Private finance needs to play a significant role in supporting global development and reducing poverty by offering cheaper and more flexible loans, according to French president, Emmanuel Macron, and a group of fellow world leaders.
In a message that is likely to dismay many anti-poverty campaigners, the group of leaders said in an open letter that government loans and grants will not be enough to spur development across low- and middle-income countries ravaged by the Covid-19 pandemic, mounting debts and rocketing food and energy prices.
The billions of pounds needed to invest in green technologies and tackle the climate crisis will also depend on “innovative, and sustainable sources of finance, such as debt buybacks” that allow governments to reduce historically high interest payments.
World leaders will meet on Thursday in Paris to discuss climate finance, green growth, the debt crisis and how to tap private sector sources of investment.
In the letter, the leaders said sectors of industry “that prosper thanks to globalisation” will need to make a contribution to global development, in what is understood to be a shift towards forcing global tech giants, energy companies and multinational services firms to pay more tax in countries where they operate.
The letter, published by the US-based media organisation Project Syndicate, is part of an effort by Macron to address growing disquiet about current systems of development finance, including overseas aid from rich countries.
The French leader also hopes to encourage greater climate finance to help poor countries cut their greenhouse gas emissions and adapt to the impacts of extreme weather.
Signatories of the letter in addition to Macron include Mia Mottley, prime minister of Barbados, Brazil president Luiz Inácio Lula da Silva, European Commission president Ursula von der Leyen, Olaf Scholz, the German chancellor, and UK prime minister, Rishi Sunak.
Japan’s prime minister, Fumio Kishida, is also a signatory with Kenya’s president, William Ruto; the president of Senegal, Macky Sall; South Africa president, Cyril Ramaphosa; Mohamed bin Zayed Al Nahyan, the president of the United Arab Emirates; and US president, Joe Biden.
“Public finance will remain essential to achieving our goals,” they said. “But we acknowledge that meeting our development and climate goals will require new, innovative, and sustainable sources of finance, such as debt buybacks, engagement from sectors that prosper thanks to globalisation, and more trusted carbon and biodiversity credit markets.”
Anti-poverty campaigners have been sceptical of efforts to use private finance to address longstanding issues of poverty and inadequate infrastructure, fearing that it will load already impoverished governments with extra debts.
Mottley’s Bridgetown agenda, which is aimed at massively expanding the funding available to developing countries, particularly those afflicted by the climate crisis, has received strong backing from Macron.
Mottley has fiercely criticised the World Bank, IMF and similar institutions, most of which were set up in the final days of the second world war, calling them unfit for the 21st-century task of tackling the climate crisis and drawing countries out of debt and poverty.
Calls have been growing from many countries, including the US, the EU and UK, for an overhaul of the World Bank.
The former president of the institution, David Malpass, appointed in 2019 by the then US president, Donald Trump, resigned earlier this year after deepening controversy over his objections to a patent waiver for Covid-19 vaccines and apparent climate-sceptic views.