PREVIEW
Kenya's President wins starring role after he leads regional demands to transform international financial system
Frustrated by the lack of progress on debt relief schemes and the launch of a UN-managed tax to compensate countries for 'loss and damage' caused by climate change, African leaders demanded a faster and more radical reforms at the Summit for a New Global Financial Pact hosted in Paris by France's President Emmanuel Macron on 22-23 June.
At the end of last year, African governments led a caucus of states in the UN General Assembly to kick-start negotiations on a global tax. But those efforts were sidelined in Paris.
Instead, western leaders agreed to a 'task force to examine possible new financial resources through taxation' taking the negotiations away from the UN (AC Vol 64 No 13, How Brussels's green tax will hit Africa).
One of the loudest voices at the summit was Kenya's President William Ruto who called for the IMF and the World Bank to be replaced as the main global lenders. As the Bretton Woods institutions were created at a three-week conference, their replacements could be designed over the same period he argued.
Ruto also proposed a global US$500 billion annual credit line to refinance maturing official debt for struggling economies into new long-term loans of 50-year maturity and a 10 to 20-year grace period.
'We need a new financial architecture where governance, where power is not in the hands of a few people,' said Ruto. In recent months, Ruto has pushed himself forward on several international issues including climate finance and reform of the international financial system.
Leaders also backed plans to pause debt repayments for a minimum of two years and a 'new rapid response' option to repurpose lending facilities when a country is hit by a climate-related disaster.
They also called on richer countries to reallocate 40% of their special drawing rights (SDRs, the IMF-issued reserve currency) to poorer counterparts, up from the previous target of 30%.
The summit communiqué referred to a roadmap to assist 'debt distressed' countries but this included little of substance from multilateral lenders to speed up debt restructuring negotiations or to offer more flexible terms.
On the margins, Senegal, supported by the 'International Partners Group' – including France, Germany, the EU, the United Kingdom and Canada – became the second African country, after South Africa, to launch a Just Energy Transition Partnership (JETP) to increase its renewable energy production to 40% by 2030, with an extra €2.5bn in financing.
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