France aims to reform the IMF and World Bank – 06/21/2023 – Environment

The reform of multilateral financial institutions, such as the World Bank and the IMF (International Monetary Fund), is the main target of the Summit of the New Financial Pact, which takes place this Thursday (22nd) and Friday (23rd) in Paris.

Called last November by French President Emmanuel Macron, the summit seeks to mobilize proposals and create a political moment to redesign the architecture of global finance, with the aim of dealing with the climate crisis and challenges of sustainable development —such as health, education, energy and basic sanitation—in the most vulnerable countries.

The meeting should bring together financial institutions, development banks, companies and NGOs. With the main financial institutions summoned, the meeting expects to receive half of the world’s GDP, according to the French government.

The summit is also attended by more than one hundred heads of state. Among them are the German Prime Minister, Olaf Scholz, the Chinese Premier, Li Qiang, and the Brazilian President, Luiz Inácio Lula da Silva, who should arrive in Paris early this Thursday afternoon.

Lula will have bilateral meetings with heads of state from Cuba, Haiti, South Africa, the United Arab Emirates and the Republic of Congo, as well as Frenchman Emmanuel Macron, with whom he is due to have lunch on Friday.

The Brazilian president is expected to speak at the Power our Planet festival —where Billie Eilish and Lenny Kravitz are performing— and also at the closing of the summit.

The main event takes place at the Palais Brongniart, which was the headquarters of the Paris stock exchange, and is made up of six round tables, which should discuss the reform of development banks, the mobilization of private investment in vulnerable countries and proposals for innovation in the global financing, such as the exchange of external debt for climate and environmental actions, advocated by developing countries.

Another financing innovation proposal is the suspension of the external debt of countries that are recovering from climate catastrophes.

Increasingly frequent in the current climate crisis scenario, extreme events such as floods, prolonged droughts and hurricanes not only prevent countries from paying debts, but also require investments for recovery — something that debt suspension could help promote.

French diplomacy hopes that multilateral financial institutions such as the World Bank and the IMF can announce in Paris a commitment to suspending the debt of countries affected by climate catastrophes.

According to a senior member of the French government, it is imperative that the two institutions take more risks. They are expected to sign a joint statement later on Thursday.

The articulation for the summit had working groups dedicated to four main themes: financing solutions for vulnerable countries, innovations in the taxation system, incentives for investment in green and resilient infrastructure in developing countries and, finally, the reform of development banks .

The summary of the working groups’ discussions was presented last Monday and will serve as a draft for the summit’s discussion.

The French have defended the creation of taxes as a means of increasing revenue destined for developing countries. One of them would be the taxation of maritime transport, which would be proportional to the carbon footprint of the sector.

In the assessment of the French, there is already a consensus on the need to tax this industry, which is outside the scope of the Paris Agreement and must negotiate a possible commitment to reducing emissions during the International Maritime Organization (IMO) conference. ) in early July.

Another tax proposal defended by the French is already practiced by the country: the tax on financial transactions. According to the government, a quarter of this revenue is destined for developing countries, in the form of donations.

Still according to the French, the adherence of the G20 countries to the mechanism could generate an annual income of US$ 150 billion, which is equivalent to the current total of official assistance donated to developing countries.

In addition to the US$ 100 billion pledged in 2009 for climate action, the fulfillment of which must be announced at the beginning of the summit, according to the Sheet revealed on Tuesday (20), there is an expectation of forwarding another promise also worth US$ 100 billion for developing countries: they would be for the IMF’s special drawing rights.

One of the strongest proposals for forwarding the resource is the transfer of management responsibility to regional development banks, such as the African Development Bank (AfDB), which would have more political strength to demand and monitor the implementation of investments.

The countries must still discuss proposals on the regulation of the carbon credits market at a global level and also the possibility of remunerating countries for the conservation of biodiversity.

Dubbed “biodiversity credits”, the idea consists of a donation — unlike carbon credits, which compensate the payer with a license to emit.

Of a political nature, the event does not involve diplomatic negotiation processes between the countries. Even so, the French hope that the proposals suggested at the summit will gain momentum in future agendas of the international community, such as the G20 meeting, the UN General Assembly and the Climate COP28.

_{The reporter traveled at the invitation of the French Embassy in Brazil.}

_{The Planeta em Transe project is supported by the Open Society Foundations.}