Reuters
Thu, June 22, 2023
U.S. Treasury Secretary Janet Yellen delivers her speech at the U.S embassy to France in Paris
PARIS (Reuters) - Following are highlights of what world leaders said at a summit in Paris on Thursday to boost crisis financing for poor countries, reform post-war financial systems and free up funds to tackle climate change.
ON REFORM
"Even with the capital that the World Bank and the MDBs (multinational development banks) have, there is clearly potential ...to increase financing capacity," said U.S. Treasury Secretary Janet Yellen, whose country is the World Bank's biggest shareholder.
Yellen said an additional 200 billion dollars could be unlocked over a decade.
"We are certainly not ruling out at some later stage a capital increase. But I think that these banks need to function better individually and as a system first, expand their mission to address global challenges, better utilize the capital they have."
ON NATURAL DISASTER CLAUSES
"We would also like to see the World Bank offer borrowers the option to add climate resilient debt clauses to their loan agreements. These clauses would help ease pressures on countries if a natural disaster strikes," Yellen said.
ON UNLOCKING PRIVATE SECTOR FINANCING
"We need to mobilise the private sector a lot more, there is a lot of liquidity, a lot of money in that world," said French President Emmanuel Macron.
ON FAILURE OF INTERNATIONAL FINANCIAL ARCHITECTURE
"It is clear that the international financial architecture has failed in its mission to provide a global safety net for developing countries," said U.N. Secretary General Antonio Guterres.
(Reporting by Leigh Thomas, John Irish, Elizabeth Pineau, Silvia Aloisi; Editing by Christina Fincher)
Rich nations pledge to unlock hundreds of billions of dollars for climate fight
Fri, June 23, 2023
By John Irish and Leigh Thomas
PARIS (Reuters) -Multilateral development banks like the World Bank are expected to find $200 billion in extra firepower for low-income economies by taking on more risk, a move that may require wealthy nations to inject more cash, world leaders said on Friday.
The leaders, gathered at a summit in Paris to thrash out funding for the climate transition and post-COVID debt burdens of poor countries, said their plans would secure billions of dollars of matching investment from the private sector.
An overdue pledge of $100 billion in climate finance for developing nations was also now in sight, they said.
Many in attendance, however, said over the two-day summit that the World Bank and the International Monetary Fund were increasingly ill-suited for tackling the most pressing challenges and needed a broad revamp.
"We ... expect an overall increase of $200 billion of MDBs' lending capacity over the next ten years by optimizing their balance sheets and taking more risks," the summit's final statement obtained by Reuters said.
"If these reforms are implemented, MDBs may need more capital," it added, recognising in a final summit document for the first time that wealthy nations may have to inject more cash.
U.S Treasury Secretary Janet Yellen, whose country is the largest shareholder of the IMF and World Bank, had said ahead of the summit that development banks had to first squeeze out more lending themselves before the possibility of capital increases was considered.
The final summit document called for each dollar of lending by development banks to be matched by at least one dollar of private finance, which analysts said should help international institutions to leverage an additional $100 billion of private money in developing and emerging economies.
The announcements mark a scaling up of action from the development banks in the fight against climate change and set a direction for further change ahead of their annual meetings later in the year.
However, some climate activists were critical of the results.
"While the roadmap from the Paris Summit acknowledges the urgency for substantial financial resources to bolster climate action, it leans too heavily on private investments and ascribes an outsized role to multilateral development banks," said Harjeet Singh, head of global political strategy at Climate Action Network International.
DEBT RELIEF
At the summit, the United States and China - long at odds on how to tackle debt restructurings for poor countries - sought to strike a more conciliatory tone after a landmark deal was reached on Thursday to restructure $6.3 billion in debt owed by Zambia, most of it to China.
"As the world's two largest economies, we have a responsibility to work together on global issues," Yellen said on a summit panel shared with Chinese Premier Li Qiang among other leaders.
However, differences remain. China - the world's largest bilateral creditor - has been pushing for lenders like the World Bank or the IMF to absorb some of the losses, which the institutions and Western countries oppose.
"China is ready to be engaged in debt relief efforts in an effective, realistic and comprehensive manner in keeping with the principle of fair burden sharing," Li said.
CLIMATE PLEDGE
The summit statement said there was a "good likelihood" of finalising this year a $100-billion climate finance pledge to developing countries.
Many of the topics discussed in Paris took up suggestions from a group of developing countries, led by Barbados Prime Minister Mia Mottley, dubbed the 'Bridgetown Initiative'.
"There is the political consensus that this issue is bigger than each of us and we have to work together and multilateral development banks will have to change how they do business and that is accepted," Mottley said at the summit's closing panel.
"We leave Paris not with speeches simply, but a commitment to get down into the granular details to make sure that what we agree here can be executed."
The $100 billion pledge falls far short of poor nations' actual needs, but has become symbolic of wealthy countries' failure to deliver promised climate funds. This has fuelled mistrust in wider climate negotiations between countries attempting to boost CO2-cutting measures.
"If we can't shape the rules in this time like others before, then we will be accountable for what potentially can be the worst reality of mankind," Mottley said.
