By Laura Parry-Davies, Digital Communications Officer, OECD Development Centre
From climate change to COVID-19 to Russia’s war against Ukraine, the world is weathering a series of multiple, cascading crises. How can we – the international community – scale-up our response?
Experts from ODI, the Boston University Global Development Policy Center, IMF, SIDA and OECD gathered to discuss the risks associated with today’s crises and put forward suggestions for next steps – as part of the OECD Development Centre’s 60th Anniversary Dialogues.
Read on for some of our key takeaways from this discussion.
We need better tools for economic development – to build resilience. But we also need better tools for making development itself resilient…
According to a new report, the V20, (a group of 58 of the most climate-vulnerable nations in the world) face over USD 400 billion in debt payments in between now and 2028. Additionally, a recent IMF estimate put 60% of low-income countries at high risk of debt distress, compared to only 1/5 a decade ago.
These countries need new liquidity. They need development finance, but many of them are also going to need restructuring. Unfortunately, restructuring has often resulted in putting development goals, climate and economic growth on the back burner, Kevin P. Gallagher, Director of the Boston University Global Development Policy Center points out.
Renewed investment in coal energy this year is an example of the de-prioritisation of global needs, in light of domestic pressures. “Last year at COP-26 we heard Western countries pledging to stop funding fossil fuel. But since then, we’ve actually seen a bit of a revival of coal generation,” says Dr Rebecca Nadin, Director of the Global Risks and Resilience team.
Linking debt restructuring to climate and development goals
A crucial step towards addressing these crises’ is to stop assessing development and financing constraints separately. We must look at financing, climate, and development targets as part of the same picture.
“Development cannot happen without resource-flows, and resource flows cannot happen without development institutions,” Susanna Gable, Chief Economist at the SIDA reminds us.
In addition to this, we need an effective climate policy package that is internationally agreed-on, Shekhar Aiyar, Head of Multilateral Surveillance in the IMF’s Research Department puts forward. The proposed centrepiece of this would be some kind of carbon pricing that is combined with green R&D incentives and investment in green infrastructure.
Scaling up and reforming development finance is another important piece of the puzzle. Multilateral development banks need more capital, more lending headroom, and sovereign debt workout mechanisms that are just and inclusive. “If we have the proper reforms of the capital markets in place, development banks can actually provide wind in the sails of a properly aligned economy,” says Gallagher.
Moving forward, we need a multilateral system that can react and work together to put out fires
In this interconnected world, what happens in one country has more of an impact on the rest of the world than it ever has had before.
Russia’s invasion of Ukraine is an example of this.
“Of course there are tensions, and war, and conflict” Gallagher affirms, “but when it comes to public goods, global financial stability, and global climate change – the community of nations have to put their individual grievances with each other aside and work collectively. Because, at this moment, we are all paying the costs of inaction and a lack of a multilateral system that is fit for purpose for the 21st century.”
If this discussion collectively brought forward one priority, it is this: we need a global project for domestic and international resource mobilisation, to re-build the world economy for the 21st century. A world economy that is low-carbon, that is climate resilient, that is socially inclusive and that can react to a globalised-inter-connected world – that will continue to deliver shocks.
- Watch the full conversation [1hr30]
- Hear more about these topics at OECD Development Centre’s Anniversary Event
This blog reflects the views of this DevTalks’ speakers, as put forward by them on 29 September 2022, drawing on prior research and experience in their areas of expertise.