UNCTAD Official Highlights Bridgetown Initiative's Urgency in Addressing Global Financial Challenges

A senior official of the United Nations Conference on Trade and Development (UNCTAD) has voiced concerns that the international community is not committing enough resources to back the Bridgetown Initiative that seeks to address three triple threats to development of debt, climate and inflation crises.

At the start of a three-day workshop, Building Economic Resilience through South-South Cooperation and Integrated Policy Strategies, at the Accra Beach Hotel, Richard Kozul-Wright, the director of UNCTAD’s Globalisation and Development Strategies Division, said the initiative was needed to address issues related to the cost of capital, particularly affecting developing nations and island economies.

The Bridgetown Initiative, led by Prime Minister Mia Mottley before COP 27, the UN Conference on Climate Change in 2022, advocates for a comprehensive overhaul of the global financial architecture and development finance, focusing on debt, climate and inflation crises.

“Reforming the international financial system is not a small issue,” Kozul-Wright told Barbados TODAY. “The Bridgetown Initiative was important for two reasons. One, it came from the South which was incredibly important [as it] was coming from the developing world and Prime Minister Mottley was a very forceful spokesperson for that. Secondly, [it] had a very clear agenda of dealing with both the problem of the cost of capital because a lot of developing countries and island economies suffer from the fact that borrowing on international markets is not prohibitively expensive, but it’s very expensive. There are initiatives that I think have been picked up with respect not only to ways of reducing the costs but also to dealing with some of the related problems around exchange rate fluctuations that countries in the developing world have.

“You borrow . . . [and] you think you’re making a sensible decision based upon your current exchange rate, and then you find that two years down the line, for a set of reasons that have nothing to do with you, your exchange rate has plummeted significantly, and, the cost of servicing your debt has increased several-fold. There are now ideas about how we can reduce some of those challenges and stresses. If you were expecting a transformation of the system in a few years, that’s not happened, obviously. But if you’re seeing ideas from the initiative that are beginning to resonate, along with the people who will ultimately matter to the big powers, then I think it’s been a success.”

He noted the slow pace of transformation in the international financial system while highlighting the success of the initiative in generating resonating ideas with key global players. Kozul-Wright said the next five years would prove critical in aligning the initiative with commitments to Sustainable Development Goals (SDGs) and the Paris Agreement.

He said: “The initiative was very conscious of the fact that development and climate, you can’t separate these two things in general, but particularly for small island economies, it’s not possible. I don’t think it’s impossible for any country really, but it’s particularly blatant in those cases, and the next five years are critical.

“If we don’t begin to actually implement on a scale some of the proposals in the initiative, then everyone and not just island economies, is going to be suffering. Because we’re talking about massive transformations and massive transformations are expensive for everybody and we need the kind of mechanisms that have been put forward in the initiative to be actually scaled up to be able to deliver on those challenges.”

Regarding the upcoming COP meeting on climate finance, Kozul-Wright expressed concerns over the inadequate progress in meeting financing challenges for climate mitigation and adaptation. He acknowledged the need for a different approach due to the scale of transformations required and the inadequacy of past commitments.

“We’re going beyond the $100 billion a year, which was promised back in 2010,” the UNCTAD official told Barbados TODAY. “Then the advanced economies claim they might have reached that target last year. Some people are sceptical of that claim. But I mean, the fact that it took them 12 years to even get close to that is worrying, because, the kind of number that people are talking about now is five, ten times that figure. So we need a different approach and we need mechanisms on the scale that are being proposed.

“So, I think the COP this year will be a real test of the commitment of the international community to live up to their promises.”

“The truth of the matter is that we have the resources to deal with this. It’s not a problem of resources. . . . It’s an issue of politics and what does it take for them to live up to it. They all claim to believe in the science, and the science tells you that if we don’t do something over the next five years, then the planet, not just small islands, but large parts of the planet, will . . . see problems.

“Politics is not so predictable, . . . not for the faint of heart. So that’s the real challenge. . . . Can the UN act as a platform that can mobilise political will in the way that the Bridgetown Initiative [sets out]? . . . The prime minister’s model is very clear on that. She’s insisting that it is a question of political will, not just a question of the kind of technocracy or financial mobilisation; its political will.”

In the absence of a clear solution, Kozul-Wright underscored the importance of the Bridgetown Initiative for providing detailed proposals from the South but stressed the need for significant contributions from major players to achieve the initiative’s goals.

(RG)