FfD4: A beacon of hope for international financial architecture reform in 2025
Eurodad's Director reflects on the important year ahead.
Today we live in a world that is facing a precarious future, torn apart by inequality, conflicts and a deep ecological crisis. The changes in governments in 2024 - the biggest election year in history - gave little hope for the action needed to address these existential issues. The pendulum seems set to continue its swing to the right in 2025. Everybody is holding their breath when it comes to the foreign policy of the new US administration and how this will impact global affairs, as geopolitical divisions are likely to be accentuated. The global climate and economic justice agenda also stands to be affected by this.
You could argue that this has been the direction of travel for a few years now, notably since the Russian invasion of Ukraine in February 2022. Geopolitical tensions and divisions have paralysed the Bretton Woods Institutions and the G20 - the bodies that are usually promoted as the preferred, efficient spaces to deal with global discussions on finance and development.
However, as the saying goes, every cloud has a silver lining. In the vacuum created by the traditional power blocs, there has finally been space for a new wind of leadership to blow from the global south. During the past few years we have witnessed the Africa Group at the United Nations successfully setting in motion historic negotiations for a UN Framework Convention on International Tax Cooperation. It has proven that the UN can provide the leadership and space for the international community to enter into constructive dialogue in a tension-fraught world.
In 2025, the fourth UN Financing for Development Conference (FfD4), which will take place from 30 June to 3 July in Seville, Spain, could also be a new wind of change in international architecture reform. All countries can participate on the same footing and civil society can meaningfully engage in the Conference and its preparatory process.
Here is the space for negotiations for a reform agenda for the urgent and longstanding changes that are needed so that the international financial architecture becomes a democratic space where all have an equal voice and vote.
A poor track record: the failings of the current system
FfD4 and its preparatory process could not come at a more critical time. So far, the global response to the interconnected, economic, climate, environmental and inequality crises has provided small and immediate relief but mainly kicked the can down the road. On debt, the Debt Service Suspension Initiative (DSSI) the G20 announced in 2020 in the immediate aftermath of the outbreak of the Covid-19 pandemic, followed by the Common Framework for Debt Treatments and the Debt Round Tables convened by the IMF, have proved ineffective in turning the tide on the debt crisis.
At the end of 2023, low and middle-income countries were spending more to repay their debt than ever before - a record US$ 8.8 trillion. Meanwhile, the creation of a Resilience and Sustainability Trust by the International Monetary Fund; the issuance of IMF Special Drawing Rights to the value of US$650 billion in 2021; the much-celebrated reform agenda of multilateral development banks initiated by the G20; and the recently announced 21st replenishment of the World Bank Group’s low-income country lending arm, the International Development Association (IDA) have not solved the problems the world is facing. Instead of creating much-needed systemic reform, they have been like putting bandaid on a bullet wound.
Moreover, as countries in the global north have refused to step up finance commitments during negotiations on the new climate finance target - the so-called “New Collective Quantified Goal on Climate Finance” at COP29 - the Azerbaijan Climate Conference in 2024, the question of how countries with the least historic responsibility for climate chaos will finance climate action remains unanswered. This fraught situation is brought into sharp focus if you consider the low levels of public development assistance in 2023, and threats to even more cuts in 2024. And despite optimistic projections that private finance can fill the gap, a recent blog from the Chief Economist of the World Bank has admitted that this was a fantasy. In fact, the blog points out: “Since 2022, foreign private creditors have extracted nearly $141 billion more in debt-service payments from public-sector borrowers in developing economies than they have disbursed in new financing.”
Leadership from civil society in 2025
Civil society is fully prepared to ensure that FfD4 lives up to its full potential to tackle the current global governance failures, thanks to the leadership of the Civil Society FfD Mechanism. The recently launched campaign ‘Turn Debt into Hope,’ advocating for debt justice and transformative financial reforms, as part of Christian Jubilee Year in 2025, will equally provide important leverage.
Eurodad’s International Conference, which will take place in Barcelona at the end of this month co-hosted by ODG-the Debt in Globalisation Observatory in Barcelona, Alianza por la Solidaridad-ActionAid Spain and Oxfam Intermon, will also be an important milestone. It will provide space for exchange, planning and coordination of the various campaigns and actions planned at this crucial time. In the midst of the uncertainty and tension in the world, we aim for the conference to communicate an important message of hope and expectation for how some of the critical crises we face today can be tackled.
Led by the global south, civil society will make every effort to ensure that FfD will be a beacon of hope in 2025.