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Opinion
Amina Gurib-Fakim argues that an innovative global development finance ecosystem is needed to unlock equitable international financing flows to pursue development paths unique to their circumstances and realities while preserving the fiscal sovereignty of developing countries.
View of an artificial one installed on Mon Choisy beach to combat soil erosion and build resilience. This installation will break the waves before they reach the shore and will also act as habitat for the fish. Credits: Ruben Pillay/Climatic Scene Countdown
PORT LOUIS, Sep 4 2023 (IPS) – The Africa Climate Summit 2023 is expected to start with new hope. In its 60+ years of history since independence, Africa has contributed about 3% of greenhouse emissions, about 2.6% of global trade and less than 3% of world GDP in 2021.
Home to 1.4 billion people with an average age of 16, the continent is suffering from stalled multilateral trade talks, and the ‘death of the Doha Round’ has given rise to unprecedented forms of protectionism, unilateralism, a lack of political leadership to embrace . and nurture multilateralism. Unfair competition, the one-sided division of Africa into Economic Partnership Agreements (EPAs), and skewed intellectual property rights have resulted in an international trading system that disproportionately favors the wealthier economies.
Amina Gurib-Fakim, President of the Republic of Mauritius (2015–2018)
Emerging trade-climate change measures will only further restrict Africa’s participation in global trade markets. So, to deal with the looming climate crisis, the question is: should Africa still rely on the ‘generosity’ of the global north? Their inability to meet the $100 billion pledge reveals their moral reluctance to acknowledge the contribution of developed countries to climate change.
Yet to make the transition towards a greener future, Africa needs access to debt relief as well as affordable public and private financing. These changes are critical for building capacity for sustained transformative growth and resilience in the face of climate challenges.
Developed countries have opposed basic reforms to support the developing world in the climate emergency. The innovative global development finance ecosystem is needed to unlock equitable international financing flows to pursue development paths unique to their circumstances and realities while preserving the fiscal sovereignty of developing countries.
Africa’s position is constrained by a lack of affordable, reliable and sufficient finance, as well as a debt crunch due to climate challenges. Instead of allocating increased funding to adaptation efforts, much of it is directed toward mitigation, which benefits financiers and creditors, thus denying countries a voice.
Africa’s economy is weak, especially after the pandemic. External debt is set to exceed $1 trillion in 2021. This undermines the ability of African governments to sustain meaningful socio-economic gains. Those with a pessimistic view of Africa label the debt issue as an African problem separate from the exploitative policies of developed countries, but the real concern lies with the developed countries. They have significant privileges to issue global reserve currencies, leading to a highly unbalanced distribution of international liquidity, as well as exorbitant interest rates and capital outflows driven by the monetary policies of rich economies.
Therefore, whenever faced with a liquidity crunch, Africa has no choice but to turn to the World Bank and the International Monetary Fund (IMF) to boost foreign exchange reserves. In the international arena, climate finance is becoming more commercial than concessional.
The United States is blocking the recapitalization of the World Bank for geopolitical reasons, with the unfortunate result of deepening structural gaps and costly financing for Africa. Thus, Africa is forced to borrow from commercial institutions as the high cost of borrowing hinders investment.
The issuance and recycling of SDRs issued by the IMF as a means of augmenting available climate finance is attracting global attention. Re-channeling of the IMF’s inoperative SDRs should be used to help provide necessary finance to developing countries.
The Bridgetown Initiative includes a number of such proposals, including the restoration of debt stability; long term debt restructuring with lower interest rates; increase in official sector-development credit; mobilizing more investment in the green private sector; Reform the business system to support global green and equitable changes.
African countries are paying an unnecessary premium on their cost of capital and are not attracting enough foreign direct investment (FDI), especially in innovative sectors and for global public goods. Africa’s fiscal and tax structures suffer from vulnerabilities, while the global tax system is still built on historical power asymmetries.
Developed countries have largely created international rules that suit their own economic interests. Furthermore, the application of climate-related measures, such as Base Erosion and Profit Shifting (BEPS) strategies, the digital economy and the European Union’s (EU) Carbon Border Adjustment Mechanism (CBAM), undermine multilateral approaches and affect fiscal sovereignty. African economies.
Voluntary carbon markets, including the Africa Carbon Markets Initiative, a sovereign wealth fund, can unlock much-needed finance for low-value assets and services. Partnerships and investments offered by Africa’s own development bank, the BRICS/New Development Bank, and the private sector are also essential sources of long-term financing, and can be harnessed to enable Africa’s self-directed development.
There is a globally recognized need to move, unlock, scale and mobilize new forms of ‘fit for purpose’ finance to meet climate agreements and the Sustainable Development Goals. The priorities for African countries largely include affordable, predictable, accessible finance.
Finally, in building a financial infrastructure that is relevant to all, African countries should not become passive receptors of international reforms and debates.
They must have the authority to lead in their chosen direction; They should have a voice and, more importantly, a collective interest at the local, regional as well as international level.
Only then can Africa be compensated for the damage it did not do!
Comment: Amina Gurib-Fakim is the former President of the Republic of Mauritius (2015–2018).
IPS UN Bureau Report
Source: www.bing.com
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