By Bhumika Muchhala
NEW YORK, Jul 15 2025 (IPS)

The Fourth International Conference on Financing for Development (FfD4) took place in Seville, Spain from 30th June to 3rd July amidst intensifying attacks on multilateralism, unprecedented cuts to global aid and development financing, and regression of decades of progress in the fight against poverty.

Participants at the once-a-decade United Nations (UN) conference included 70 heads of states, over 1,000 civil society leaders, and over 400 policymakers from governments around the world, who engaged in over 100 panel events and 50 protest actions.

Importantly, civil society actors experienced an unprecedented wave of restrictions and lack of access, from difficulties obtaining accreditations, discriminatory profiling, chilling of freedom of speech, and exclusion from key negotiations.

This left many advocates, including those who had followed the FfD4 negotiations closely, to organize a protest at the conference’s venue on its final day.

However, the outcome document, or Compromiso de Sevilla, was adopted weeks ago by consensus of UN member states on 17th June in New York, making this fourth conference the first where an outcome document was agreed before the Conference began. This was lamented by many participants as rendering the conference itself a purely symbolic event, without the final negotiations taking place.

The adoption of the text was marked by the official withdrawal of the U.S. who stated a refusal to participate in Sevilla, who waited to withdraw until almost a year of intergovernmental negotiations had concluded.

The role of the US in the negotiations has been publicly reported, in terms of aggressively blocking and requesting deletions across entire paragraphs of the seven themes of FfD, that of domestic public resources, international development cooperation, private finance, sovereign debt, systemic issues, science and technology, and follow-up and monitoring.

Also, driving the race to the bottom during the negotiations was the European Union and other developed country delegations such as Australia, New Zealand, Canada, Japan and the U.K. The aggregate effect inflicted dilutions, distortions, and erasure of global economic governance milestones and actionable commitments into a reaffirmation of the status quo, with many critics arguing that the Compromiso de Sevilla shows little shift, or even backsliding, from the previous three FfD outcome documents in 2015 (Addis Ababa Action Agenda), 2008 (Doha Declaration) and 2002 (Monterrey Consensus).

In fact, lost in the sweeping tide of attention that private financing, and in particular blended finance and incentivizing institutional investors, received at the Seville conference, is the political genealogy and systemic origins of FfD.

Its roots are in the collective initiative of the Non-Aligned Movement (NAM) in the late 1990s to address the systemic asymmetries that characterize the international financial architecture, resulting in the boom-bust financial crises experienced by the global South through 1980s and 1990s.

The nations of NAM called for a multilateral process that would generate action towards reforms that expand policy and fiscal space for structural transformation toward economic, monetary and financial sovereignty in the South. The 2002 Monterrey Consensus argued that the systemic drivers of global inequalities between nations and regions cannot be resolved on the national terrain alone—international cooperation and democratic global economic governance is critical.

Specifically, these systemic drivers refer to the key pillars of the international financial architecture: the international currency hierarchy marked by US dollar hegemony—or the scaffolding of unequal economic exchange, deregulated capital flows, market-based exchange rates, financial speculation and dependency, chronic sovereign debt distress, and a trade architecture defined by extractive, value-chain dependent and low-value-added production structures that are the legacy of colonialism.

Debt Battleground

At a time when debt servicing costs across the global South have reached a historic high of $1.4 trillion in 2023 (principal plus interest), public budgets are being eviscerated, the SDGs derailed, and climate action rendered into a fiscal impossibility. In this looming context, FfD4 fell far short on delivering meaningful reform of the outdated and imbalanced global debt architecture.

While the first iteration of outcome document, The Elements Paper, issued on 24 November 2024, included proposals for a new multilateral sovereign debt resolution framework for fair, binding, and effective crisis prevention and burden sharing.

At the heart of the debacle of sovereign debt is the absence of a sovereign debt crisis resolution mechanism. Meanwhile, the creditor profile has shifted over the decades from predominantly official creditors to a five-fold increase in private creditors, who not only refuse to participate in equitable debt restructuring but also impose high and variable interest rates, creating a crisis in the cost of capital for sovereign borrowers.

The historical context of the post-war regime of international crisis management governed by international financial institutions (IFIs) conditions continued market access and international financial legitimacy on both the uniformity and continuity of debt servicing. In turn, the means of debt repayment are enforced through austerity measures which has for decades eroded social equity, economic resilience, and the delivery of public services and systems across the global South.

During the FfD4 negotiations, the Association of Small Island Developing States, the Africa Group, and countries like Cuba, Brazil, and Pakistan called for the creation of a UN Framework Convention on Debt. Indeed, external debt payments by many countries far exceed aid and other financial transfers, or public expenditures on essential public services like health and education, generating both a net outflow of financial resources from South to North while simultaneously eroding economic development, social equity, and well-being.

Supported and campaigned for by global civil society, the framework would encompass a global consensus on the rules, principles, and structures of the various stages of the debt cycle. By locating deliberations in the UN General Assembly’s one-state-one -vote system, member states argued the Convention would facilitate the fairness and transparency of debt resolution mechanisms and civil society advocates clarified that it would democratize the global debt architecture from exclusive and creditor-dominated G20 and IMF forums.

However, the staunch opposition of most creditor countries, in particular the US and EU, led to the deletion of the Convention language and an insistence on relegating debt issues to the Group of 20 (G20) Common Framework. Critics in civil society and academia have consistently argued that the G20 status quo has failed to resolve debt distress and create fiscal space, is unable to ensure equitable participation of private creditors (e.g. comparability of treatment), enables a lack of transparency in debt contracts, and blocks rules on responsible lending and borrowing, for example.

Unsurprisingly, debt crises are reproduced while any resulting fiscal space is funneled into paying off private creditors, generating a ‘kicking the can down the road’ scenario that simply extends debt purgatory. The final debt architecture agreement in paragraph 50(f) states that member states “… will initiate an intergovernmental process at the UN, with a view to closing gaps in the debt architecture and exploring options to address debt sustainability, including but not limited to a multilateral sovereign debt mechanism.

In other areas of the debt chapter, the drive to pursue sustainability-linked debt swaps witnessed a turbo-charged boost as a ‘win-win solution.’ But as policy researchers have demonstrated for years, debt swaps are no magical panacea for debt distress. They fail to create sufficient fiscal space, adequately address long-term debt sustainability, while further constricting policy autonomy within borrower nations.

On the other hand, a potentially constructive initiative of is an agreement to “establish a platform for borrower countries with…a UN entity serving as its secretariat.” The platform is to focus on discussing technical issues, sharing information and experiences in addressing debt challenges, coordinating restructuring approaches, and strengthening borrower countries’ voices in the global debt architecture. This menu of initiatives within a borrowers platform has the potential to meaningfully rebalance an international debt architecture long dominated by consolidated creditor circles in the Paris Club and G20.

Reign of Private Finance

In the dozens of speeches made and hundreds of events held in Seville, it was impossible not to notice the aggressive promotion—and normative consensus—of private financing, proffered as a monolithic answer to narrow the estimated $4.3 trillion financing gap in the South.

The derisking development model, replete with its constellation of mechanisms such as blended finance and guarantees, dominated FfD4 with a laser focus on how private capital can be incentivized by the global South through the use of securitization, or the bundling of individual project loans into vehicles that can be bought by financial funds.

Buttressed by over a decade of the ‘Billions to Trillions’ narrative authored by the World Bank and the UN ecosystem, the idea asserts, with brazen decisiveness, that scarce public resources in the global South will always fall short of ever-growing development and climate financing needs and thus, private (and profit-seeking) capital is indispensable.

The seemingly logical resolution to this depoliticized reality becomes a quid pro quo: fiscal gaps can only be closed by attracting Wall Street (e.g. investment banks, asset managers, insurers, pension and private equity funds, among others) to invest in development, infrastructure, and green projects.

Commitments to private capital mobilization run rife across the Compromiso de Sevilla text. For example, scaling up private financing from “public sources by 2030 by strengthening the use of risk-sharing and blended finance instruments, such as first-loss capital, guarantees, local currency financing, and foreign exchange risk instruments, taking into account national circumstances” is highlighted.

In turn, such a scaling up requires “an enabling policy environment which facilitates private investment in agriculture and food systems, and the role that public investments can play in incentivizing and derisking private investments.” To realize this, member states are encouraged to “strategically attract foreign development investment, including from institutional investors.

However, the ‘billions to trillions’ aim of activating the supposed spigot of private cash has been recently exposed by multiple sources as a myth. A Financial Times article titled, “The magic pony of private finance fails to fund the global green transition,” revealed that only 10 per cent of private financing went to global South nations.

