UN Chief Antonio Guterres expressed deep concerns about the global financial system during a summit in Paris, stating that it is outdated, dysfunctional, and fails to uphold principles of justice, UN press service reports.
He highlighted the regression in achieving fundamental international goals, such as combating hunger and poverty, with over 750mn people malnourished in 2023 and millions on the brink of poverty. The COVID-19 pandemic and Russia's invasion of Ukraine have further exacerbated the situation. Guterres pointed out the stark disparity between rich and developing countries, as the former could print money to revive their economies while the latter faced exorbitant borrowing costs, up to eight times higher.
During the summit, France proposed a special pact aiming to reform the global financial architecture and respond effectively to climate change challenges. The proposed reforms include restructuring the International Monetary Fund and the World Bank to allocate more funds to states in need of support.
French President Emmanuel Macron emphasized the initiative's objective to prevent countries from choosing between fighting poverty and protecting the climate and biodiversity. Guterres highlighted that 52 states are either in default or dangerously close, including the least developed and most climate-vulnerable countries. The existing global financial system, which perpetuates inequality, is in urgent need of reform.
While acknowledging that the process of reforming the international financial architecture will require time, Guterres put forward immediate measures to address the challenges faced by developing states. He proposed a $500bn annual SDG (Sustainable Development Goals) stimulus package for investment in sustainable development and climate action.
He also suggested the creation of a debt relief mechanism supporting payment suspensions, longer loan terms, and lower interest rates. Furthermore, Guterres called for expanding development and climate finance through capital base increases and changes in the business model of multilateral development banks.
Transforming the risk approach to attract affordable private financing for developing countries was also emphasized. Redistributing unused special borrowing rights to increase reserve funding for states in need was another recommended approach.
By implementing these innovative mechanisms and taking immediate action, the international community can make significant strides in the fight against poverty, hunger, and environmental degradation.
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