February 27th 2025.
The United Nations Conferences on Financing for Development have always been important events for reaching a global consensus on key financing issues. The upcoming meeting, which is scheduled to take place in Spain in mid-2025, will continue the progress that has been made in previous meetings held in Monterrey, Doha, and Addis Ababa. Excitingly, preparations are already underway with the launch of two major background documents. These documents, known as the "Zero Draft" and the proposals from an international commission of experts, serve as the foundation for the negotiations. As someone who had the honor of coordinating this commission, I can attest that both documents reflect our ambition to build upon the Addis Ababa Action Agenda.
The main goal of this process is to support the growth strategies of developing countries. Our commission of experts has emphasized the need to restore and strengthen the role of the state in this process. We envision the state as a driving force for development and structural transformation. This means focusing not only on the quantity but also the quality of resources that are mobilized. We must also shift from a short-term project-focused agenda to one that is geared towards collectively defined long-term goals. Accomplishing these tasks will require strengthening the currently weakened multilateral system and creating new regional platforms. One crucial issue that must be addressed is public-sector over-indebtedness, which has affected about one-third of developing countries. Several others are also facing high debt levels and interest costs. This problem stems from the large fiscal imbalances during the COVID-19 pandemic and the rise in interest rates in recent years. To manage this issue, we propose the implementation of an ambitious short-term renegotiation instrument, building upon the G20's 2020 Common Framework for Debt Treatments.
However, this time around, the renegotiation process must be faster and more inclusive. We also believe that access should be extended to middle-income countries. In the long term, we need a permanent mechanism for sovereign debt restructuring. This mechanism could be housed either in the UN or the International Monetary Fund, as long as it remains independent from the IMF Board. Another urgent objective is to revitalize development financing. Our estimates show that an additional $4 trillion is needed annually to fund the UN Sustainable Development Goals. Achieving this requires high-income countries to fulfill their commitment to provide "0.7% of gross national income to developing countries and 0.15-0.20% of GNI to least developed countries." Unfortunately, most developed countries have not met these targets, and in recent years, the funds directed to low-income countries have actually decreased.
Another area that requires attention is increasing the financing available from multilateral development banks and supporting the expansion of national development banks' activities. In addition to traditional lending, these institutions should also support developing countries in providing international public goods, such as pandemic preparedness, climate change mitigation and adaptation, and biodiversity protection. We must prioritize environmentally sustainable financing, especially considering the current state of biodiversity loss and global warming, which has already surpassed the 1.5o Celsius threshold set by the Paris climate agreement. To achieve this, we propose greater involvement of the private sector, with the help of credits for environmental investments or complementary mechanisms, such as loan guarantees from development banks. We also believe that building adequate, progressive tax bases is crucial. This includes preventing multinationals from shifting their profits to low-tax jurisdictions and tax havens, as well as ensuring that the wealthy pay their fair share of taxes. To achieve this, we propose the adoption of the principle of "significant economic presence," where multinationals pay a fair share of taxes in all countries where they operate. Additionally, for rich individuals, we believe that a global asset registry based on beneficial ownership is essential. We hope that the UN Tax Convention, currently being negotiated, will foster the necessary international cooperation. However, we also believe that a coordinating institution is needed, which could be created by transforming the current UN expert committee into an intergovernmental organ.
To support developing countries, we must also improve IMF credit facilities and revise their conditionalities. In addition, we need two new Fund instruments: an international swap facility and a fund that can intervene in international markets for emerging and developing countries' bonds during economic downturns. These changes should be complemented by more frequent and strategically timed issuances of special drawing rights. These funds should be directed towards financing development or environmental goals while preserving their character as reserve assets. In terms of institutional reforms, we believe that promoting regional monetary arrangements in the developing world is crucial. This could lead to a denser system of global and regional institutions, similar to the one we see with the MDBs.
In terms of trade, it is essential to uphold existing tariff commitments made at the World Trade Organization. We also believe that negotiating a new agreement to set the limits of industrial policies, with special and differential treatment for developing countries, is necessary. Additionally, we must include exceptions for intellectual property rights related to health and environmental technologies. To ensure fairness in commodity markets, we must promote the greater use of international and national buffer stocks. One issue that has not been addressed in previous conferences on financing for development is international financial regulation. However, we believe that several important matters should be on the agenda this year. These include designing or strengthening the regulation of digital financial assets, international credit rating agencies, and international commodity futures markets. We also believe that a new global investment agreement is necessary, and existing investment-protection agreements should be revisited to avoid demands against national provisions that protect social and environmental standards.
Finally, we must also focus on several institutional reforms. This includes establishing adequate institutions to manage the renegotiation of sovereign debt, oversee international tax cooperation, and bolster international financial cooperation. We must also address the longstanding demand of the developing world for greater "voice and participation" in the Bretton Woods institutions. This means establishing a fair allocation of capital shares, increasing these countries' basic votes, and creating more open, inclusive processes for selecting each body's leadership.
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