The ratio of private to public capital has struggled to rise above 1:1, and institutional investors like pension funds are notable by their almost total absence. Furthermore, number-crunching from the Organisation for Economic Cooperation and Development shows that every dollar of multilateral investment activated merely 30 cents of private investment.

Simply put, trillions are not manifesting. One explanation is that the scale of profits expected by financiers cannot be delivered with public goods and services investments; they two are inherently contradictory in nature.

Two fundamental issues persist.

First, rather than galvanizing new heights of financing, private creditors are in reality responsible for net outflows of financial resources from developing countries and into their own coffers. Indeed, the World Bank discloses that since 2022, “foreign private creditors have extracted nearly US$141 billion more in debt service payments from public sector borrowers in developing economies than they disbursed in new financing … this withdrawal has upended the financing landscape for development.”

And second, structural, institutional, and political changes to address fiscal space, such as redressing tax evasion and avoidance, fiscal restraint rules, constraints on public money creation, economic diversification, and technology transfer, for example, are conveniently elided.

Survival of the Systemic?

The integral focus of the Monterrey Consensus in addressing the need for international monetary cooperation, recurrent financial crises, vulnerabilities to exogenous shocks, and adverse spillovers of rich country policies across the global South has essentially evaporated from FfD discourse and text.

In a text that supposedly addresses the international financial architecture, it is shocking that there is no meaningful reference to the international monetary system, nor to central banks, the core institution of national money creation. Indeed, the 4th FfD text presents the sharpest regression of systemic issues across the four FfD texts produced over 23 years, despite the recent experience of the COVID pandemic and current debt crisis exposing the systemic fault lines of a global financial architecture designed to extract rather than provide.

However, one key deliverable is offered in the outcome document, that of addressing the inordinate power of Credit Rating Agencies (CRAs) in determining the cost of capital in the global South and the central role they play in both debt and climate crises.

Paragraph 55 states a decision to “establish a recurring special high-level meeting on credit ratings under the auspices of ECOSOC for dialogue among Member States, credit rating agencies, regulators, standard setters, long-term investors, and public institutions that publish independent debt sustainability analysis.”

While this falls short of proposals to establish an intergovernmental commission to regulate CRAs for the objective of producing accurate, objective, and long-term oriented credit ratings, it is a potential step forward in bringing CRAs into global economic governance.

There is widespread agreement by UN member states on the urgency for multilateral oversight on the oligopoly of three central CRAs, that of Moody’s, Standard and Poor, and Fitch, with attention to their multiple dysfunctionalities.

Recent pandemic and debt crises have exposed challenges, from a developing country perspective, in terms of bias and pro-cyclicality in ratings, conflicts of interest, and penalization of debt, climate and social vulnerabilities.

Beyond the inadequacy of CRAs rating methodologies and bias in implementation that undermine developing countries’ access to capital markets and increase their borrowing costs by inflating risk premiums, advocates for financial regulation have asserted that CRA regulation must include the establishment of multilateral, public, and independent rating agencies, promoting competition to avoid quasi-monopolistic market dynamics.

The spotlight on CRAs has the potential to hold financial power to account, however, it will depend on the ability of member state voices and proposals to set the agenda forward, rather than that of CRAs and other financial actors.

Given the colossal challenges in development financing at a time of global authoritarianism, war and conflict, and the spectre of ‘post-aid international development,’ what are the possibilities of democratizing global economic governance? The right to development, inclusive dignity, historical equity, and the political economy of inequality will require grappling with old and new forms of power.

One thing is certain. The way forward must hold steadfast to the aspiration and vision of a fair, equitable, and effective financial architecture that works for the majority.

Bhumika Muchhala is Senior Advisor, Third World Network and Adjunct Professor, The New School.

IPS UN Bureau

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APMDD and allies demonstrate on the streets in the Philippines. Credit: Asian Peoples' Movement on Debt and Development (APMDD)

By Bhumika Muchhala and María José Romero
NEW YORK / BRUSSELS, Jul 6 2023 (IPS)

One message that was repeated throughout last month’s summit on a so-called “New Global Financing Pact” was that developing countries urgently need mass financing to tackle the climate and biodiversity emergency. And there is not enough of it in public coffers.

Unfortunately, the false narrative that the only way to fill this gap is to ‘leverage’ more private finance also persisted. The resulting Paris Agenda for People and Planet stated: “meeting global challenges will depend on the scaling up of private capital flows.” This should be achieved in large part by revamping the role of multilateral development banks (MDBs).

Last December, the World Bank Group (WBG), the biggest MDB, launched its so-called “evolution” process, with the support of G7 governments. This set the institution to work on increasing its lending by deepening its reliance on the financial market.

The dogged reliance on private capital as saviour appears to be steeped in capitalist realism. It is believed to be implausible for the public sector to deliver the scale of financing needed to address the climate and development crisis.

Private capital, which can be leveraged using public money, securitised and reproduced is favoured as the pragmatic choice. However, while the financing gap to deliver on the sustainable development goals is very real, the neat narrative buttressing private capital obscures two empirical realities.

First is the absence of rich countries’ political will to deliver on agreed commitments, from the 0.7 per cent of Gross National Income in development aid made in 1970 to the US$100 billion per year climate financing agreed in 2009.

Second, the ongoing systemic wealth drain from developing to rich countries. Since 1982, developing countries as a whole have transferred an estimated US$4.2 trillion in interest payments to global north-based creditors, far outstripping aid flows and concessional lending during the same period.

Additionally, tax-related illicit financial flows cost countries hundreds of billions of dollars in lost tax income every year. Debt servicing is draining approximately 25 per cent of total government spending in developing countries as a whole, hijacking both climate and SDG (Sustainable Development Goals) financing.

The allure of private finance

Last month, in a new attempt to ‘leverage’ private capital, the WBG launched the Private Sector Investment Lab, a partnership with the private sector that aims to “rapidly scale solutions that address the barriers preventing private sector investment.”

Furthermore, it announced “an expanded toolkit for crisis preparedness, response, and recovery” that includes providing “new types of insurance” to backstop private sector projects. This follows a not-so-new pattern articulated in the WBG’s Evolution Roadmap draft published in April

While the WBG is set to expand its mandate to incorporate “sustainability” considerations, the approach is still rooted in a heady cocktail of de-risking instruments such as risk guarantees, blended finance and first-loss positions by governments, and in tweaking national regulatory frameworks to enable a business-friendly environment.

The goal is as singular as the solution: to make investment more profitable for the private sector. The (optimistic) rationale: ‘incentivising’ private capital will ‘crowd in’ economic growth and climate, biodiversity and development financing. This assumes that it is possible to equate commercial goals and the public interest, which is not always the case without creating financial barriers that undermine access to public services, such as user fees.

It also ignores that risks are transferred from private to public actors, further increasing debt vulnerabilities, and the developmental dilemma posed by prioritising private profits over distributive goals and state sovereignty.

In ongoing discussions about the Roadmap, it is yet to be seen if the WBG will incorporate sufficient provisions within its plans to ensure the recipient state’s right to regulate in the public interest for a rights-based economy that upholds distributive justice. That is, economic, climate and gender equity.

Solutions with legitimacy

The largest coalition of developing countries in the United Nations (known as the “Group of 77”), representing 134 nations, have been calling for reform of the international tax, debt and financial architecture for many years.

These calls, enshrined in resolutions adopted by the UN General Assembly, includes establishing a multilateral legal framework that would comprehensively address unsustainable and illegitimate debt, including through extensive debt restructuring and cancellation, and agreeing on a UN Tax Convention with equitable participation of developing countries to address tax abuse by multinational corporations and other illicit financial flows.

As was made clear last month in several developing countries’ calls, a reform agenda should not be limited to merely boosting MDBs’ coffers – via financial innovation techniques – but rather include governance reform that meaningfully augments the voice and vote of developing countries in macroeconomic decision-making, which is the litmus test for legitimate and democratic economic governance.

Furthermore, for many in civil society, for the WBG to “evolve” in a credible way it must also seek to independently evaluate the development impact of its policy prescriptions for developing countries over recent decades. Civil society organisations are stating this again in official feedback on the Evolution Roadmap submitted to the Bank this week.

The ways in which the mythology of the private financier is construed dangerously omits the concrete reforms for historical economic justice, and state sovereignty, that the global south are demanding. This disjuncture calls for a clear-eyed questioning of the allure of private finance. Here lies the difference between new forms of extraction as opposed to change towards redistributive justice.

https://www.eurodad.org/civil_society_calls_for_rethink_of_world_banks_evolution_roadmap

Bhumika Muchhala is Political Economist and Senior Advisor at Third World Network
and María José Romero is Policy and Advocacy Manager at the European Network on Debt and Development (Eurodad)

IPS UN Bureau

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Credit: IMF

By Bhumika Muchhala
NEW YORK, Oct 26 2022 (IPS)

Held in-person for the first time in three years, the annual meetings of the International Monetary Fund and World Bank last week in Washington, D.C. failed to offer solutions to the dozens of developing countries in debt distress or on the forewarned global recession instigated by monetary tightening.

