A Bank for G-20

South Africa’s G-20 presidency offers a real opportunity to set the agenda and shape global outcomes in a world marred by conflicts, and a massive climate and development crisis.

The pandemic has undone years of progress in poverty and hunger eradication and pushed an additional 93 million people into poverty. South Africa’s predecessors, Brazil, and India reoriented the G20’s priorities towards development concerns centred on implementing the SDGs, finance for development, prioritising food security, digital public infrastructure, and climate action. It is amply clear that without plugging the massive SDG financing gap, SDGs cannot be redeemed.

Financing gap

Per UN estimates, the SDG financing gap for developing countries currently stands at $4 trillion. Much of the developing world is reeling under a debt distress not being able to sustain essential social services. Development aid has received a severe beating with most of the big donors notably the US withdrawing from the international development scene. Net bilateral flows to low-income countries has fallen consistently after the initial rise during the pandemic. Also the private sector’s investment in SDGs has been lacklustre. Estimates indicate that only 4 per cent of the $410 trillion in global private assets invested in developing countries have been directed towards SDGs.

The G20 Eminent Persons Group on Global Financial Governance highlighted many of these failures of the global financial architecture and provided a roadmap for reform in 2023 under India’s presidency.

The inadequacy of the international financial architecture in financing SDGs in developing countries led to louder calls for reform. Developing countries have long critiqued the multilateral financial institutions due to their structural rigidities, delayed institutional responses to crises, and the dominance of the Global North coupled with the underrepresentation of the Global South.

The G20 Eminent Persons Group on Global Financial Governance highlighted many of these failures of the global financial architecture and provided a roadmap for reform in 2023 under India’s presidency. Their report stressed the urgency of stepping up MDB (multilateral development bank) financing of global public goods like SDGs and climate action and also called for a more inclusive governance structure of international institutions through greater voting rights for India, Brazil, and China.

New institution needed

Several reasons call for the creation of a new financial institution to finance the SDGs. First, the existing financial order, born in the context of the Second World War, is incapable of financing the SDGs which require major, sustained, and transformative changes across countries and sectors. However, both the World Bank and the IMF have a country-focused operating model which is not in line with SDG financing, which required a broader focus across countries and sectors.

Existing global financial institutions have historically prioritised economic rate of return, neglected environmental and social concerns, and have a poor record in climate finance. The basic tenets of the multilateral development banks are not in line with the SDG agenda for 2030 and the Paris Agreement. Both the World Bank and the IMF have pushed for a growth-based approach to poverty alleviation and climate concerns have never featured prominently in their lending.

SDGs require new, stable, and long-term sources of financing. The G20’s Development Bank should strategise finance towards addressing the development and sustainability needs. A dedicated bank to fund the SDGs would not only be instrumental in furthering the SDGs but also ensure that geopolitical conditions don’t derail the SDGs.

Developing countries have long critiqued the multilateral financial institutions due to their structural rigidities, delayed institutional responses to crises, and the dominance of the Global North coupled with the underrepresentation of the Global South.

Without long-term sustained finance from a dedicated development bank, the SDGs will surely fail.

The inadequacy of the international financial architecture in financing SDGs in developing countries led to louder calls for reform. Developing countries have long critiqued the multilateral financial institutions due to their structural rigidities, delayed institutional responses to crises, and the dominance of the Global North coupled with the underrepresentation of the Global South.

The G20 Eminent Persons Group on Global Financial Governance highlighted many of these failures of the global financial architecture and provided a roadmap for reform in 2023 under India’s presidency. Their report stressed the urgency of stepping up MDB (multilateral development bank) financing of global public goods like SDGs and climate action and also called for a more inclusive governance structure of international institutions through greater voting rights for India, Brazil, and China.

The inadequacy of the international financial architecture in financing SDGs in developing countries led to louder calls for reform. Developing countries have long critiqued the multilateral financial institutions due to their structural rigidities, delayed institutional responses to crises, and the dominance of the Global North coupled with the underrepresentation of the Global South.

The G20 Eminent Persons Group on Global Financial Governance highlighted many of these failures of the global financial architecture and provided a roadmap for reform in 2023 under India’s presidency. Their report stressed the urgency of stepping up MDB (multilateral development bank) financing of global public goods like SDGs and climate action and also called for a more inclusive governance structure of international institutions through greater voting rights for India, Brazil, and China.

This commentary originally appeared in The Hindu Businessline.

• Developing and Emerging Economies
• Sustainable Development
• India
• development finance
• G20 South Africa
• global financial reform
• global financial reform
• global financial reform
• Global South representation
• multilateral development banks
• SDG financing gap

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