Opinion: The post-war Bretton Woods global financial system is no longer enough

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Michel Miraillet is the ambassador of France to Canada.

International solidarity has never been more critical. A growing number of crises are weakening the poorest and most vulnerable countries to an even greater extent than in the past.

We need to help the most exposed countries exit the COVID-19 crisis, deal with the consequences of Russian aggression in Ukraine on their food and energy security, and cover the very high cost of climate transition and consequences of extreme climate events. To do that, it is necessary to scale up finance.

The postwar international financial architecture, inherited from Bretton Woods, is no longer sufficiently adapted to deal with the challenges prevalent in the 21st century.

The international community’s responses to crises are currently fragmented, partial and insufficient. Firstly, concessional resources provided by development institutions are not delivering their full potential in terms of impact, co-finance and alignment with needs.

Secondly, the expansion of stringent finance conditions of aid and a resulting rise in debt levels in developing countries are slowing investment there. Such measures ultimately do not provide developing countries with means to address the challenges they are facing.

Meanwhile, there is insufficient support for development and for the protection of our global public goods owing to a lack of resources. The world is also at further risk of geopolitical fragmentation, at a time when we need effective multilateralism and enhanced co-operation more than ever.

A number of G7 and G20 countries, as well as organizations and associations, share this observation with France and wish to promote the same conviction: We have to act fast and join efforts. We know that we can count on our Canadian ally, who has been highly committed to ensuring mobilization on this issue.

We are therefore now calling for a review and for a shakeup of finance. We must together drive change in our global financial system to make it more responsive, just and inclusive, and to fight inequalities, finance the climate transition and biodiversity protection, and move closer to achieving the United Nations Sustainable Development Goals (SDGs).

This is the objective of the Summit for a New Global Financing Pact, which will be held on June 22 and 23 in Paris. This summit intends to be inclusive, with every country, every opinion and every proposal being able to be expressed.

The summit is part of a positive momentum. The launch of reform by the World Bank, India’s G20 presidency and Brazil’s right after, the SDG midterm review and commitments made at COP climate change meetings are all reasons for hope to build on this momentum.

Tangible solutions have already been initiated: The Paris Club and the G20 launched an initiative for debt treatment, and France plays a pivotal role in implementing co-ordinated solutions under this Common Framework. We have proposed and obtained the issuance of US$100-billion in IMF Special Drawing Rights for the most vulnerable countries.

All countries in a position to do so must take part in this effort. Several multilateral development banks have begun to respond to the G20′s requests and have implemented initial measures to optimize capital to increase their lending capacity.

But we must now go even further, following the example of the Bridgetown Initiative, a set of innovative solutions spearheaded by Barbados to address climate vulnerability affecting many middle-income developing countries.

We will promote a reform agenda for development banks and the IMF to provide more finance to countries in the most need as well as global challenges. It is an agenda that aims to improve existing instruments and capital and to promote innovative approaches and instruments to support the poorest and most vulnerable countries.

It also aims to mobilize more private finance using risk-sharing and guarantee mechanisms to redirect financial flows toward these countries to support the local private sector and durable infrastructure. This requires stepping up the use of our instruments and public and private innovative and new financing mechanisms.

To be more effective, our international financial institutions should be able to do more than they are currently doing to work better together, while better mobilizing private savings. To be more inclusive, we must above all give a greater voice to the most vulnerable countries in international fora.