Meanwhile, austerity measures are reinforced through a repeated emphasis on fiscal tightening, underpinned by a monetarism upheld by the IMF and rich country central banks.

The scenario of a dual tightening in both monetary and fiscal policy is only exacerbated by the absence of political will among creditors to cooperate in debt restructuring, bolstered by narratives of losing market access to financial flows.

New loan programs are created by the IMF to boost concessional financing for food price shocks, climate transitions and liquidity shortfalls. However, these very loans create new debt and reinscribe the very austerity measures that worsen the challenges of inflation and climate.

Within these asymmetries of power and access in the world economy, and the foreclosing of developmental policy tools for developing countries, what then is the fate of the vast majority of people and nations in the world?

The IMF’s World Economic Outlook warned of an imminent recession amidst a shift of financial regime from cheap and easy money to an aggressive synchronization of global monetary tightening.

“In short, the worst is yet to come, and for many people 2023 will feel like a recession,” said IMF Chief Economist Pierre-Olivier Gourinchas. Convening the world’s finance ministers, central bank governors, and financial market leaders, the IMF announced a slowdown in global growth by 2.7%, down from the 3.2% growth projected for this year.

On the heels of a global pandemic followed by the war in Ukraine, the US Federal Reserve’s interest rate hikes, aimed toward domestic price stability, is creating a global push toward more expensive money.

A stronger dollar, higher international and domestic interest rates, coupled with depreciating currencies and sell-offs in many developing country assets, is generating protracted economic and social pain across the globe.

The spillover impacts are seen in soaring food and fuel prices, increases in dollar-denominated debt and imports costs, volatile commodity markets and debt distress intensifying into a 50-year record across the developing world.

The UN’s 2022 Trade and Development Report warns that the most vulnerable countries and communities are being hit the hardest. Warnings of another ‘lost decade’ abound, in that the current interest rate hikes resemble those of 1979-82, which triggered debt crises in over 40 developing countries where ‘structural adjustment programs’ through IMF loans contributed to a decade of lost growth and development across the Global South.

Inflation targeting consumes financial rule makers

The tightrope global central banks are walking is acknowledged by IMF Managing Director, Kristalina Georgieva, who says, “Not tightening enough would cause inflation to become de-anchored and entrenched — which would require future interest rates to be much higher and more sustained, causing massive harm on growth and massive harm on people.

On the other hand, tightening monetary policy too much and too fast — and doing so in a synchronized manner across countries — could push many economies into prolonged recession.”

Meanwhile, the topline recommendation of the IMF’s Global Financial and Stability Report is that “central banks must act resolutely to bring inflation back to target.” Doing otherwise would risk credibility and market volatility, or in other words, create difficulties in market access to financial and investment flows and/or worsen borrowing terms.

One of the central tenets of neoclassical economic consensus among global central banks is that of maintaining price stability through a low inflation target of 2%. Financial rulemakers have for decades deemed inflation a threat to economic growth by way of the specter of hyperinflation. However, empirical evidence points to the contrary.

Collating data from 31 countries from 1961-94, World Bank chief economist Michael Bruno and William Easterly concluded that the inflation does not lead to lower growth, even when the significant oil price increase of 1974-75 is included.

The US Federal Reserve’s own historical archives demonstrate that the so-called ‘Great Inflation’ of 1965-82 did not harm growth either. In light of these studies by neoclassical economists and central bank institutions, economists Anis Chowdhury and Jomo Kwame Sundaram argue that “there is no empirical basis for setting a particular threshold, such as the now standard 2% inflation target – long acknowledged as ‘plucked from the air.’”

From press conferences to panel speeches, the IMF leadership repeats that the danger of “entrenched” inflation requires a global commitment to tackle it head on through global to domestic monetary tightening.

This stems in large part from a belief that once inflation begins, it has an inherent tendency to accelerate. Consequently, IMF loans and surveillance recommend central bank independence (from the executive) as a means to ensure unbiased financial policymaking, while critics contend that it has only enhanced the influence and power of big banks and financial actors, largely at the expense of the real economy.

However, history again demonstrates that inflation does not accelerate easily, even when workers have more bargaining power, or wages are indexed to consumer prices – as in some countries.

Lost decade redux?

The IMF’s Fiscal Monitor, published on October 12, called upon all policymakers to “maintain a tight fiscal stance, so that fiscal policy does not work at cross-purposes with monetary policy.” In essence, fiscal policy must serve monetary policy in its “fight against inflation,” by retrenching public spending for the singular objective of sending “a powerful signal that policymakers are aligned in the fight against inflation.”

The rationale is straightforward: “In a time of high inflation, policies to address high food and energy prices should not add to aggregate demand.” Increased demand is anathema, as it “forces central banks to raise interest rates even higher.”

The fiscal tightening is not new. In 2021, 131 governments started scaling back public spending. The geographic and population scale of austerity cuts is expected to intensify up to 2025.

Governments are implementing, or discussing, a range of fiscal adjustment policies, such as targeting social protection, regressive taxation, reducing public expenditure in social sectors, eliminating subsidies, privatizing public services or State-Owned Enterprises, pension reforms, labor flexibilization.

All have long histories of negative social impacts on economic and social rights, such as the right to food, water, health, housing, education, and livelihoods. The human impact will reach over 6 billion people, or 85% of humanity, in 2023.

In a time of poly-crisis, retrenching public spending and imposing regressive taxes that disproportionately hurt the poor, especially women, not only extinguishes the hope of achieving the Sustainable Development Goals by 2030, but more fundamentally, regresses decades of fighting poverty.

Meanwhile, the IMF’s Board has approved the creation of two new loan facilities, the new Food Shock Window, available for a year to countries reeling from the global food price crisis, and the Resilience and Sustainability Trust (RST), through which many rich countries may re-channel their unused Special Drawing Rights if the funds are used to address “external shocks, including climate change and pandemics” by rules set out by the Fund.

While both loans address urgent threats, they also create new debt. The RST is also conditional upon an IMF loan program hinged on fiscal consolidation.

The severity of the food crisis warrants aid in the form of grants not loans. Based on prior research done by the World Bank and Center for Global Development on food price spikes, Oxfam estimates that another 65 million people could be pushed below the $1.90 extreme poverty line as a consequence of food price increases.

Debt crises nearing point of no return

Despite the imminent threat of a debt crises imploding across many developing countries, sovereign debt solutions, the Group of 20, IMF, World Bank as well as the Institute of International Finance, the consortium of private financial actors, have to date failed to create viable solutions.

The G20’s Debt Service Suspension Initiative, which suspended debt payments for 73 low-income countries, was terminated at the end of 2021. And two years after the Common Framework was established in 2020, it’s multiple flaws have led even the World Bank to call it a ‘slow-motion debt tragedy.’

One key dilemma is the lack of political will to enforce a comparability of treatment, where all creditors, including private, participate on equivalent terms or restructuring and in the principle of burden sharing. Another challenge is the glacial pace of restructuring is not only protracted but also riddled with uncertainty.

Middle-income countries, where the vast majority of the world’s poor reside and where serious debt defaults are taking place, are not included. Low-income countries fear that access to commercial financing will be cut off if they apply to the Common Framework, as evidenced by Fitch and S&P slashed Ethiopia’s sovereign rating when the nation applied to the Common Framework in 2021.

Out of the three countries that have so far asked for their debt to be treated – Chad, Ethiopia and Zambia – only Zambia has seen some forward movement.

The narratives coming from within the IMF reiterate a subservience to market access and creditor interests. Across panels and webinars, senior level IMF staff remarked that a large debt restructuring is a serious event, which may result in a decrease of future multilateral and private financing, in amounts that outweigh the financing gained in relief or restructuring.

Some warned that private creditors will not participate in debt restructuring where national fiscal instability reigns. To secure market access, countries have to tighten fiscal belts even more. The logic here is that financial stability imperative for accessing private credit requires fiscal consolidation that generates social devastation.

The lack of official creditor participation and the dilemma of transparency, referring in large part to China, was repeatedly stressed as a key problem. At the same time, an old and wholly condescending trope of the need to increase debtor discipline in light of its financial mismanagement and irresponsibility repeatedly emerged.

Meanwhile, there is no mention of the often-legalized corruption of private actors, such as tax evasion and avoidance, speculative and/or rigged trading. Amidst the talk, actual debt solutions are in omission. While political will is already in short supply, the lack of cooperation toward problem-solving is exacerbated by the finger-pointing between the creditor groups of bilateral, private, and multilateral.

