Will Paris Summit be first step towards a new global financial system?

The Summit for the New Global Financing Deal held in Paris was a major meeting involving some 1,500 participants, including 40 heads of state, over two days. French President Emmanuel Macron described it as an important milestone and a step towards a deeper reform of international financial architecture and governance. The summit aimed to address two major challenges: fighting inequalities and tackling climate change.

Some of the highlights of the summit include the World Bank's initiative to provide convenient loan repayment options for countries affected by natural calamities. They launched climate-resilient debt clauses, which allow debt payments to be automatically paused when a country faces a natural disaster or pandemic. This provides flexibility for countries to divert World Bank loans to emergency needs during crises.

The UK Export Credit Agency also announced the inclusion of these clauses in loan agreements with twelve partner countries in Africa and the Caribbean.

Zambia reached a historic $6.3 billion debt restructuring agreement with China and the International Monetary Fund (IMF). The agreement includes a reduction in interest rates, a three-year moratorium on full payment (only interest payments are required) and a 20-year extension of the payment period. This agreement is crucial, as it sets a precedent for other countries with debt problems to seek similar restructuring agreements, which could prevent further economic crises.

A Just Energy Transition Partnership (JETP) deal with Senegal was announced, in the amount of $2.74 billion. The partnership aims to help Senegal achieve its goal of installing 40% renewable energy capacity by 2030. The agreement, backed by France, Germany, the European Union, the United Kingdom and Canada, focuses on increasing energy renewable instead of eliminating coal force. This represents a shift towards cleaner energy sources.

Overall, the Paris summit was seen as a significant step in addressing global challenges related to finance, climate change, and inequality. The agreements and initiatives announced during the summit have the potential to bring about positive change and pave the way for further international cooperation in these critical areas.

Progress has been made on recycling Special Drawing Rights (SDRs), but US Congressional approval remains a hurdle. Belgium and Switzerland have recently pledged their support, and France has increased its previous commitment to 40% SDR recycling, moving closer to the $100 billion target.

However, the contribution of 21,000 million dollars promised by the US is still pending approval in Congress, which raises doubts about the fulfillment of the goal. President Petro of Colombia and President Ruto of Kenya requested new SDR allocations from the International Monetary Fund (IMF).

There is broad political support for a global shipping tax, which could generate significant funds for climate finance. Greece and Japan, two of the largest shipowners, as well as Korea and Japan, two of the largest shipbuilders, have imposed a carbon tax on their shipping activities.

Three major flag states, including Liberia and the Marshall Islands, also support this initiative. The International Maritime Organization (IMO) has upcoming meetings to discuss greenhouse gas emissions and adopt a revised strategy.

Reactions to the developments include Avinash Persaud, Advisor to the Prime Minister of Barbados, highlighting the need for a better shock-absorbing system and increased funding for ecological transformation. Rachel Kite, dean of The Fletcher School at Tufts University, emphasizes the importance of implementation and leadership beyond the summit. Lawrence Tubiana, executive director of the European Climate Foundation, sees the summit as the first step in addressing the shortcomings of the global financial system and urges leaders in the Global North to take action.

In general, progress has been made on issues such as the reform of multilateral development banks, international taxation, debt suspension clauses, and the fulfillment of SDR promises. However, there is a call for concrete action plans and new sources of financing for development, climate action and nature. The Global North is urged to take responsibility and act quickly.

Hugh Evans, co-founder and CEO of Global Citizen, expressed his disappointment with the summit for a new global financial deal, saying: "We very much welcome the commitment by the World Bank and the multilateral development banks to introduce standstill clauses on debt for climate-sensitive nations.

Yet G7 leaders have once again failed to address the expressed needs of developing and climate-sensitive countries.The US, in particular, has not met its climate finance commitment, offering only empty words from Secretary Janet Yellen.Trust gap between Global South and Global North to achieve success on development and climate change."

Ronan Palmer, associate director for clean economy at climate think tank E3G, emphasized the need for providers of finance for Senegal's Just Energy Transition Partnerships (JETPs) to ensure that the scale and type of finance aligns with the needs of development of Senegal. He warned against excessive borrowing and stressed the importance of Senegal's proposed renewable energy target, stating that it is not in Senegal's or the world's interest to be dependent on gas for the long term.

Mohamed Addo, founder and director of Power Shift Africa, criticized French President Macron's statement about allowing Senegal to develop gas projects as a transitional energy source. He saw it as an outrageous statement coming from a former colonial power and accused Macron of using economic power to set energy policies in Africa for the benefit of Europe.

Addo stressed the need to invest in renewable energy in Africa instead of tying the continent to an outdated fossil fuel infrastructure. He urged Africa to make the leap to 100% renewable energy and highlighted Africa's clean energy potential, stating that the continent should be freed from the fossil fuel industry with the right investments.

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