What happened at the Paris Summit?

The two day ‘Summit for a new Global Financial Pact’ has just finished in Paris. Promoted as a chance to bring together countries to “build a more responsive, fairer and more inclusive international financial system”, it was attended by hundreds of delegates, including over 40 Heads of State and Finance Ministers. But now the dust is settling, what did it actually deliver?

So much is at stake. 54 countries are in debt crisis, and the climate emergency is only going to make this worse, with more and more countries going into debt to pay for the costs of adaptation, as well as climate disasters such as floods and hurricanes. Right now, lower-income countries are spending five times more on servicing their debts, than they are on dealing with the climate crisis.

These are deep structural issues that need to be addressed. Much of the rhetoric ahead of the summit from President Macron who was co-hosting pointed to the need for more meaningful change. Barbados Prime Minister Mia Mottley called for attendees to deliver a path to “transformation, not reform” of the global financial system.

Just a drop in the ocean?

In the end the outcome agreed little to match the scale of the challenge or the rhetoric of the summit.

The World Bank did agree to a new scheme, to pause debt repayments for countries struggling with climate disasters. But crucially, only for new loans – and this is a pause, not debt cancellation – the debt will still need to be paid with interest in future. This will do nothing to help countries like Pakistan, which was hit by horrendous floods, but is paying the World Bank $1.2 billion this year.

During the summit we also heard that an agreement to restructure some of Zambia’s debt had been reached. $6.3 billion of debt between Zambia and other countries will be restructured, but we have heard nothing about the $4.5 billion still owed to big banks and hedge funds, the private lenders who if paid in full could make up to 250% profit on Zambia’s debt.

Although it’s positive this deal has been agreed, the fact that it has taken three years to get here highlights the glacial pace at which these international processes are moving. There are 53 other countries in need of a swift resolution to their debt crises, they can’t wait.

One big concern coming out of the summit is that global North governments did not commit any new funds to the global South to help with the climate crisis. Instead, they called for multilateral institutions like the World Bank and IMF, and the private sector to step in. But this likely means new loans – which will mean even more debt. Proposals for ‘climate finance’ from these sectors will only plunge countries into more debt in the future, and without debt cancellation, will just be used to repay existing debts.

Similarly, the IMF said it had reached its target for $100 billion of rich country reserves at the Fund (Special Drawing Rights) to be rechannelled to lower income countries – but these will all be given as loans, much of it had been announced already, and the rest might never happen.

But there is hope – leaders such as Barbadian Prime Minister Mia Mottley, and Kenyan President William Ruto used the summit to demand real action and a fundamental transformation of the relationships between rich and lower income countries.

What happens next: Demands for reparations and debt cancellation

Although success should be celebrated, and couldn’t have happened without thousands of us adding our voices to campaigns, as reported, the summit largely failed to deliver the wide scale debt cancellation that so many countries need. Activists and campaigners decried the lack of ambition and failure to deliver solutions that live up to scale of the crisis and are calling for more to be done.

“The content and governance of the Paris Summit has been disappointing. It is an undemocratic space that promotes more loans, greater participation of MDBs and the private sector.” Carola Mejia, Latindadd.

Many activists are not just calling for debt cancellation, but also reparations, highlighting the need to address centuries of exploitation and the draining of resources. If anything, the summit has hardened the resolve to push for more real, structural solutions to the debt and climate crisis.

And there are more opportunities to do so in the coming months. We’ll be  campaigning for a new law to make sure the big banks and hedge funds, private lenders, like those who have so far refused to cancel Zambia’s debts are compelled to act. And this autumn we’ll be at the World Bank and IMF Annual meetings, the first time in 50 years they’ll be held in a county in Africa, to demand real action on debt cancellation.

Add your voice to the campaign.

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