20 years after Monterrey, the UN Financing for Development process is as important as ever
This week, exactly 20 years ago, world leaders adopted the United Nation’s Monterrey Consensus. They committed to “Confronting the challenges of financing for development” with a global response and to creating a fully inclusive and equitable global economic system.
The Consensus included the critical recognition that in a globalizing interdependent world economy “National development efforts need to be supported by an enabling international economic environment”. This was the birth of the UN’s Financing for Development (FfD) process which now – 20 years down the line – is as important as ever.
The Covid-19 pandemic has exacerbated core problems that the Financing for Development process was created to solve, including skyrocketing inequalities both within and between countries and genders, and lack of public resources to combat poverty and finance sustainable development.
The pandemic came after a decade of soaring public and private debts globally. It heightened the debt vulnerabilities in most countries, leading to the highest global debt levels in half a century. More than half of low-income countries are in, or at risk of, debt distress.
Very limited fiscal space, particularly in global south countries, is undermining the prospects of tackling key challenges such as the climate crisis and the achievement of the Sustainable Development Goals. The pandemic has also served as a stark reminder of why truly global solutions are needed to resolve key economic challenges such as large-scale international tax dodging and unsustainable and illegitimate debts.
The 20th anniversary of the Financing for Development process is an important moment to remind governments of the commitments they have made to providing such solutions.
In the Monterrey Consensus world leaders, for example, stressed that: “To promote fair burden-sharing and minimize moral hazard, we would welcome consideration by all relevant stakeholders of an international debt workout mechanism, in the appropriate forums, that will engage debtors and creditors to come together to restructure unsustainable debts in a timely and efficient manner”.
A global debt workout mechanism – under the auspices of the UN – is still today a central part of the solutions that civil society organisations are calling for. So why is it that even today – 20 years after Monterrey – we still do not have such a mechanism?
The hard fact of the matter is that the ambition and will to cooperate, which governments displayed in Monterrey, started to fade shortly after the summit. In particular developed countries continued to keep discussions about economic issues in non-inclusive forums such as G20, OECD and the Paris Club, where most developing countries cannot participate on an equal footing.
In the years that followed, numerous additional governmental initiatives, groupings and forums have continued to shoot up and multiply in rich country capitals around the world. In Orwellian style, the forums outside the UN have sometimes been given names such as “global forum” or “inclusive framework”. But globally inclusive is exactly what these forums are not.
The United Nations remains the only body where all countries are able to participate on a truly equal footing, and developing countries have consistently called for this to be the place where global economic governance takes place. Ironically, rich countries often respond to these calls with the argument that this would be a duplication of the processes taking place in the non-inclusive bodies.
The hard lessons that led to the Monterrey Consensus are still very valid, namely that non-inclusive decision-making leads to an incoherent, unfair and ineffective global economic system and never-ending political power struggles between countries. And although the impacts of the breakdown of global economic cooperation is hardest felt in developing countries, the price is paid by citizens all around the world.
One powerful example of the price of failed cooperation is on international taxation. Hundreds of billions of dollars are lost to public budgets every year due to the blatant failure to stop large-scale international tax dodging by multinational corporations and the wealthy elites.
The most recent changes to the global rules – including the new minimum corporate tax rules – were carried out by the OECD-led so-called “Inclusive Framework”. Once again this resulted in an outcome that is not only ineffective, but also includes strong biases against the interests of the poorest countries.
Over one-third of the world’s countries were never part of the OECD-led negotiations, and four of the developing countries that did participate decided not to support the outcome document. Global tax governance is now also faced with a very familiar problem, as it looks impossible to reach anything near global implementation of the new rules.
The result will be a global tax system that continues to be a patchwork of thousands of bilateral and multilateral treaties, multiple different standards and a range of more or less creative unilateral tax solutions. In other words – an ineffective mess that will continue to cost countries billions of dollars due to international tax dodging and fail to ensure fairness.
Especially in light of the impacts of the Covid-19 crisis, it is clear that this is unsustainable. A number of concrete proposals for fair and inclusive global solutions to these problems have been tabled. This includes specific civil society proposals for a debt workout mechanism and a UN Tax Convention, that build on long-standing calls by developing countries.
What we need now is political will, and in particular the richest countries need to show a real will to cooperate in a truly inclusive forum.
As we mark the 20th anniversary of the cooperative spirit of the Monterrey Summit, civil society organisations are calling for a Monterrey+20 Summit on Financing for Development to negotiate and adopt global solutions to confront the challenges of financing for development.
The spirit of Monterrey was a will to engage in truly global cooperation to address the financial and economic challenges we face. It is high time to bring that spirit back.
Pooja Rangaprasad is Policy Director, Financing for Development, Society for International Development (SID); Tove Maria Ryding is Tax Justice Coordinator, European Network on Debt and Development (Eurodad).