Representatives of around one hundred countries, including forty heads of state and government, international financial organisations and institutions, civil society and academia, as well as companies and investors, met in Paris on 22 and 23 June 2023 for the Summit for a New Global Financial Pact. The aim was to put in place a roadmap for reforming development finance institutions and increasing private sector participation in infrastructure development.
The President of the French Republic, Emmanuel Macron, has called for a meeting in two years’ time to take stock of the roadmap defined at the Summit for a New Global Financial Pact to be held in Paris on 22 and 23 June 2023. A follow-up mechanism has also been set up for this purpose. And in the meantime, development finance institutions are agreeing to provide more concessional financing for developing countries, especially those most vulnerable to climate change.
On the subject of debt, an agreement has been reached within the Committee of Official Creditors on the treatment of Zambia’s debt. This agreement will unlock the second disbursement of the International Monetary Fund (IMF) programme, which will be presented to the IMF Board in July 2023. It was also agreed to continue efforts to restructure the debt of Ghana and Zambia through the Joint Framework of the G20 and the Paris Club (which does not include China), as both countries are in default.
Better protection against climate shocks
Ivory Coast and France have also agreed a debt reduction and development contract “under which €1.14 billion of Ivory Coast’s bilateral debt will be converted into grants to finance various development projects, including €72.1 million for education”, announced the Élysée after the summit.
For its part, the World Bank Group announced that it was strengthening its capacity to help countries prepare for and respond to crises, by providing additional aid to develop preparedness. To do this, the financial institution based in Washington in the United States of America will be designing new types of insurance to provide safety nets for development projects and increasing flexibility to allow countries to reallocate funding to emergency response in the event of a crisis.
Mobilising private investment
Among the crises hampering development in Africa is climate change, which is (partly) responsible for the drought in the Horn of Africa. In response to this shock, €270 million has so far been mobilised to support the Global Climate Risk Shield in countries vulnerable to climate change, as well as €2.9 billion in concessional financing mobilised by the multilateral development banks (MDBs) and other players. The private sector, which is expected to play a key role in the future global development finance architecture, is expected to contribute €5.1 billion in risk management capacity.
Accelerating green bonds
The energy transition was also at the heart of discussions at the Summit for a New Global Financial Pact in Paris. A Partnership for a Just Energy Transition was set up between Senegal and the G7 countries to support this West African country’s transition to an energy mix in which renewable energies will account for 40% by 2030, with initial commitments from bilateral donors, MDBs and private investors totalling $2.5 billion.
Green bonds are one of the solutions for financing sustainable development. Over the next few years, the European Commission and the Green Bonds Initiative of the European Investment Bank (EIB) aim to provide technical assistance and €1 billion to reduce the risk of instruments on capital markets in order to mobilise €15-20 billion for sustainable investments. Heads of state and government, as well as civil society, will meet at COP 28 in Dubai, United Arab Emirates (UAE), from 30 November to 12 December 2023. Between now and then, the International Finance Corporation (IFC), the private sector financing arm of the World Bank Group, plans to launch a water and climate financing initiative.