History has repeatedly illustrated the way forward on debt, and the waves of austerity that it generates. For decades, advocates and policymakers alike have called for a transparent and binding debt workout mechanism within a multilateral framework for debt crisis resolution, in a process convening all creditors.

The UN General Assembly has adopted multiple resolutions calling for such a mechanism over the years. Debt justice movements from across the developing world have urged for the cancellation of all unsustainable and illegitimate debts in a manner that is ambitious, unconditional, and without repercussions for future market access.

Past cases show how reducing debt stock and payments allow for countries to increase their public financing for urgent domestic needs.

The principle of burden-sharing ensures genuine debt relief, as does the commitment to include all creditors in an automatic or orderly way. Recognizing that multilateral institutions account for around one-third of the outstanding debt of low- and lower-middle-income countries, the World Bank and IMF must participate in such efforts.

They should both cancel debt payments owed, and the IMF should eliminate surcharges. Protection needs to be provided to debtor states against holdouts and lawsuits by non-participating creditors, while laws and procedures for responsible borrowing and lending need to be ensured to protect citizens and communities against corrupt, predatory and odious debts.

Last but not least, an automatic mechanism for a debt standstill in the wake of an extreme exogenous shock should be created. As proposed by the G77 group of developing countries in the UN General Assembly in response to the global financial crisis of 2007-8, such a mechanism must “be established for a determined period in response to external catastrophe events, as climate and natural disasters, health pandemic, military conflict and inflation.” The prescience of the G77 group in 2009 offers a salient message.

While the developing world has little recourse but to ‘dance to the tune of the Federal Reserve,’ the devastating toll of the human, social and economic crisis must be addressed through tools and choices that can be generated.

The question is how to muster political will, be it from the moral pressure of global justice movement to analysis of the effects that soaring poverty and intensifying climate change will have on the very survival of our planet and species.

Bhumika Muchhala is development economist and senior advocate on economic governance at Third World Network. She works on research, analysis, advocacy and public education on the international political economy of development, feminist economics and decolonial theory and approaches.

IPS UN Bureau

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The IMF and G20 concluded their Annual Meetings without real solutions to debt crises, fiscal austerity and financing shortfalls across the Global South. Credit: hrw.org

By Bhumika Muchhala
NEW YORK, Oct 19 2021 (IPS)

Last week’s annual meetings of the International Monetary Fund (IMF), World Bank and G20 finance ministers illustrated that despite a historic debt crisis sweeping across developing countries and their urgent need for external financing for health and economic recovery, global economic institutions governed by rich countries do not possess the political will to deliver meaningful solutions. The inadequacy of the G20’s debt relief framework, which has failed to restructure sovereign debt since its inception, stands without change or any fresh effort to mobilize private sector participation in debt relief.

Despite the broad call to recycle SDRs from rich to poor countries, the few countries that made commitments to do so are employing a conditional loan mechanism which will further drive fiscal consolidation measures in low-income countries.

Deprived of the policy independence and vaccines that allow advanced economies to enact massive fiscal stimulus programs and open their economies, many developing countries are facing a cycle of deflation and despair.

The IMF’s flagship World Economic Outlook (WEO) confirms the entrenchment of global divergence between North and South by reporting that developed countries will return to pre-crisis growth projections in 2022 while developing countries’ recovery will stretch to 2024, in a journey marked by “permanent economic scarring and revenue losses” for the South.

The WEO concludes that unemployment is a major driver of this gap and unemployment rates would be persistently higher if trouble with vaccinations leads to COVID-19 becoming ‘endemic.’

A brand new (and conditional) loan to recycle SDRs?

In the months preceding the largest ever allocation of $650 billion SDRs was issued by the IMF on August 23, a momentum to recycle SDRs from rich to poor countries was generated by a broad range of actors, including the UN, governments and civil society.

A milestone was achieved when G7 leaders committed to voluntarily channel $100 billion of their unused SDRs. Despite this amount falling short of the IMF’s own conservative estimate of the $200 billion financing shortfall in low-income countries between 2021 and 2025, the move was welcomed in light of the unequal distribution of SDRs based on IMF members’ quotas, where over 60% (or $400 billion) of the SDRs go to developed countries.

After France announced it will channel 20% of its SDR allocation to African countries, with a focus on vaccine donations, all eyes were on the Annual Meetings for announcements by other rich countries.

In a virtual panel last week, IMF Managing Director Kristina Georgieva said that the “100 billion number is very achievable,” alluding to several countries who had stated, but not yet committed exact amounts, their intentions to channel SDRs. Given the urgency of fiscal space and external financing across developing countries, more details were expected.

The Fund was tasked by the G20, G7 and IMF membership to design a mechanism to recycle the funds. In response, the IMF proposed two key pathways, that of scaling up the long-standing Poverty Reduction and Growth Trust (PRGT) concessional loan facility for low-income countries and establishing a new Resilience and Sustainability Trust (RST) that would be accessible to middle-income countries.

While both proposals were accepted by the G20 and the G24 group of developing countries in the IMF, years of critique looms over the PRGT for its fiscal consolidation conditions, including by the Fund itself. Empirical research has long illustrated how the PRGT shrinks public expenditure for indispensable social services and employees in health and education and promote regressive taxation measures that disproportionately hurt women and low-income communities.

Meanwhile, the RST, which is still being formulated and will be presented for approval to the Fund’s Board in 2022, is the first loan facility to address balance of payment risks stemming from climate change and pandemics, featuring conditionality related to climate or pandemic preparedness designed and monitored in coordination with the World Bank.

There are three key concerns that already emerge in the little that is currently published or known of the Fund’s design of the RST. First, access to the RST will be contingent on having a conditional IMF loan program already in place. According to one of the only published sources on the RST, it would likely ‘top up’ a regular IMF loan program.

Second, while many in the international community have asked the IMF to support countries with climate transition risks, including financing for a just transition, the RST should not be counted as climate finance. The latter is direct budget support for climate mitigation and adaptation, while the RST addresses budget distortions that may arise from climate change.

Third, it remains to be seen whether the RST’s stated objective of catalyzing private and other multilateral financing will involve creating an enabling environment for the vested interests of private finance in creating investible climate-oriented schemes that yield more for profit than for people.

In a letter to G20 finance officials and the IMF, over 280 civil society organizations and networks, including researchers and academics, called for a set of principles to govern the fair channeling of SDRs to developing countries.

These principles include, for example, avoiding the attachment of policy conditionality, accrual of more debt, double-counting of SDRs as aid, and ensuring access for middle-income countries that have been excluded from multilateral initiatives.

The letter stresses the importance of recycling SDRs through grant funding that facilitates budget support for public services and a fair recovery that supports climate justice, and tackles economic and gender inequality, including the unpaid care burden that women bear, and the pandemic exacerbated.

A critical opportunity to progressively alter the basic tenets of development financing in the current global financial architecture has been missed by the Fund and its rich country members.

G20 fails to address record high debt distress

As the G20’s wholly inadequate debt moratorium concludes at the end of 2021, the World Bank reports that the debt burden of low-income countries rose to a record $860 billion and half of the world’s poorest countries are in external debt distress as a result of the pandemic. And yet, the G20’s finance ministers again fail to advance real debt solutions such as debt relief, debt cancellation and fair restructuring mechanisms for countries requesting debt reduction.

Indeed, no new relief scheme or possibility of a debt standstill was announced by the G20 finance minister’s communiqué, even with the imminent closure of its Debt Service Suspension Initiative (DSSI).

Meanwhile, the G20 proved once again their lack of power to increase private sector creditor participation in debt reduction initiatives beyond mere reaffirmations. At the Spring Meetings in April 2021, Mohamed El-Erian, President of Queens’ College, Cambridge and Chief Economic Advisor at Allianz, said at a webinar that the Paris Club process of case-by-case debt treatments is “not enough to overcome coordination problems in the private sector; the Paris Club needs to impose more of a stick for the private sector.”

The inability to regulate the private sector into debt relief participation alludes to how the ‘chutzpah‘ of bondholders is a direct outcome of the way G20 leaders and their central banks have nurtured private finance to become so powerful that they now find themselves unable to curtail its might.

The Jubilee Debt Coalition stated in their press release that the G20 are asleep at the wheel as the debt crisis intensifies in low-income countries, pointing out that the DSSI has suspended less than a quarter of debt payments, while the G20’s Common Framework for Debt Treatments (CF) has restructured no debt.

