During a joint press conference at the conclusion of the New Global Financial Pact Summit in Paris, France, hosted in by President Emmanuel Macron, highlighted notable moments when leadership was bold and strong, and others when it was sorely lacking. As Heads of State and ministers from the Global North and Global South grappled with the inequities in the global financial system, their goal was to empower developing countries to invest in clean energy and fortify their resilience against natural disasters. While some leaders shone brightly, it was evident that others, notably those representing the US, fell short of the world’s expectation.
William Ruto calls for a new multilateral lender to address the climate crisis. Kenya’s president has called for the creation of a global green bank separate from the World Bank and IMF, warning that traditional multilateral lenders were “hostage” too rich world interests and unable to solve the climate crisis. William Ruto, who was elected less than a year ago, told the Financial Times the new non-aligned bank could help to close a shortfall of trillions of dollars needed to halt global warming. “We are in a crisis situation,” he said. He was speaking as world leaders met in Paris to discuss reforming the global financial system, including the World Bank and IMF, to free up cash to address climate change and ease the debt burden on developing countries.
“We need to hammer out in this Paris agreement that we need a new financial mechanism to deal with climate change that is not controlled by a shareholder or is not subjected to the interest of any country,” he said in an interview. Ruto said the new “mechanism”, which would be akin to a global green bank, should be funded by green taxes and levies applied globally. This could include taxes on financial transactions and fossil fuels or levies on shipping and aviation, which could raise between $1.5tn and $2tn a year, he said. While France has pushed for a levy on emissions from shipping, conversations on other global climate tax initiatives have been inconclusive.
A World Bank paper in 2022 estimated that introducing a levy or other measures to impose a price on greenhouse gas emissions from shipping could generate $60bn in revenues a year. Ruto said he had discussed his proposal with international leaders including French President Emmanuel Macron, who is co-hosting the summit with Barbados prime minister Mia Mottley. Macron was only lukewarm, or “commeci, commeça”, on the idea of a new green bank, Ruto said. But the whole of Africa backed his suggestion, he claimed, while China, which has become the single biggest lender to the developing world in recent years, was aware of Kenya’s position. Ruto, who last month suggested African leaders could ditch the US dollar to facilitate trade within the continent, is due to meet Chinese President Xi Jinping later this year to discuss topics including climate change. Ruto is part of a growing cohort of voices from lower- and middle-income countries criticizing the World Bank and the IMF. Mottley last year set out the so-called Bridgetown Initiative to push for the transformation of the global financial system. “We need to fix the system,” she told the FT this week.
Ruto said a new bank operating independently of traditional financial architecture was key to ensuring that countries such as Kenya did not accrue huge debt in seeking to cut emissions and transform their energy systems. Nations including Kenya pay far more to borrow money than their Western counterparts, creating a vicious cycle of debt, he argued. He said Africans “don’t want to end up” paying “eight times more” to borrow than richer countries. “We want to pay equal to everybody,” he said. Kenya, east Africa’s economic powerhouse, spends about $5bn a year on debt repayments. Ruto’s predecessor, Uhuru Kenyatta, borrowed heavily from Beijing. Keen to avoid the route of Zambia and, most recently, Ghana, Ruto, who is generally friendly to the West, has promised to avoid a debt default. While Ruto questioned the role the IMF and World Bank can play in tackling climate change, he argued that these bodies should be reformed. On top of existing initiatives, these institutions should spend $500bn annually on refinancing high-cost debt held by developed countries, he said. Speaking at the summit, Macron emphasised the need to address poverty and rising temperatures simultaneously. “The first principle is that no decision maker, no country, should ever have to choose between reducing poverty and protecting the planet,” he said.
Author: James Osondu
Sofia Bureau Chief- Bulgaria