Marrakech - United Nations Development Programme (UNDP) Administrator Achim Steiner welcomed positive momentum toward multilateral bank reform at the Annual Meetings of the World Bank and International Monetary Fund (IMF) this week, but he urged bigger, broader investment to tackle poverty and protect the planet.
"We welcome reform of multilateral development banks under new leadership, but the twin crises of poverty and climate demand significantly more. What is still missing is a broader and urgent discussion around restructuring debt, attracting private capital, and stimulating domestic resource mobilization - each of which is larger in scale than financing from development banks alone," Steiner said.
Multiplying global crises and multiple shocks over the past five years have wrought devastating consequences for developing countries. Decades of progress on poverty have been reversed, and climate change is inflicting ever greater hardship on the poorest and most vulnerable. At the same time, many developing countries owe, in debt service to multilateral development banks (MDB) lenders, more than what they receive in development finance from them.
"Last year, 46 countries paid more than 10% of government revenues in interest payments alone. We must address debt restructuring urgently, because debt overhang could derail expanded lending over time," Steiner added.
UN analyses show that the average low-income country spends 2.3 times more on servicing net interest payments than on social assistance, 1.4 times more than on domestic health expenditures, or 60 percent of what it spends on education.
The UN Global Crisis Response Group (GCRG) estimated this year that in total, 48 countries are home to 3.3 billion people whose lives are directly affected by underinvestment in education or health because of large interest payments.
"The World Bank's stated ambition to bridge the Sustainable Development Goals (SDG) financing gap is welcome. To meet global challenges, the Bretton Woods institutions will need to expand concessional financing. Partnerships, especially with the United Nations, are also essential to reach the poorest and people in the world's most crisis-hit settings," Steiner said.
With only 15 of the SDG targets on track, world leaders re-committed to the SDGs in September, setting a course for action to achieve the goals. However, financing still falls short by some US$3 trillion per year, according to a G20 report by an Independent Group of Experts.
"As we see clearly with events of this week, this is a new period of uncertainty, polarization, and fragmentation that threatens an already fragile global growth outlook and the global energy transition. These are extraordinary times that demand extraordinary measures. The Secretary General's call for an urgent SDG Stimulus is more relevant than ever," Steiner said.
"Now is a time to meet countries where they are-as some face deep social crises or try to prevent conflict, others are stepping up their digital and energy transitions. None of us can afford to operate in a 'business-as-usual' mode."
Rising needs, proposed responses
At the Annual Meetings, which gathered finance ministers and central bank governors on the African continent for the first time in 50 years, the United Nations advocated for measures to allow the Secretary-General's $500 billion SDG Stimulus Plan to start flowing before the end of 2024 to three priority areas:
- Re-channeling an additional $100 billion in unused IMF Special Drawing Rights (SDRs), including to multilateral development banks. This would allow wealthier economies to redirect SDRs-effectively an emergency international reserve-to strengthen balance sheets and expand lending to heavily indebted and fragile countries.
- Addressing debt overhang and debt restructuring in developing economies. This means stepping up the implementation of the Common Framework for debt treatment by speeding up the process and changing eligibility criteria to benefit more countries. It would also mean devising new solutions for the broader set of countries saddled with large debt repayments.
- Mainstreaming state-contingent debt clauses in all official lending. This would make climate-resilient future borrowing fairer and more predictable.
Reform of the multilateral development banks is important, but meeting SDG financing gaps and tackling the poverty and climate crises will demand much larger, longer-term domestic resource mobilization, including taxes, remittances, sovereign bonds, and private-sector investments in addition to official development financing.
"Realizing equitable global development and advancing the Sustainable Development Goals hinges on reshaping the global financial system so that the poorest and most vulnerable are prioritized," concluded Steiner.