In particular, private creditors received the largest amount of debt payments, $14.9 billion, and suspended just 0.2% of debt payments out of total debt suspended since the pandemic started. In early 2021, Chad, Ethiopia and Zambia applied to the CF for debt restructuring. So far, none have been successful, in large part due to private lenders refusal to take part in debt reductions. Meanwhile, the current rise in global interest rates will increase the cost of debt servicing, worsening debt crises and preventing indebted countries from both economic and health recovery while also triggering capital outflows and its attendant ripple effects of currency depreciation and financial instability.

Meanwhile, the current rise in global interest rates will increase the cost of debt servicing, worsening debt crises and preventing indebted countries from both economic and health recovery.

In response to the wave of debt distress sweeping across the South, the UN Conference on Trade and Development has called for substantive debt relief and outright cancellation. The counterfactual, they state, is another lost decade for development marked by developing countries using their vital public finances for debt payments rather than investing in pandemic and economic recovery.

Even the Fund’s Fiscal Monitor report highlights limitations of the international debt architecture to support orderly restructurings as a core risk for global pandemic recovery.

In stark contrast to the G20, several developing countries at the 76th UN General Assembly in September called for debt cancellation, comprehensive debt restructuring and debt relief linked to middle-income countries or to the UN Sustainable Development Goals (SDGs).

Small island and developing states called for debt relief in the context of a new vulnerability index for the provision of multilateral support. Against these segmented scales of political and economic power, a democratization of decision-making in the global debt architecture is increasingly urgent.

As long as the multilateral response to the debt crisis generated by the economic fallout of the pandemic is governed by creditor countries, the decades old imperative to establish a debt workout mechanism capable of carrying out timely and fair restructuring, including debt cancellation, will remain elusive.

Fiscal austerity continues to exacerbate global inequalities

In Georgieva’s policy agenda last week, she underscored that health spending is a priority and that where fiscal space is limited, “lifelines should be increasingly targeted toward the most vulnerable groups.” However, in her institution’s Fiscal Monitor, an explicit priority is placed on reducing deficit and debt levels, “undertaking structural fiscal reforms (such as pension or subsidies reform) … and committing to fiscal rules that lead to deficit reduction in the future.”

The IMF’s historical preoccupation with fiscal consolidation is a reflection of capital market and investor reasoning, in which the only path to securing access to low-cost borrowing for most developing countries is “strengthening the credibility of their fiscal policy.”

Embedded within a financial architecture shaped by a short-term and speculative logic, and pro-austerity bias, the South’s public budgets are subject to private interests that are in diametric opposition to equitable and rights-based development.

Consequently, the priority of securing the confidence of creditors is illustrated by Oxfam’s finding that out of 107 IMF loans, 90 require fiscal consolidation measures across 73 countries. Instead of facilitating public investment in health, education and social protection systems, medium-term policy advice in the loans cut and freeze public wage bills, through which public employees are financed, and increase or expand value-added and general sales taxes.

Unless the autonomy and impunity enjoyed by global finance is regulated, the potential of fiscal policy to play a role in sustained decent work creation and pursuing the right to equitable development is structurally constrained. Fiscal policy, when it invests in the public system that services communities, can open up political space to shift the balance of power between the market and the state in managing the economy and delivering long-term economic resilience through providing people with equity and access to public services and social systems.

Deepening inequality and poverty across the South is a direct result of the failure of effective multilateralism. Between 65 and 75 million people have been thrown into poverty, the gap between the top 10% and bottom 80% mushrooms, and achieving the SDGs by 2030 is rendered close to fantasy in many developing countries.

Women have been dealt the most unequal hand, experiencing at least $800 billion in lost income globally in 2020 while low-wage informal work and unpaid care work has increased beyond measure.

Ultimately, the principles of historical responsibility, distributive justice and interdependency of recovery must guide the centers of financial and economic clout to support rather than hinder health and economic recovery for the most vulnerable regions of the South.

Tinkering on the technocratic smokescreens of power and resource asymmetries created by centuries of colonial history, and more recently by four decades of neoliberalism that has institutionalized a pathologically unequal financialized world economy, will no longer suffice. Structural change is indispensable, precisely because the counterfactual may well be a lost decade for the vast majority of the human race.

Bhumika Muchhala is Senior Researcher and Policy Advocate on Global Economic Governance at the Third World Network.

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Bhumika Muchhala of Third World Network. Credit: UN Photo/Paulo Filgueiras

By Bhumika Muchhala
UNITED NATIONS, Aug 7 2015 (IPS)

At about a quarter to seven on the evening of Sunday, Aug. 2, the member states of the United Nations adopted the post-2015 development agenda outcome document, titled “Transforming Our World: The 2030 Agenda.”

As governments endorsed the 29-page product resulting from almost two years of transparent and relatively democratic negotiations, the final 48 hours had witnessed a very different story, that of a sharp turn towards closed-door consultations and last-minute bargaining chips.What transpired requires a moment to reflect on the reality of vested interests and deeply unequal power between negotiating governments.

The 2030 Agenda is arguably the most ambitious and expansive development agenda that has ever been set in motion. It will be in effect for 15 years (2015-2030) and is to be implemented on all levels ranging from the global and multilateral level (such as the World Bank), regional (such as regional commissions and funds) and national (both government level and development agencies).

The main meat of the 2030 agenda is the Sustainable Development Goals (SDGs), comprised of 17 goals and 169 targets covering economic, social and environmental issues ranging from inequality, poverty, climate change, infrastructure, energy, industrialisation, consumption and production, health, education, ecosystem, biodiversity and oceans.

These SDGs will be the first global development paradigm to be marked by universality, meaning that all countries are to take action toward sustainable development, including the rich and powerful. This distinguishes the SDGs from the Millennium Development Goals (MDGs) of 2000-2015, which was based on an explicitly donor-recipient model of aid from the rich countries to the poor.

For all 193 governments of the U.N. to come to an agreement on this agenda was a breathtaking feat of conflict and compromise. However, over the first weekend of August, the otherwise open and recorded negotiations went into radio-silence in the back-rooms as the United States reportedly issued an ultimatum without which they refused to adopt the document.

The U.S. wanted to replace the word “ensure” with the word “promote” in two goals that talked about ensuring that the profits and patents reaped from the world’s natural biodiversity are shared fairly with the countries and communities from which they are extracted. The legal agreement on biodiversity clearly states the word “ensure.” By injecting the much weaker word “promote,” the U.S. tried to dilute hard-won legal language to something that is nebulous at best and unenforceable at worst.

This amendment essentially lets rich and powerful countries, whose corporations and research institutions extract the vast majority of biodiversity resources of the world, off the hook from their legal commitments to equitably share benefits and rewards that come from these resources. Developing countries were infuriated because most of this extraction happens in their countries, specifically, from the seeds, plants, forests and land on which most indigenous peoples across the world live in.

The negotiating group of 134 developing countries had repeatedly stated that the global goals were not to be re-opened for negotiation at the last minute, that they were sacrosanct. The fact that this firm position was flagrantly violated as a last-minute take-it-or-leave-it deal filled the air of the U.N. conference room with a palpable distrust and tension. People rushed in and out of conference rooms, furiously whispering in each other’s ears while working day and night to reach a consensus, no matter what.

Similarly, the progressive language on debt was also undermined, reportedly by the European Union this time. Up until the morning of Sunday, Aug. 1, the document said: “We recognize the need to assist developing countries … through debt financing, debt relief, debt restructuring and sound debt management, as appropriate.” This language recognised the sound development economics arguments called for by numerous economists and developing countries, on the urgent need to address external debt if any development goals are to be achieved.

By late afternoon, this was inserted: “Maintaining sustainable debt levels is the responsibility of the borrowing countries…”  Plucked out of the outcome document of the Financing for Development conference in Addis Ababa last month, this sentence harmfully faults borrowing countries for their debt burdens without due attention on the complex role of lenders and creditors, a point that has been repeatedly emphasised in the Greek case.

It’s a stark regression from the notion of co-responsibility between lenders and borrowers in previous U.N. documents from Monterrey in 2002 and Doha in 2008.

The fear of such retrogression in language from the Addis Ababa document drove developing countries to keep insisting until the last hour that it not be annexed to the 2030 Agenda as developed countries called for. In the end, the Addis Ababa text was not annexed. But the compromise was this sort of selective importation of language. Other attempts were also proposed by developed countries in the final hours but were steadfastly fought back, such as removing reference to “policy space,” arguably the most vital demand of developing countries.

Although policy space is mentioned twice in the 2030 agenda and once in the SDGs, it is qualified with language from the Addis Ababa text in one of these three mentions. This language is: “…while remaining consistent with relevant international rules and commitments.” This negates the very point of policy space, which is to address the very “international rules and commitments” that constrain the ability of a state to formulate and carry out development-oriented policies and pathways.

