Need for new framework to fund development

One New York-based professor has joined Barbados and other small island developing states (SIDS) in calling for a new financing development model and for more developed countries to take greater responsibility for their contribution to climate change.

Professor Jeffrey Sachs, Director of the Centre for Sustainable Development at Columbia University, is insisting that multilateral financing agencies consider the Caribbean’s unique and other vulnerabilities when it comes to development financing.

At the same time, the public policy analyst argued that it was time that developed countries take responsibility for their contribution to the climate crisis.

“I am calling specifically for two immediate things. One is a massive scale-up on the balance sheets of the multilateral development banks.

The second is special funding for countries in vulnerability like the Caribbean region because of climate change, and that reflects the historical responsibilities of the world to provide that,” said Sachs.

“In addition, we need special funding for losses and damages. Why should the Caribbean pay this phenomenal cost of adaptation when it is the responsibility of the United States, Europe and the other high-emitting countries?” he added.

Sachs was addressing the Shridath Ramphal Centre (SRC) lunchtime chat series on Thursday, under the theme, Facilitating Private

Sector Investment for Sustainable Development Goal (SDG) Achievement in Caribbean SIDS.

He lamented the high rates at which the region had to borrow funds to carry out sustainable development projects, stating that in addition to being assessed on the unfair bases of income per capita, the Caribbean was facing challenges related to climatic events.

Sachs suggested that should the region be able to access financing at a more competitive rate similar to developed countries, a lot more sustainable infrastructural investments would be made by Caribbean leaders to create industries and jobs.

Noting that there was “enough finance in the world”, the economist said the rich countries have to facilitate “low-cost, long-term finance” to the rest of the world as a matter of urgency, to build out infrastructure and human development.

“That is what we need today. We need a financial system that doesn’t direct all the money to the rich countries but that enables a massive investment programme for development in the rest of the world and does it on a fair, inclusive and equitable basis,” he said.

Sachs said he was hoping that discussions around the issues could be revved up and “serious” new policies would be created among nations by the time of the G20 Summit which is scheduled for Bali, Indonesia in 2022.

The university professor said he would continue to press for the creation of “a new development finance framework” that looks honestly at what’s happened with COVID, looks at the SDG needs and climate change and see the situation in the world today akin to the situation in 1944/1945 when the Bretton Woods institutions were created because world leaders knew something new was needed for the future of finance.

He expressed confidence that with continued pressure from governments and the private sector, the “finance challenge” would be solved.

“I think we will make progress. There is a glimmer of hope. We got the SDR (Special Drawing Rights) allocation this month, which is US$650 billion,” said Sachs.

“I think we can build on that advance so that next year we can have a real breakthrough of a new era of development finance that seriously aligns with the needs of the SDGs and the Paris Agreement,” he added.

Earlier this week, the board of governors of the International Monetary Fund (IMF) approved the general allocation of US$650 billion to boost global liquidity.

About US$275 billion of the allocation, which will become effective on August 23, 2021, will go to emerging markets and developing and low-income countries.

According to the IMF, the newly-created SDRs will be credited to its member countries in proportion to their existing quotas in the fund.

marlonmadden@barbadostoday.bb