At Paris summit, World Bank to unveil debt payment pause for countries
hit by disasters
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[June 22, 2023]
By Leigh Thomas, John Irish and Elizabeth Pineau
PARIS (Reuters) -The World Bank chief will announce a raft of measures
on Thursday to aid countries hit by natural disasters, including a pause
in debt repayments to the lender, as world leaders gather in Paris to
give impetus to a new global finance agenda.
Some 40 leaders, including about a dozen from Africa, China's prime
minister and Brazil's president, will be joined in the French capital by
international organisations at the "Summit for a New Global Financial
Pact".
It aims to boost crisis financing for low-income countries, reform
post-war financial systems and free up funds to tackle climate change by
getting top-level consensus on how to progress a number of initiatives
currently struggling in bodies like the G20, COP, IMF-World Bank and
United Nations.
Leaders are set to back a push for multilateral development banks like
the World Bank to put more capital at risk to boost lending, according
to a draft summit statement seen by Reuters.
In a speech to be delivered on Thursday, new World Bank president Ajay
Banga will outline a "toolkit", including offering a pause in debt
repayments, giving countries flexibility to redirect funds for emergency
response, providing new types of insurance to help development projects
and helping governments build advance-emergency systems.
While the new World Bank measures are designed to give developing
nations some financial breathing space, there was no discussion of
multilateral lenders offering debt writedowns - so-called haircuts.
China - the world's largest bilateral creditor - has been pushing for
lenders like the World Bank or the International Monetary Fund to absorb
some of the losses.
Those institutions and many developed nations, notably the United
States, are resisting, arguing that acceding to Beijing's demand would
be tantamount to a bailout for China. Chinese Prime Minister Li Qiang is
due to speak at the summit on Friday.
NEW VISION
Citing the war in Ukraine, climate crisis, widening disparity and
declining progress, leaders said the World Bank and other multilateral
financial institutions needed a new vision.
The global financial architecture is outdated, dysfunctional and unjust,
the United Nations Secretary General Antonio Guterres said.
"It is clear that the international financial architecture has failed in
its mission to provide a global safety net for developing countries," he
said.
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U.S. Treasury Secretary Janet Yellen
meets French Finance Minister Bruno Le Maire during the New Global
Financing Pact, in Paris, France June 22, 2023. Christophe Ena/Pool
via REUTERS
French President Emmanuel Macron, hosting the summit, said it was
time to act or trust would be lost.
The summit aims to create roadmaps that can be used over the next
18-24 months, 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'.
The coronavirus pandemic pushed many poor countries into debt
distress as they were expected to continue servicing their
obligations in spite of the massive shock to their finances.
Africa's debt woes are coupled with the dual challenge faced by some
of the world's poorest countries of tackling the impacts of climate
change while adapting to the green transition.
Wealthy nations have yet to come good on climate finance that they
promised as part of a past pledge to mobilize $100 billion a year, a
key stumbling block at global climate talks.
Though binding decisions are not expected, officials involved in the
summit's planning said 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.
U.S. Treasury Secretary Janet Yellen, whose country is the World
Bank's biggest shareholder, said multilateral development
institutions should become more effective in the way they use their
funds before thinking of injecting more money into them.
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.
(Reporting by John Irish, Leigh Thomas; addiitoal reporting by
Elizabeth Pineau and Karin Strohecker; writing by John Irish and
Silvia Aloisi; editing by Philippa Fletcher and Christina Fincher)
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