On the other side of the North-South firewall, African and Arab countries called for the removal of a critical paragraph recognising human rights as a principal aim of sustainable development and a commitment to non-discrimination for all. While the paragraph was saved from this late Friday night intervention, the essential term “discrimination” was scrapped and the word “fulfill” was demoted to “promote.”

Issues such as ethnicity, migration status, culture, economic situation or age as a protected status were also scrapped although “race, colour, sex, language, religion, political opinion, national or social origin, property, birth, disability or other status” remain.

African and Arab diplomats argued against the recognition of LGBT rights and objected to the inclusion of “all social and economic groups,” while many Latin American countries, the European Union and the U.S. firmly opposed the offense against human and civil rights.

It is now more than two decades since the U.N. reaffirmed the interdependence of human rights and development at the Vienna World Conference on Human Rights and more than 20 years since the U.N. first recognised sexual orientation and gender identity as prohibited grounds of discrimination.

The 11^th hour turn from openness to opacity reflects a crisis of multilateralism in the world’s primary locus of multilateralism, the U.N. After all, the U.N. is supposed to be the most democratic and universal institution that exists to date, one in which every nation has a vote, unlike the rich country-dominated IMF or World Bank.

The private bilateral consultations over the weekend of Aug. 1-2 were, according to many independent observers, a manufactured crisis that opened the door to text that endangers global development and law.

The problem is that backroom dealings and pressure campaigns have ominous implications for the legitimacy and fairness of international negotiations, not to mention the political will of governments to take the sustainable development goals seriously.

The new global development agenda has powerful potential to make an ambitious and universal dent of urgently needed progress in our economies, societies and environments.  At the same time, process is also important. What transpired this first weekend of August requires a moment to reflect on the reality of vested interests and deeply unequal power between negotiating governments.

(Note: As of Aug. 6, 3:00 p.m., the final outcome document of the post-2015 development agenda has not yet been officially published by the U.N. Secretariat. The last draft available is the Aug.1  draft without the changes noted above.  There is some speculation and concern as to why there is a delay of four days, which is only compounding the lack of transparency in the final hours of negotiation.)

Edited by Kitty Stapp

Excerpt:

Bhumika Muchhala of Third World Network. Credit: UN Photo/Paulo Filgueiras

By Bhumika Muchhala
ADDIS ABABA, Jul 23 2015 (IPS)

The United Nations is the only universal forum that connects systemic issues to the global partnership for development. The latter recognises North-South cooperation based on historical responsibility and varying levels of development and capacity among member states of the U.N.

And there is a vital acknowledgement of the global rules and drivers that determine national policy space for development.While prospects are uncertain for now, what is increasingly clear is the stark fact that the geopolitical offensive in the U.N. has not abated. If anything, it has become even more pronounced.

With regard to such systemic reforms, the Addis Ababa outcome on Financing for Development (FfD) explicitly ignores a landmark initiative in the U.N. itself to establish an international statutory legal framework for debt restructuring.

Instead, it reaffirms the dominance of creditor-led mechanisms, such as the Paris Club, whose inequitable governance was criticised in the Doha Declaration of 2008.

The Addis outcome also welcomes existing OECD and IMF initiatives which do not address the scale of debt problems afflicting many developing countries today, such as Jamaica, which according to its finance minister’s intervention in Addis Ababa, won’t be able to finance its SDGs until its external debt can achieve sustainability in 2025.

Clearly, servicing creditors has to precede development goals. Reversing this order by incorporating national development financing needs into debt sustainability analyses was neglected by most member states in the FFD negotiations.

In spite of the global recognition that capital controls are crucial to developing countries ability to protect themselves from financial crises, the outcome document demotes the use of “capital flow management measures” as a last resort “after necessary macroeconomic policy adjustment.”

This is a regression from the 2002 Monterrey Consensus, which recognised that “Measures that mitigate the impact of excessive volatility of short-term capital flows are important and must be considered.” Financial regulations, particularly on derivatives trading, goes unheeded.

Similarly, the Addis outcome makes no call for special drawing rights (SDR) allocations. Again, this is a step back from Monterrey, which addressed SDR allocations in two clauses. SDR allocations, if carried out on the basis of need, could serve as a development finance tool by boosting developing countries foreign exchange reserves without creating additional dependency on primary reserve currencies.

Unlike most global economic arenas, FfD has the mandate to address international monetary system reform in a development-oriented manner. The Addis outcome, again, missed this chance entirely.

Despite these critical retrogressions, there are two beacons of light in the Addis outcome: the establishment of a Technology Facilitation Mechanism (TFM) in the UN that supports SDG achievement, and an institutionalized FFD follow-up mechanism that will involve up to five days of review every year to generate “agreed conclusions and recommendations.”

However, this follow-up forum is to be shared with the review of MOI for the post-2015 development agenda, going against developing countries call for the FFD follow-up to be distinct and independent from that for the post-2015 development agenda in order to maintain focus on the specificities of the FFD agenda.

While the TFM has positive potential, especially if it address intellectual property rights and endogenous technological development in developing countries and does not become a platform to facilitate the ‘green economy’ through the , it is at the same time not tantamount to the financing items that comprise the development agenda. As such, the TFM helps obscure the paucity of political ambition on the FFD agenda.

A crisis of multilateralism

Perhaps the most sordid mark of a process that occurred in bad faith is the fact that negotiations never transpired in Addis Ababa. There was no official plenary, no proposals articulated and no document projected onto a screen to amend.

Instead, what took place over four days in Addis Ababa was a behind-the-scenes pressure campaign exerted by the most powerful countries onto most developing countries. One developing country delegate revealed that the pressure included bullying and blackmailing to silence many developing countries who can’t afford to be politically defiant.

Another delegate disclosed that he had never before experienced such an absence of transparency within the U.N. Some observers commented that what transpired in Addis Ababa was akin to a ‘Green Room’ style of discussions, where private talks are held in small groups without any gesture of openness or transparency.

A central strategy of developed countries was the distortion of developing country narratives and the creation of new narratives to undermine the longstanding arguments of developing countries. Throughout the FFD negotiations in New York, the European Union (EU) created a narrative of ‘the world has changed.’

They argued that developing countries’ emphasis on international public finance as the primary source for financial resources and developing countries’ red line on the Rio principle of CBDR does not reflect a world that has changed since Monterrey in 2002.

Much of the FfD text is still premised on an outdated North-South construct, the EU said, which does not reflect the complexity of today’s world. Germany reinforced the EU’s position, adding that the G77’s positions do not consider the reality that emerging economies are now capable of taking on some of the financing burdens for development.

In response to this challenge laid on middle-income countries, India provided a succinct response. India pointed out that the 30 richest countries of the world account for only 17 percent of the global population, but over 60 percent of global GDP, more than 50% of global electricity consumption and nearly 40 percent of global CO2 emissions.

The UN report on “Inequality Matters – World Social Situation 2013,” said that in 2010, high-income countries generated 55 percent of global income, while low-income countries created just above 1 percent of global income even though they contained 72 percent of the global population. India clarified that despite the relatively faster rates of growth in developing countries, international inequality has not fallen.

The above UN report on inequality shows that that excluding one large developing country (e.g. China), the Gini coefficient of international inequality was higher in 2010 than as compared to 1980. India concluded that these figures attest to the fact of the North-South gap, saying that member states will be doing themselves a disservice if reality is misrepresented.

Implications for post-2015 and climate change

The ways in which key words such as “transformative,” “ambitious,” “rule of law” and “enabling environment” were used, or misused, by developed country negotiators in the FFD negotiations have made their developing country counterparts wary of the gap between actual meaning and rhetorical application.

The phrase ‘enabling environment’ is used by developing countries to refer to an enabling environment for development. This involves development-oriented reforms in the international financial and trade architecture, such as addressing unfair agricultural subsidies in developed countries or pro-cyclical macroeconomic conditions attached to financial loans.

However, developed countries also use the phrase ‘enabling environment’ with equivalent vigor. Except that they are referring to an enabling environment for private investment, such as business-friendly taxes and labour market deregulation.

The experience of the FfD negotiations suggests that when these terms are tossed about in the post-2015 and COP 21 negotiations, they will be associated with limiting the policy space of developing countries. For the most part, this limitation is linked to facilitating private sector activity through multi-stakeholder or public-private partnerships that involve shared financing between multiple entities while most decision-making remains in the seat of the private sector.

Meanwhile, an implicit ebbing, if not a reneging, takes place on the public and international financing obligations of developing countries. Consequently, financing and decision-making shifts to institutions where developing countries have to compete with representatives of the private sector and private foundations for voice and representation.

