A moral problem, a power problem, a practical problem

We are today facing — when we look at the present international financial architecture — a moral problem, a power problem and a practical problem.

First of all, a moral problem.

We all remember that vaccines were not evenly distributed. We all remember that Europe, the United States and other rich countries were able to print trillions to support their economies after Covid, for the recovery of their economies, to support their populations.

Then, because there was a huge global liquidity problem, the IMF (International Monetary Fund) was able to issue Special Drawing Rights. Special drawing rights is money created out of nothing.

The countries of the European Union, to which my country belongs — 500 million people, a little bit less — received $160 billion. The African continent, three times the population, received $34 billion. There is something fundamentally wrong in the rules, because these are the rules of the system that allow for these injustices to take place.

And then middle-income countries, and it’s particularly relevant for small island developing states, do not face adequate debt relief mechanisms, and do not face the possibility of having access to concessional funding at the levels that will be necessary, because they are considered to be middle-income countries.

Which again, is a deep injustice, because small island developing states, in particular, have a high level of vulnerability because of the structure of their economies, because of their geographic location, their size, and because of the enormous impact they suffer in relation to climate change.

So, there is a serious moral problem with the international financial system.

And there is a power problem. The Bretton Woods institutions were created after the Second World War. Obviously, the structure of what was created, with smaller limitations during the last decades, reflects the power relations that existed after the Second World War.

They are outdated, and so the system is unfair and dysfunctional. The system needs reform, to adapt it to the realities of today’s global economy.

And power questions are always difficult to solve.

And then, we have a number of practical issues. Even with the present system, much more could have been done. And much more can be done in relation to a better link between climate and finance and stronger support for adaptation, in particular in small island developing states.

A lot more can be done in multiplying the effect of the work of multilateral development banks, if they change their business model — a new approach to risk — and they are able to use their resources to leverage massive access to private finance at reasonable costs for developing countries.

Much more can be done in new instruments that allow, for instance, swaps between debt and investment in adaptation for climate change. So, there are lots of things that can be done if there is political will to do so, even if we will not be able to solve — and I hope we will be sooner or later — the moral problem and the power problem.

We have presented our sustainable development goals report, and we will have the SDG Summit in September, together with a Summit on Financing for Development. We are preparing a policy brief to all member states that will be issued in June on the reform of the international financial architecture.

When the G20 meets, (I will) insist on the need for these moral, power and practical problems to be solved.

Excerpts from the UN Secretary-General’s opening remarks at the joint press conference with Prime Minister Andrew Holness of Jamaica, 15 May 2023.

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