Paris summit is a chance to fix the climate funding emergency

French President Emmanuel Macron hosts a summit on Thursday and Friday to pin down a roadmap for easing the debt burdens of low-income countries while freeing up more funds for climate financing.

Around 50 heads of state, along with representatives from international institutions and civil society, will attend a the summit  with the  objective   being  to develop a new global financial system so the most vulnerable countries will be better equipped to combat both poverty and climate change.

Ranging from debt relief to climate finance, many of the topics on the agenda take up suggestions from a group of developing countries, led by Barbados Prime Minister Mia Mottley, dubbed the ‘Bridgetown Initiative’.

Macron announced his intention to host this summit at the end of COP27 back in November, 2022. Environmentalists were not satisfied with how the climate negotiations had concluded. But in the final hours, a historic agreement was reached providing for the establishment of a fund to compensate for the effects of climate change suffered by developing countries.

The initial aim of this week’s Summit for a New Global Financial Pact was to establish concrete measures to finance this fund. “From now on, the battle against poverty, the decarbonisation of our economy and the fight for biodiversity will be very closely linked,” Macron said at the time. 

“We are moving to a world – I would call it the Bridgetown system of finance – (that) recognises that we have to massively upscale the public sector and focus that on building resilience and adaptation because it’s hard for that to be funded any other way,” said Avinash Persaud, a special envoy for Mottley on climate finance.

Though binding decisions are not expected, officials involved in the summit’s planning said that some strong commitments should be made about financing poor countries.

Nearly eighty years after the Bretton Woods Agreement created the World Bank and International Monetary Fund (IMF), leaders aim to squeeze more financing from multilateral lenders for the countries that need it most.

In particular, there should be an announcement that a $100 billion target has been met that will be made available through the International Monetary Fund for vulnerable countries, officials said.

The plan, first agreed two years ago at an African finance summit in Paris, calls on wealthy governments to lend unused special drawing rights to the IMF to, in turn, lend to poor countries.

Governments are also looking at ways to allow the World Bank to use leverage to lend more to poor countries without putting its top AAA credit rating a risk.

“We want to go farther and should be able to set targets to put more public money on the table,” a French presidency source said.

Rising global interest rates have left a growing number of low-income countries dependent on IMF funding while the most distressed – Ethiopia, Ghana, Sri Lanka and Zambia – have had little choice but to default.

A G20 ‘common framework’ for debt restructuring has proven painfully slow with western officials blaming China – now a major creditor after years of heavy lending – of dragging its feet.

 Reuters reports that a  source close to the Paris Club creditor nations said on Monday that the governments Zambia owes money to aim to make a debt restructuring proposal in time for the summit in what is widely seen as a test case for the much-criticised G20 restructuring framework.

On top of interest rate stress, developing and emerging market countries are also struggling to secure the $1 trillion economists say they need by 2030 to finance carbon emission cuts, boost climate resilience and deal with damage from climate change.

Persaud said support was also expected for the IMF and other multilateral development banks to offer $100 billion in currency risk guarantees to unlock private investment in poor countries for climate and development initiatives.

Some leaders are expected to lend their weight to long-stalled proposals for a levy on shipping industry emissions ahead of a meeting next month of the International Maritime Organization, officials said.

They said calls are also expected to be made in favour of disaster risk clauses in lending agreements, which allow a country to suspend repayments in the case of a disaster.

Report with Reuters and France24