As the last two weeks of post-2015 development agenda negotiations conclude in New York, the repercussions of the FFD experience remain to be witnessed. Will developing countries unite with renewed strength and determination to bring multilateralism back? Or will the retrogression in commitments and actions induced by Addis Ababa drag the post-2015 outcome down to its lowly ambition?

While prospects are uncertain for now, what is increasingly clear is the stark fact that the geopolitical offensive in the U.N. has not abated. If anything, it has become even more pronounced.

In fact, the current geopolitical dynamics in the U.N. renders a troubling irony to the international community as it embarks on its most ambitious sustainable development paradigm for the next 15 years.

Part of this Op-Ed can be read here.

Edited by Kitty Stapp

Excerpt:

Bhumika Muchhala of Third World Network. Credit: UN Photo/Paulo Filgueiras

By Bhumika Muchhala
ADDIS ABABA, Jul 22 2015 (IPS)

The third Financing for Development (FfD) conference in Addis Ababa concluded last Thursday, July 16, in bad faith as developed countries rejected a proposal for a global tax body and dismissed developing countries’ compromise proposal to strengthen the existing U.N. committee of tax experts.

Usually, when large conferences end after conflicts and climax in intergovernmental negotiations, there is a sense of exhilaration. This did not happen in Addis Ababa.The hallmark failure of the 3rd FfD conference is the missed opportunity to create an intergovernmental tax body, despite the persistent push into the 11th hour by a critical mass of developed countries led by India and Brazil.

Instead, there was deep disappointment amidst developing countries and many U.N. staff and outrage amidst civil society who had been following the FfD process over the last year. But among developed countries, there was relief, at best, or complacency, at worst. As the representative of Japan said in the final plenary, many developed countries, including Japan felt a sense of relief.

As the civil society coalition on FfD stated in its reaction to the outcome document, a fundamental opportunity was lost to tackle structural injustices in the current global economic system and ensure that development finance is people-centred and protects the environment.

Not only does the Addis Ababa outcome not rise to the world’s multiple crises, including finance, climate and distribution, it lacks the necessary ambition, leadership and actions to be associated with the post-2015 development agenda.

Indeed, the outcome is wholly inadequate to support the operational Means of Implementation (MOI) for the Sustainable Development Goals (SDGs), and exposes an unbridged gap between the rhetoric of aspirations in the post-2015 development agenda and the reality of the void of actions in the Addis Ababa outcome, which does not commit to new financial resources let alone scaling up existing resources.

In light of the agreements in the Monterrey Consensus and the Doha Declaration (in the first and second FfD conferences), the Addis Ababa Action Agenda displays a retrogression from the past, which undermines the FfD mandate to address international systemic issues in macroeconomic, financial, trade, tax and monetary policies.

The hallmark failure of the 3rd FfD conference is the missed opportunity to create an intergovernmental tax body, despite the persistent push into the 11th hour by a critical mass of developed countries led by India and Brazil.

Such a global tax body, that would enable the U.N. to have a norm-setting role in tax cooperation at an equal capacity to that of the current monopoly of the OECD, would have been a meaningful advancement in global economic governance and domestic resource mobilisation.

The intransigence of developed countries against such a key step demonstrated their unwillingness to democratise global economic governance and their disregard for FfD and U.N. standards of “good governance at all levels” and “rule of law.”

The core argument of developing countries is that given the reality that they are most affected by illicit financial flows, tax evasion and avoidance and transfer mis-pricing by large corporations, they should have an equal say at an international negotiation table on tax rules.

Given the glaring absence of new financial commitments, let alone the assurance of new and additional financial resources for climate and biodiversity finance, the majority of funds needed to finance the SDGs will come out of domestic budgets.

However, ample research shows how hundreds of billions of dollars are extracted out of the corporate tax purse of developing countries, particularly in the resource-rich African continent.

This is due to the very loopholes and tricks in the international tax architecture that is defined and dominated by the OECD. A global tax body could have shifted this power imbalance and delivered some fairness to global political economic structures.

The Addis Ababa outcome legitimises the predominance of private finance through blended finance and public-private partnerships (PPPs). This is problematic precisely because it is unattached to accountability measures or binding commitments based on international human and labour rights, and environmental standards.

A fast-growing body of evidence substantiates global concern over an unconditional support for PPPs and blended financing instruments. Without a parallel recognition of the developmental role of the state and robust safeguards to enable the state to regulate in the public interest, there is a great risk that the private sector undermines rather than supports sustainable development.

The Addis outcome’s blind trust in PPPs and blended finance is premised on the notion that such arrangements will lower the risk for private investment. The outcome makes no mention of the critical importance of inclusive and sustainable industrial development for developing countries, for the objectives of supporting economic diversification, adding value to raw materials and ascending the value chain, improving economic productivity and developing modern and appropriate technologies.

Civil society had hoped that being in Addis Ababa governments would remind themselves of the African Union’s Agenda 2063 based on shared prosperity through social and economic transformation.

Similarly, there is no critical assessment of trade regimes. Instead of safeguarding policy space, the Addis outcome fails to critically assess international trade policy in order to provide alternative paths to commodity-dependence, eliminate or at least review investor-state dispute settlement clauses, and undertake human rights impact and sustainability assessments of all trade agreements to ensure their alignment with the national and extraterritorial obligations of governments.

Furthermore, the additional steps to address gender equality and women’s empowerment seem to speak more to “Gender Equality as Smart Economics” than to women and girls’ entitlement to human rights and show a strong tendency towards the instrumentalisation of women by stating that women’s empowerment is vital to enhance economic growth and productivity.

The core competencies of FfD are comprised of international systemic issues such as capital flows, external debt, trade, financialisation and the monetary system.

The ability of the U.N. to address systemic issues is routinely challenged by developed countries who argue that these issues are outside the domain of the U.N.

Power and control over systemic issues and reforms are thus kept exclusively in the rich countries’ domain of the Bretton Woods Institutions (the IMF and World Bank), the G7 and the G20.

However, not only does the U.N. have a longstanding history in substantively analysing and proposing reforms on systemic issues, it is also the only universal forum where all countries, from the smallest island nation to the poorest landlocked country, have a voice and a vote in the General Assembly.

Part Two can be read here.

Edited by Kitty Stapp

Excerpt:

Bhumika Muchhala of Third World Network. Credit: UN Photo/Paulo Filgueiras

By Bhumika Muchhala
NEW YORK, Jul 10 2015 (IPS)

The key priorities of the Group of 77 developing countries (G77) remain somewhat aligned around a set of issues that have been present from the beginning of the FfD negotiations in New York.

This set of issues includes a re-commitment to Official Development Assistance (ODA) by developed countries, including the provision that climate finance and biodiversity financing is new and additional to traditional official development assistance (ODA). This language, regrettably, is not present in the current July 7 draft outcome document.In the context of vested geo-political interests and the wide gap between North and South, a strengthened ethos of multilateralism is at its most critical imperative next week in Addis Ababa.

In the final plenary, the tone of the G77 was to remain within the main areas of debate while leaving the majority of the text, whose language has been arrived and agreed upon through arduous negotiations, closed to further negotiation in Addis Ababa. In other words, the entire text should, preferably, not be re-opened to negotiation.

However, the U.S. and Japan were far more aggressive, with Japan stating that it is important to emphasise that nothing is agreed until everything is agreed, and the U.S. making note of “a list” of problem issues, essentially warning Member States that some of the text could be at risk if consensus was not achieved.

The European Union noted that they were not in agreement with the formulation of South-South cooperation and fossil fuel subsidies, in that these sections are “too weak.” The long-standing position of the EU is that more obligations and commitments should be taken on through South-South cooperation and that fossil fuel subsidies should be rationalised with more determination.

Across all U.N. discussions, the issue of South-South cooperation is a centrifugal point. Developing countries routinely clarify that South-South cooperation is a complement, not a substitute, to North-South cooperation and that international development financing commitments are to be met by developed countries taking the lead in the framework of the global partnership for development.

Paragraph 56 in the July 7 text mentions South-South cooperation as having increased importance and different history and particularities, and stresses that “South-South cooperation should be seen as an expression of solidarity among peoples and countries of the South, based on their shared experiences and objectives.

It should continue to be guided by the principles of respect for national sovereignty, national ownership and independence, equality, non-conditionality, non-interference in domestic affairs and mutual benefit.”

Paragraph 57 welcomes the increased contributions of South-South cooperation to poverty eradication and sustainable development and encourages developing countries to voluntarily step up their efforts to strengthen South-South cooperation, and to further improve its development effectiveness in accordance with the provisions of the Nairobi Outcome document of the High Level U.N. Conference on South-South Cooperation.

