The grand narrative of private finance: over-reliance on attracting investment is undermining change at World Bank


This blog analyses the World Bank’s 'Evolution Roadmap' and is written by Bhumika Muchhala, from the Third World Network and Eurodad's Maria Jose Romero.

Read the full opinion piece on IPS News

One message that was repeated throughout last month’s summit on a so-called “New Global Financing Pact” was that developing countries urgently need mass financing to tackle the climate and biodiversity emergency. And there is not enough of it in public coffers.

Unfortunately, the false narrative that the only way to fill this gap is to ‘leverage’ more private finance also persisted. The resulting Paris Agenda for People and Planet stated: “meeting global challenges will depend on the scaling up of private capital flows.” This should be achieved in large part by revamping the role of multilateral development banks (MDBs).

Last December, the World Bank Group (WBG), the biggest MDB, launched its so-called “evolution” process, with the support of G7 governments. This set the institution to work on increasing its lending by deepening its reliance on the financial market.

The dogged reliance on private capital as saviour appears to be steeped in capitalist realism. It is believed to be implausible for the public sector to deliver the scale of financing needed to address the climate and development crisis.

Private capital, which can be leveraged using public money, securitised and reproduced is favoured as the pragmatic choice. However, while the financing gap to deliver on the sustainable development goals is very real, the neat narrative buttressing private capital obscures two empirical realities.

First is the absence of rich countries’ political will to deliver on agreed commitments, from the 0.7 per cent of Gross National Income in development aid made in 1970 to the US$100 billion per year climate financing agreed in 2009.

Second, the ongoing systemic wealth drain from developing to rich countries. Since 1982, developing countries as a whole have transferred an estimated US$4.2 trillion in interest payments to global north-based creditors, far outstripping aid flows and concessional lending during the same period.

Additionally, tax-related illicit financial flows cost countries hundreds of billions of dollars in lost tax income every year. Debt servicing is draining approximately 25 per cent of total government spending in developing countries as a whole, hijacking both climate and SDG (Sustainable Development Goals) financing.

Read the full opinion piece on IPS News