear to political decision-makers and investors that it was time to redefine the architecture of global development financing. This is because the principles and operations of the DFIs are no longer necessarily adapted to the current context, compared with previous decades when socio-economic issues were less important.
A cocktail of challenges
With demographic pressure, social inequalities, armed conflicts and climatic shocks (floods, drought, erosion), financing needs are much greater, while access to capital is becoming increasingly scarce, particularly for the countries of the South. This is particularly true for African nations, which emit less than 5% of total greenhouse gas (GHG) emissions but suffer the most from the disastrous consequences of global warming. Over the next few years, DFIs will have to work to increase the volume and accessibility of their financing response to the 17 Sustainable Development Goals (SDGs), which focus on economic efficiency, social equity and ecology.
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“In sub-Saharan Africa, per capita income is the same as it was 14 years ago. Meanwhile, debt is rising in all emerging markets. Insidiously, a growing mistrust is taking root between North and South, complicating prospects for progress. The South fears that promised resources will never arrive, and feels that energy regulations are not applied uniformly everywhere. But the truth is that continued carbon-intensive growth is not sustainable. We need to figure out how to finance a different world, one that can preserve the climate, control pandemics if not prevent them, produce abundant food, create jobs and provide access to clean air, water and energy at an affordable cost,” explains Ajay Banga, President of the World Bank Group.
No consensus….
While the various spring discussions failed to produce a consensus on a genuine reform of the DFIs, IMF member countries did commit to a “significant increase” in lending resources by the end of 2023. Which doesn’t sound like a concrete step forward when you consider that the African continent is still waiting for the famous $100 million in climate financing that developed countries had promised to release together since the Paris Agreement in 2015. This matter will once again be on the agenda from November 30 to December 12, 2023, at the 28th Conference of the Parties (COP28) on climate.
The event will take place in Dubai’s business center, home to the industries of several multinationals, some of them controversial for their greenwashing. Nevertheless, the role of the private sector remains crucial in mobilizing funds to support emerging countries.
These include formal collaboration with the multilateral development banks (MDBs) to boost investment in green infrastructure, which is currently considered to be useful for the energy transition and forest preservation.
A few concrete commitments
For the time being, the African Development Bank (AfDB) has pledged to raise up to $25 billion to support climate resilience on the continent. As for the French Development Agency (AFD), its Communications Director Papa Amadou Sarr hinted in Marrakech that the group would soon be stepping up its interventions “in the key sectors of water, sanitation, energy, education and health”.
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Other development partners, such as Denmark’s Investment Fund for Developing Countries (IFU), announced with great fanfare in New York that it would double its budget by 2030. This Danish reform, analyzed recently in an interview on Afrik 21, is a concrete response to the financing of the MDGs at a time when only 15% of these commitments are being met, according to the United Nations report. It will provide much-needed fodder for discussions between heads of state and entrepreneurs, who are expected in Congo Brazzaville on October 25, 2023 for the Summit of the planet’s three great basins.
Benoit-Ivan Wansi, special correspondent in Morocco
