The proposals for reforming the global financial architecture stemming from the Bridgetown initiative, named after the capital of Barbados, will be at the heart of the “summit for a new global financial pact”, organized in Paris on June 22 and 23. Unveiled by Mia Mottley, Prime Minister of Barbados, at the 27e climate conference (COP27) in Sharm El-Sheikh (Egypt), in November 2022, this initiative is supported by many countries in the South while arousing the interest of developed nations.
“For the first time, the Paris summit could set up a new financial framework commensurate with the challenges and put an end to yesterday’s solutions”, hopes Avinash Persaud, at the origin of this initiative. The special envoy for climate action of Mme Mottley no longer wants to hear about green bonds, debt-for-nature swaps or even carbon markets, all these mechanisms developed to mobilize climate finance but which, despite their “positive contributions”, are largely insufficient.
Based on the observation that the global financial architecture is unsuited to meeting the challenge of the fight against climate change, the Bridgetown initiative proposes to strengthen the financing capacity of development banks, like the World Bank or the African Development Bank, and to further leverage private sector investment. According to a report commissioned by COP27 at the end of 2022, developing countries will need at least 2,400 billion dollars (about 2,197 billion euros) per year by 2030 to face the emergency climate change, i.e. 6.5% of their GDP.
Infernal spiral
However, after the Covid-19 pandemic, which widened the deficits, and the rise in interest rates which increased the cost of borrowing, these countries have little room for maneuver. Too indebted to adapt to the consequences of global warming, they are very vulnerable to it. The slightest cyclone can erase points of GDP from them and precipitate them into default. Debt and climate change feed each other in a kind of infernal spiral.
The Dominican Republic is well placed to know: in 2017, Hurricane Maria destroyed the equivalent of 226% of its annual GDP in a few hours. “We need a major initiative to accelerate private investment in poor countries”, adds Avinash Persaud. In fact, the International Monetary Fund (IMF) estimates that they should be doubled, mainly in energy infrastructure and transport.
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