The U.S. referred to a “list” of issues that, in their view, have not been agreed upon, and which they did not clarify. This list is a potential source of stalemate in Addis Ababa. It could become the foundation for contentious trade-offs and further dilution of an already extremely diluted outcome document.

The danger here is the reopening of hard-won text where there is already some degree of intergovernmental agreement. If developed countries reserve their option to ask for further movement in their favour, across the spectrum of issues ranging from public and private finance, debt and systemic issues, the opening paragraphs and systemic issues, a united G77 defence of FfD for developing countries would be critical.

In the context of vested geo-political interests and the wide gap between North and South, a strengthened ethos of multilateralism is at its most critical imperative next week in Addis Ababa. There is still ample space and prospect for Member States to push for the best possible compromise and outcome in Addis Ababa.

A genuine global partnership for development requires efforts where negotiations are conducted in good faith, without backhanded tactics to manipulate text, and without resorting to undemocratic measures to influence the text.

The very integrity of FfD as an international conference is that it addresses, with the most universal membership available in global governance fora to date, systemic issues in the international architecture for development finance, private finance, capital flows, debt, trade and now this year, technology as well.

The significance of FfD is that it can decide on intergovernmental commitments to deliver concrete and actionable commitments on development finance, as well as generate political momentum for much-needed reforms in the international systemic and structural architecture.

For example, it has the potential to push for reforms on financial regulation, debt sustainability, trade and the international monetary system. The history of political and social change involves a vital role for the international norm setting that can take place through the FfD conference.

As the draft civil society declaration for Addis Ababa states, the level of ambition witnessed in this year’s FfD negotiations is hardly suited to function as the operational MOI for the post-2015 development agenda, which is one of the goals, though not the only one, of this conference.

Even more unfortunately, there is now a serious risk of retrogression from the agreements in the Monterrey Consensus of 2002 and the Doha Declaration of 2008. The countries that historically, and with good reason, have taken on a large part of the responsibility to lead in delivering MOI, have gone to great lengths to shed this responsibility or shift them to others.

The FfD text as of the current draft of July 7 fails to ensure the space to undertake normative and systemic reforms that would enable developing countries to mobilise their own available resources. This combination makes it impossible for countries to generate the requisite resources to deliver a sustainable agenda.

Civil society has expressed its disappointment that save for an explicit decision in Paragraph 123 to establish a Technology Facilitation Mechanism at the U.N. post-2015 Development Summit in order to support the SDGs, the FfD draft outcome document is almost entirely devoid of actionable deliverables.

While not a pledging conference it is deplorable that a conference on financing fails to scale up existing sources and commit new financial resources. This calls into question governments’ commitment to realize a development agenda as expansive and multi-dimensional as the SDGs.

In particular, civil society notes the rejection of a U.N. tax body which would create significant sustainable financing for development through, for example, combating corporate tax dodging in developing countries.

A very low window of opportunity was expected if the FfD outcome document was closed in New York. On this note, it is a positive development that concrete negotiations will carry forth into Addis Ababa next week.

While inevitable friction will ensue across well-established battle-lines, the 3rd FfD conference still has a breath of hope for a better outcome.

Part One can be found here.

Edited by Kitty Stapp

Excerpt:

Bhumika Muchhala of Third World Network. Credit: UN Photo/Paulo Filgueiras

By Bhumika Muchhala
NEW YORK, Jul 9 2015 (IPS)

Lack of ambition and consensus in the New York negotiations begs the question of whether governments in Addis Ababa will salvage or further dilute the outcome of the Third International Conference on Financing for Development from July 13-16.

The establishment of a global tax body, a strong and independent follow-up process for FfD, the Rio principle of CBDR and the link between the post-2015 development agenda and the FFD agenda are among the central issues for the Addis Conference to resolve.To some degree, this dearth of intergovernmental consensus that leaves an open document maintains the pressure for final hour compromises in Addis Ababa.

After weeks of political impasse in the intergovernmental negotiations for the Third Conference on International Financing for Development (FfD), an open text to be negotiated in Addis Ababa next week was presented on July 7 by the FfD Co-Facilitators to government delegates and negotiators in New York.

Titled ‘The Addis Ababa Action Agenda of the Third International Conference on Financing for Development”, the draft outcome document, containing 134 paragraphs across 31 pages, is a result of numerous draft revisions beginning with the first ‘Elements Paper’ in January 2015.

Negotiations in New York gathered momentum in April and in the last few months have become heated and tense affairs marked by clashing positions between developed and developing countries and deep discontentment over both content and process.

The Co-Facilitators of the process, Ambassadors George Talbot of Guyana and Geir Pedersen of Norway, convened non-stop informal discussions and even smaller private meetings, all behind closed doors, in the last several weeks. Until mid-June, negotiations in plenary format were open and transparent to all, including via webcast, and interventions by civil society organisations (CSOs) were accepted from the floor.

However, recent informal meetings were explicitly closed, with CSOs being asked to leave the room at initial sessions when some individuals made attempts to observe the proceedings in person.

At the heart of the intergovernmental wrangling is a glaring lack of consensus, which the Co-Facilitators highlighted in their introduction to the final FfD plenary in New York.

Developed countries were intent on seeking to wrap up the negotiations in what would have been a diminished outcome compared to the agreed outcomes in the Monterrey Consensus of 2002 and the Doha Declaration of 2008, and what is needed for the current and future challenges of FfD.

On the other hand, developing countries continue to demand a more ambitious outcome.

Intergovernmental discussions commenced in October 2014 and evolved into negotiations by April 2015. However, rather than convergence on key actions and decisions, the conflicts and red lines became further entrenched for both developed and developing countries.

To some degree, this dearth of intergovernmental consensus that leaves an open document maintains the pressure for final hour compromises in Addis Ababa.

Parts of the text where tension is rife and where negotiation efforts will be targeted include the contentious and central decision to establish an intergovernmental, or global, tax body where developing countries have a voice in agenda-setting, as many developing countries have been arguing for, most notably India.

Developed countries are firmly against such an establishment and have ensured that the relevant language was deleted from earlier versions of the text and now Paragraph 29 refers only to the U.N. Committee of Experts on International Cooperation in Tax Matters and to enhance its resources and increase the frequency of its meetings to two sessions per year.

Besides international tax cooperation, the two other issues highlighted by the Co-Facilitators in the plenary were the conflict on the Rio Principle of common but differentiated responsibilities (CBDR) and the link between FfD and the post-2015 development agenda, including its core component of the Sustainable Development Goals (SDGs), and the means of implementation (MOI) that the FfD outcome is to contribute toward.

The discord on CBDR has consumed a significant amount of time and space in the FfD negotiations, with sharp arguments for it propounded by the G77 and China group of 134 developing countries and arguments against it by developed countries, in particular the European Union and the United States.

The G77 has argued that if the 2015 FfD conference is to contribute to the MOI for the SDGs, the application of CBDR is indispensable for the political legitimacy of the FfD agenda.

The G77 explained how CBDR encapsulates universality, differentiation and responsibility: differentiation as the basis of crafting commitments; responsibility as the basis of delivering actionable MoI and for upholding the global partnership for development; and universality of the implementation of goals by all States.

Developed countries argued that CBDR only applies to environment and climate change-related issues, and that the North-South dichotomy is in today’s world anachronistic, and no longer reflects a world that has changed.

In response developing countries highlighted how the North-South gap in terms of inequality of consumption and production is still sharp and visceral in its magnitudes, and that if the SDGs have effectively mainstreamed environmental action across all goals and targets, it is only natural that the principle of CBDR is equally valid for the entire agenda of not only the post-2015 development agenda but also the FfD agenda.

The current text of July 7 refers in Paragraph 6 to the reaffirmation of “all the principles of the Rio Declaration on Environment and Development.”

While this formulation does not specify CBDR, the principle as such is included on the whole and is a more favourable outcome than the danger of a redefinition or distortion of the principle.

The link between the FfD conference and the post-2015 development agenda is located in the articulation of MOI. Developed countries have been clear that the FfD outcome is to comprise all of the MOI for the post-2015 development agenda, whereas developing countries have been resolute in the nuance that while the FfD outcome contributes significantly to the MOI for the post-2015 development agenda, it does not by any means comprise the whole of the MOI.

This argument has been central to developing countries’ call for a follow-up process for FfD that is distinct and independent from the follow-up process of the post-2015 development agenda.

The text of July 7 reflects this position of developing countries in Paragraph 19, in the formulation that reads: “The post-2015 development agenda, including the SDGs, can be met within the framework of a revitalized global partnership for sustainable development, supported by the concrete policies and actions as outlined in the present Action Agenda.”

Part Two can be found here.

Edited by Kitty Stapp

Excerpt: