V20 Group: World Needs Fit-for-climate Global Financial System Right Now

TEMPO.CO, Jakarta - The Vulnerable Twenty Group of Ministers of Finance (V20 Group) called on international financial institutions to move with a greater sense of urgency towards a fit–for–climate global financial architecture ready to enable stronger climate action by driving sustainable development for the most vulnerable and scaling up access to and volume of financing, according to a media release received by Tempo on Tuesday, September 5, 2023.

President William Samoei Ruto, President of Kenya and host of the Africa Climate Summit, said that Africa is ushering in a new era of international solidarity and multilateral governance to guide the world in climate action and a new Green Industrial Age. African nations are emerging as the new torch-bearers of the most impactful climate action. At the summit, the African nations are aspired to start a new growth agenda that will deliver shared prosperity and sustainable development.

Following the lead of President Ruto, who met with Ghana’s President and Climate Vulnerable Forum chair Nana Akufo-Addo during the summit, finance ministers from the two countries and other V20 member economies in Africa expect the summit to show that financing can be dramatically scaled and accelerated in order to defuse the debt and climate crises as well as avoid global economic conflagration. The V20 Group called for the full integration of the V20 Accra-Marrakech Agenda in the summit’s Nairobi Declaration.

“We refuse to pursue the same path while hoping for different outcomes. No more. We expect nothing less than a fit-for-climate global financial system. We need to make debt work, to normalize the integration of loss and damage funding through the MDB system, revolutionize how we manage risk, and generate new resources through guarantees and credit enhancement that can offset high capital costs for climate investments.” This was according to the Ghanaian Finance Minister and the V20 Chair Ken Ofori-Atta, who was represented by Minister of State Dr. Mohammed Amin Adam at the V20 event hosted in the African Union pavilion at the summit.

“Our focus is prosperity, not mere survival. Expect the V20 to continue to shake the tree of complacency and demand immediate action,” Ofori-Atta added.

Climate change has exacerbated loss and damage as well as indebtedness across Africa. Between 2000 to 2019, 55 V20 economies lost 20 percent of their wealth due to climate change impacts, equivalent to USD 535 billion in aggregate dollar terms. It is also estimated that 40 V20 economies are in debt distress. External sovereign debt of V20 countries together almost doubled between 2008 and 2021, from USD 295 billion to USD 818 billion. Over the period of 2022-2029, total debt service payments by V20 countries would reach USD 552 billion.

Moreover, bond spreads on private capital for V20 African countries have pushed upwards to over 900 basis points, further making the cost of capital out of sustainable reach. According to the Debt Relief for Green and Inclusive Recovery (DRGR) report released today, debt service costs represent 93 percent of climate finance needs in Africa.

Njuguna Ndung'u, Kenya Cabinet Secretary, National Treasury & Economic Planning, asked: “When do we get solutions that are formidable and appropriate in scale that are appropriate for the future? How do we address the climate and debt crises to provide momentum for growth? The international financial reform agenda must create fiscal space to deliver SDGs by 2030 through climate action. It is important that we build critical mass support for climate vulnerable economies around climate prosperity with the aim to deliver on catalytic deals that unlock new long-term sources of capital or deals that would be crucial to changing market economics.”

“It is time for African money to work for Africa’s people,” added UN Assistant Secretary-General Ahunna Eziakonwa.

Also speaking at the V20 event were World Bank senior managing director Axel van Trotsenburg; South Sudan member of parliament Woda Jeremiah Jago, European Climate Foundation CEO Laurence Tubiana, Task Force on the IMF member Kevin Gallagher; and Pepukaye Bardouille, Bridgetown Initiative Director and Special Advisor on Climate Resilience to the Prime Minister of Barbados.

TEMPO.CO

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