Barbados' capital, Bridgetown, at 3 p.m.: Is the recent move in finance by Barbados leading to reforms?
The International Monetary Fund (IMF) launched the Resilience and Sustainability Trust Fund (RST) in 2022, a USD 40 billion fund aimed at financing reforms to promote climate resilience in developing countries. By 2024, the IMF had approved 18 RST programs worth a total of USD 8.4 billion.
The Bridgetown Initiative, first presented by Mia Mottley, the Prime Minister of Barbados, at the UN General Assembly in 2022, is another significant initiative in this arena. Mottley devised the Bridgetown Initiative alongside Avinash Persaud, a World Bank economist and former head of the Barbados Financial Services Commission.
The Initiative has been a prominent topic in discussions at global conferences such as the UN's COP climate change summits. It has been endorsed by global leaders such as France's president, Emmanuel Macron, and international organizations including the IMF.
The Bridgetown Initiative calls for reforms to global finance to make the system fairer, more inclusive, and more responsive to the climate crisis and the needs of developing countries. Version 2.0 of the Bridgetown agenda summoned the private sector to mobilize USD 1.5 trillion per year for 'green and just' transformations.
In response to the debt crises exacerbated by conflicts, the Covid-19 pandemic, and climate-related disasters, the meeting resulting from the Initiative proposed three central ideas. The first was the facilitation of quick and easy access to money, especially in economic emergencies.
The Initiative also proposed the creation of new international taxes on wealth, shipping, aviation, and fossil fuel companies to feed climate change funds. Version 3.0 of the Bridgetown agenda, proposed in 2024, called for a USD 1 trillion expansion of Multilateral Development Bank (MDB) lending, which was to prioritize the building of resilience to climate change and the achievement of the Sustainable Development Goals (SDGs).
Countries must now develop a roadmap for expanding the annual funding goal for climate finance to the number originally called for by developing countries at the summit: USD 1.3 trillion, by 2035. This is a daunting task, given that as of 2024, 62 countries were classified as being either at high risk of debt distress or already experiencing it, with most countries in Africa and Oceania on the list.
The UN's Loss and Damage Fund, approved and launched in 2023, aims to assist countries most vulnerable to the effects of climate change. However, as of now, it has only received USD 495 million in contributions. The UN approved a new annual target of USD 300 billion for global climate finance at its 2024 climate change conference, COP29 in Azerbaijan.
The G20 has established a roadmap to make multilateral development banks 'better, bolder, and bigger', which the banks have endorsed and are now in the process of implementation. However, the next few years will be difficult for the Bridgetown agenda due to political uncertainties and opposition from the United States government, which is opposed to reforming the global financial system.
One of the most innovative aspects of the Bridgetown Initiative is the introduction of climate-resilient debt clauses. These clauses, first introduced by Grenada and Barbados, allow debt repayment to be suspended when a country suffers a shock, such as an extreme weather event. Several Multilateral Development Banks have also introduced them in some debt contracts.
The Bridgetown Initiative's next action aims to advance a new global economic order to tackle debt crises and climate change challenges for vulnerable nations. Depending on the roadmap's ambition for reform of the international architecture, the Initiative could be considered a success, moving from being a Barbados initiative to a legitimate international initiative.
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