• CSOs call for a Financing for Development summit - Monterrey +20 - which delivers meaningful economic architecture reform

Jean Saldanha, Director of the European Network on Debt and Development (Eurodad), reflects on the past week:

“This week’s meetings came at a crucial moment. Global poverty is on the rise for the first time in 20 years. There are serious doubts that Covid-19 vaccines will reach poor countries in the near future. Jobs are being decimated everywhere and inequality is on the rise. Yet the measures announced at this week’s G20 Finance Ministers and IMF-World Bank Spring Meetings continue to fall drastically short of what is needed.

“Firstly, the G20’s inadequate Debt Service Suspension Initiative (DSSI) has been extended by another six months without broadening its coverage to middle-income countries, including multilateral creditors, or addressing the ongoing private creditor holdout.

“The G20 Finance Ministers and the IMF and World Bank all stated that this will be the last extension of DSSI, without a real multilateral debt resolution framework on the table that provides fair, timely, transparent and comprehensive debt cancellation and restructuring.

“While hopes remain pinned on the Common Framework for debt treatments, approved last November, it is far from adequate to respond to the challenges at hand.

“Secondly, the general allocation of US$ 650 billion worth of the IMF’s Special Drawing Rights (SDRs) will translate into low-income countries receiving around US$7bn and middle-income countries around US$204 bn. The relatively low amounts received by these countries is the result of a fundamental flaw in the financial system which means that SDRs are heavily skewed towards rich countries (around 67 per cent), while low-income countries only get around one per cent.

“While proposals are being discussed on mechanisms that would compel rich countries to transfer free of cost their SDRs to poorer countries, such mechanisms do not exist at present. A $3 trillion allocation was - and is - what is needed.

“Thirdly, the ‘Green, Resilient and Inclusive Development’ (GRID) approach, which was promoted by the World Bank at the meetings, opens the door for more policy conditionality and structural reforms, including those linked to a more substantial role for the private sector in development, for instance through public-private partnerships for infrastructure and public services. This risks weakening the resilience of governments and can contribute to widening inequality within and between countries.

“We welcome the announcement of an early replenishment of the International Development Association (IDA), which is the WBG’s arm that provides finance to low income countries. But, it is essential that it delivers concessional resources based on a policy framework that delivers positive development outcomes.

“We look forward to the upcoming publication of the WBG’s new Climate Change Action Plan for 2021-2025. An ambitious plan is imperative, and it must be one that matches the current climate challenge. This requires the WBG to immediately adopt a ‘whole-of-institution’ commitment to end all types of support for fossil fuels, both direct and indirect, as soon as possible.

“Finally, the discussion about the future of the international corporate tax system was high on the agenda - not least due to announcements from the US administration regarding their position on the issue. Unfortunately, as stressed in Eurodad's reaction, the voices, concerns and interests of developing countries once again seem to be sidelined in the OECD-led negotiations on new global corporate tax rules, and strong concerns over the increasing complexity of the tax system remain.

“The pandemic does offer an opportunity to rebuild better but this means rebuilding fairer. It seems clear that both the G20 and the Bretton Wood Institutions are not up to the task, and they lack democractic legitimacy. This is why since the outbreak of the current crisis, Civil Society Organisations have been calling for a new Financing for Development Conference – Monterrey+20 – where the issue of global economic architecture reform is firmly on the table.”

ENDS

Media contact: Julia Ravenscroft, Communications Manager, Eurodad: +32 486 356 814