(Additional reporting by Casey Hall in Shanghai, Simon Jessop and Marc Jones in London; writing by John Irish and Silvia Aloisi; editing by Toby Chopra)
At Paris summit, World Bank, IMF take steps to boost crisis financing
Wed, June 21, 2023
By Leigh Thomas, John Irish and Elizabeth Pineau
PARIS (Reuters) -The World Bank will ease financing for countries hit by natural disasters, it said on Thursday, as the International Monetary Fund announced it had hit its target of making $100 billion in special drawing rights available for vulnerable nations.
The two announcements were made at a gathering in Paris of some 40 leaders, including about a dozen from Africa, China's prime minister and Brazil's president, that aims give impetus to a new global finance agenda.
It aims to boost crisis financing for low-income states and ease their debt burdens, reform post-war financial systems and free up funds to tackle climate change by getting top-level consensus on how to promote a number of initiatives struggling in bodies like the G20, COP, IMF-World Bank and United Nations.
An announcement about Zambia's debt was also expected later on Thursday after its creditors indicated this week a restructuring proposal was nearly ready after more than two years of negotiations.
"It is clear that the international financial architecture has failed in its mission to provide a global safety net for developing countries," United Nations Secretary General Antonio Guterres said, calling the system outdated, dysfunctional and unjust.
Leaders are set to back a push for multilateral development banks like the World Bank to put more capital at risk to boost lending, according to a draft summit statement seen by Reuters.
In remarks to a panel on Thursday, new World Bank president Ajay Banga outlined a "toolkit", including offering a pause in debt repayments, giving countries flexibility to redirect funds for emergency response, providing new types of insurance to help development projects and helping governments build advance-emergency systems.
"We need a robust and predictable financial safety net," Ethiopian Prime Minister Abiy Ahmed told the conference, calling for a boost to below-market financing and more grants.
"African countries are facing an unprecedented funding squeeze which have aggravated the vulnerabilities," he said.
While the new World Bank measures are designed to give developing nations some breathing space, there was no discussion of multilateral lenders offering debt writedowns - so-called haircuts.
China - the world's largest bilateral creditor - has been pushing for lenders like the World Bank or the IMF to absorb some of the losses, which the institutions and rich countries oppose.
NEW VISION
Citing the war in Ukraine, climate crisis, widening disparity and declining progress, leaders said the World Bank and other multilateral financial institutions needed a new vision.
French President Emmanuel Macron, hosting the summit, said it was time to act or trust would be lost.
The summit aims to create roadmaps for the next 18-24 months, ranging from debt relief to climate finance. Many of the topics on the agenda take up suggestions from a group of developing countries, led by Barbados Prime Minister Mia Mottley, dubbed the "Bridgetown Initiative".
The coronavirus pandemic pushed many poor countries into debt distress as they were expected to continue servicing their obligations in spite of the massive shock to their finances.
Africa's debt woes are coupled with the dual challenge faced by some of the world's poorest countries of tackling the impacts of climate change while adapting to the green transition.
Wealthy nations have yet to come good on climate finance that they promised as part of a past pledge to mobilize $100 billion a year, a key stumbling block at global climate talks.
Nearly eighty years after the Bretton Woods Agreement created the World Bank and IMF, leaders aim to squeeze more financing from multilateral lenders for the countries that need it most.
IMF Managing Director Kristalina Georgieva told the summit it reached its target of making $100 billion in special drawing rights available for vulnerable countries.
Rich countries agreed in 2021 to re-channel some of their unused IMF special drawing rights, an international reserve currency, to poor countries.
U.S. Treasury Secretary Janet Yellen, whose country is the World Bank's biggest shareholder, said multilateral development institutions should become more effective in the way they use their funds before more capital was added.
The summit also wants more engagement from the private sector. A coalition of countries said it would provide 2.5 billion euros ($2.7 billion) to Senegal to help it achieve its target of 40% of installed capacity from renewable energies by 2030, President Macky Sall said on Thursday.
The agreement with Senegal is the fourth such Just Energy Transition Partnership (JETP) and follows deals with Indonesia, Vietnam and South Africa struck since 2021.
(Reporting by John Irish, Leigh Thomas; addiitonal reporting by Elizabeth Pineau and Karin Strohecker; writing by John Irish and Silvia Aloisi; editing by Christina Fincher, Andrew Cawthorne and Mark Potter)
World Bank should add disaster clauses to debt agreements- Yellen
Treasury Secretary Yellen testifies on Capitol Hill in Washington
Reuters
Thu, June 22, 2023
PARIS (Reuters) -U.S. Treasury Secretary Janet Yellen said on Thursday the World Bank should add disaster clauses to debt agreements with poorer countries, speaking ahead of a summit in Paris that will discuss how to boost crisis financing for low-income nations.
Such clauses could be part of a broader reform of the World Bank to free up more funds, Yellen told journalists in the French capital.
"We would also like to see the World Bank offer borrowers the option to add climate resilient debt clauses to their loan agreements. These clauses would help ease pressures on countries if a natural disaster strikes," she said.
Yellen, whose country is the World Bank's biggest shareholder, added multilateral development banks should be reformed to become more efficient before shareholders think of injecting more money into them.
"Even with the capital that the World Bank and the MDBs have there is clearly potential ...to increase financing capacity," she said, adding an additional 200 billion dollars could be unlocked over a decade.
"We are certainly not ruling out at some later stage a capital increase. But I think that these banks need to function better individually and as a system first, expand their mission to address global challenges, better utilize the capital they have."
(Reporting by Leigh Thomas, writing by Silvia Aloisi, editing by Toby Chopra)
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