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Mashat urges expanding innovative financial tools, debt swaps for climate action
Minister of International Cooperation Rania Mashat urged the international community to expand innovative financing tools and debt swaps for climate action to reduce the burdens on developing countries and support their development efforts.
Mashat, the Governor of Egypt to the World Bank Group, made the remarks while delivering Egypt’s speech during the G24 Governors and Ministers Meeting which fell within the framework of the World Bank and IMF 2024 Spring Meetings in Washington, in the presence of IMF Managing Director Kristalina Georgieva and President of the World Bank Group Ajay Banga, as well as many members of the bank from Africa, Asia, and Latin America, and representatives of the International Monetary Fund and the World Bank.
She explained that, as underscored in the communique, the commitment to allocate 45% of annual financing to climate-related projects is commendable but should not be at the expense of financing core developmental challenges of eradicating poverty and boosting shared prosperity on a livable planet. This requires, particularly, a focus on supporting the structuring and bankability of projects.
The Minister added that the planned improvements to the financing model should deliver a Framework of Financial Incentives (FFI) that encourages countries to address all eight identified global challenges, which were endorsed by Governors in Marrakech last October.
These are adapting to climate change and mitigating its effects; supporting fragile and conflict-affected states; epidemic prevention and preparedness; access to energy; food security; water security and access; enabling digitalization; and protection of biodiversity and nature.
Mashat stressed that this is only possible through strengthening country ownership and demand-driven engagement to support all eight global challenges in a balanced manner including through scaling up private capital mobilization. And it is crucial to meet global and development aspirations and hence the importance of adequate funding for the Global Solution Accelerator Platform (GSAP) and Livable Planet Fund (LPF).
The minister stressed that confronting the economic challenges facing developing countries requires significantly larger resources. Therefore, she noted the importance of increasing financial capacity for the International Development Association (IDA).
“We support the call for a strong replenishment of the IDA21 and this robust replenishment will require strong efforts from contributing countries to safeguard concessional financing for the most vulnerable countries. This should be center stage in 2024.”
Mashat also highlighted the sizable gap between the commitments and financing for climate action continues to be a major concern.
She noted that the Loss and Damage Fund needs to be operationalized.
Mashat also said that while it is a positive step forward that innovative financing tools are being discussed intensively, particularly debt for climate swaps; however the size of these operations needs to be scaled up to achieve the dual goals of climate action and debt reduction.
The minister also encouraged stronger MDB and IFI collaboration to deliver a harmonized agenda targeting global SDGs implementation in line with national strategies, also emphasizing the importance of country platforms that foster this collaboration to skillfully channel highly concessional resources, unlock private finance, and actively share knowledge and experience.
Sovereign debt accumulated rapidly between 2013 and 2023 in developing countries, and high debt service costs coupled with currency depreciation are eroding the capacity of countries to finance domestic development programs.
“We support the call for designing a comprehensive and responsible approach that has concrete and impactful measures to support countries to break the vicious cycle of worsening debt and climate crises,” she said.
“In conclusion of my remarks, I would like to highlight the issue of IMF surcharges and reiterate the Groups’ earlier calls, including for their elimination or substantial permanent reduction,” she added.
The minister said that sovereign debt accumulated rapidly between 2013 and 2023 in developing countries, and high debt service costs coupled with currency depreciation are eroding the capacity of countries to finance domestic development programs.
In this regard, the minister supported the call for designing a comprehensive and responsible approach that has concrete and impactful measures to support countries to break the vicious cycle of worsening debt and climate crises.
She concluded her speech by supporting the call made by the G24 to reduce or permanently cancel the additional fees imposed by the International Monetary Fund, a call that was adopted by Egyptian President Abdel Fattah El Sisi during the New Global Financing Pact in Paris, during June 2023.
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