Global financial structure reform must be inclusive

This month, the World Economic Forum (WEF) will bring together government and international civil society leaders to deliberate on and work towards resolving global issues.

The theme this year is ‘rebuilding trust.’ It creates an opportune moment for global leaders to make concrete commitments towards bridging the existing inequalities in the current approach to development financing.

This would include expanding meaningful engagement to include diverse constituencies in the global south.

Additionally, exploring the intersections between climate – which has dominated the agenda — and other thematic areas that have been driven into relegation such as gender, health, and education among others.

The sustainable goals are interdependent and the advancement of one, with the regression of another will result in the ultimate failure of the development agenda.

Already there are ongoing efforts to revamp the structures that ensure the functioning and stability of the international financial system.

Triggered by the need to bolster financing for the sustainable development goals (SDGs), the reform agenda is also galvanised by the inefficient and exploitative nature of the financial architecture.

Low and middle-income countries (LMICs) are paying three times more on interest rates for external debt compared to high-income countries. Yet, most development finance is currently in the form of loans. In fact, LMICs are spending more money on servicing their loans than they are on the provision of social services to their citizenry. Consequently, they are forced to take out new loans to repay existing obligations, resulting in a vicious dependency cycle. While it could be argued that this emanates from long-term inadequacies in governance and accountability mechanisms, the reform agenda theoretically attempts to consider aggravating circumstances including colonial legacies and their perpetuation of neocolonialism.

Despite the promise of the 2030 agenda to leave no one behind, discrimination continues to play out in reform efforts. Most tragically, is the marginalisation of those most affected by the existing situation that these goals aspire to mitigate and remedy. There is a disconnect between these macroeconomics and those occurring at the meso- and micro levels.

For instance, the language used by climate experts and economists in discussions and negotiations on the prospective transformation and its nexus to the climate agenda is highly technical. Laypersons are left to decipher carbon markets, credit rating systems, debt relief, foreign currency markets and rechanneling special drawing rights, among others.

The drivers of the reform agenda must therefore relate the anticipated transformation to, among other areas, the daily lives of the masses including access to social services, high income and value-added taxation, depreciation of local currencies and a steady rise in cost of living. An informed public is also better equipped to hold their political representatives accountable for their foreign policy positions and their legislative decisions on development issues domestically.

In pursuing a reimagined and fit for purpose system, at WEF, a holistic consideration of the 2030 agenda is key. There must be a departure from siloed approaches based on themes, sectors, race and gender towards strategic collaboration. The global financial architecture reform process must be people-centered, shifting from exclusivity, saviourism and the tokenistic involvement of sidelined groups, towards their meaningful engagement and participation. If not, the reoccurrence of historical injustices threatens to further delay the prospects to attain our global goals.

- Stephanie Musho is a human rights lawyer and an Aspen Institute New Voices Senior Fellow. [email protected]