“To really help poor countries, we should use massive amounts of donated aid”

Where are the new firm commitments of Western countries to transfer larger amounts to the South in order to ensure adaptation to climate change and the fight against poverty? Where are the announced reforms of multilateral institutions such as the World Bank and the IMF to implement a more active policy towards the poorest countries? What are the new financial instruments that will be used in favor of poor countries in the South to change the paradigm?

Almost nothing concrete came out of the Paris summit of June 22 and 23, 2023 on a new global financial pact, apart from a few marginal agreements concerning a very small number of countries such as Zambia (debt restructuring) or again Senegal (support for the country’s switch to renewable energies).

Promises rarely followed by effects

On the political level, it was nevertheless necessary to convey the idea that financial aid from the West to the South was continuing, was not affected by the Covid crisis, the war in Ukraine, or even inflation which is reducing the purchasing power of food-importing populations and States.

The commitments of the Paris summit are always announced in the form of promises to come which are rarely followed up with effects. We recycle past commitments that have not been kept – the 100 billion dollars a year for the adaptation of poor countries to climate change, the tax on financial transactions – to make new ones that have little chance of being fulfilled. materialize one day. The reforms of the international financial system (mainly the World Bank and the International Monetary Fund) are still at a standstill, no agreement between major Western donors currently exists to transform them (the United States’ veto vis-à-vis an opening of decision-making bodies to emerging countries) or granting them additional intervention capacities (all traditional Western donors, with a few exceptions).

Finally, we continue to act between the development banks, which think only in terms of loan financing, additional, deferred, restructured, canceled in the best of cases, to ensure financing for the South, which is nevertheless in a crisis of over-indebtedness.

In the state in which

So why such inertia at the global level in terms of North-South cooperation when the word “transition” is on everyone’s lips? We owe it to several factors that are not often made explicit. Here are some examples.

The multilateral financing system for aid to developing countries is dominated by representatives of Western countries’ finance ministries who sit on the decision-making bodies of the boards of directors of the International Monetary Fund and the World Bank. The latter have no desire for the system to change and to be able to call into question a parcel of their power. Although they deny it, they campaign for the status quo. Bringing them together in Paris or elsewhere to implement change is not very operational because they hold both the power and the purse strings.

Official development assistance from Western countries is not mainly directed towards the poorest countries. Middle-income countries benefit the most. Thus, official development assistance, whose official mission is to fight against poverty in poor countries but also to provide a response to climate change, is mainly directed towards middle-income countries which are not among the most needy. This oddity is easily explained: donor countries, like multilateral financing institutions, prefer to lend to countries which theoretically have the means to repay, which constitute commercial targets, which can pursue a policy of mitigating climate change, rather than helping the poorest who are already over-indebted and have no significant effect on mitigating climate change.

The loan is addictive

Finally, multilateral aid from the IMF and the World Bank is essentially in the form of loans which cause indebtedness and sometimes over-indebtedness. International bilateral aid also includes a large share of loans, whether for Western aid but also aid from emerging countries like China. This loan aid creates long-term dependencies between lenders and recipients that have political implications. Loan aid creates dependence on the lender, over a long period (reimbursement of loans for some over forty years, restructuring or cancellation of loans in return for economic, commercial and sometimes political measures). The loan, much more than the gift, therefore establishes the dependence of the South vis-à-vis the donor countries, whatever they may be. However, to truly help poor countries in their fight against poverty and climate change, it would be necessary to make massive use of donated aid.

This grant aid is much more conducive to directly supporting the fight against poverty in poor countries because it essentially promotes the social sectors (education, health, fight against poverty), which have no immediate return. This grant aid is much more conducive to helping poor countries meet the challenges of adapting to climate change, which represents an additional cost for poor countries in the South.

A new global financial pact for the South must address these major issues head-on. For the moment, we evade them. We avoid dealing with them directly. Until when ?

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