Reforming the Global Financial System to Make Opportunity Universal and Sustainable
The world is neither achieving its goals nor addressing humanity’s biggest threats because of insufficient financing. A more ambitious development finance system – comprised of aid, financing from multilateral development banks (MDBs), private capital, domestic resources, and philanthropic capital – is needed to make the sort of big bets that can achieve local, national, and global goals.
Much of today’s development finance system was established in 1944 in response to the 20th century’s world wars.
For decades, the system helped support the growth that enabled Europe’s recovery and Asia’s rise and helped billions climb out of poverty.
Yet in recent years, that system has struggled. The difficulties have been due in part to the nature and scope of today’s current crises, which like climate change and Covid-19 have affected every country simultaneously and which have in many cases unwound previous progress. The institutions have also been held back by their own layers and layers of obsolete rules and procedures. Despite good intentions and good work, they are falling short.
The Rockefeller Foundation’s Global Economic Recovery team is working with a broad alliance of nations, institutions, and individuals to strengthen and augment those systems. We are also focused on building a global financial architecture that can mobilize substantially more, and better quality, financing.
What happens on global economic reforms next will signal the world’s willingness—or lack thereof—to address today’s crises with a focus on long-term gains rather than short-term payback. Without imminent action in 2023, the promise at the core of the global economic order may be broken for good. But with the right agenda, the system can be restored and revitalized enough to meet the rest of the 21st century’s challenges and opportunities.
At The Rockefeller Foundation, we believe that with the right reforms and innovations, the global development finance system can combat climate change and poverty at the same time—and benefit everyone by making the world more prosperous and, stable.
- As the world’s finance ministers travel to Washington for the annual spring meetings of the World Bank and the International Monetary Fund (IMF) next week, humanity’s future hangs in the balance. Climate change threatens to make the world either inhospitable or unhabitable for billions of people.
- This paper provides an overview of the governance, operational and financial characteristics of 10 borrower-led MDBs operating in low- and middle-income countries, offers three case studies highlighting their innovations and developmental potential, and proposes policy options to help improve the effectiveness of these MDBs.
- New fund will help to expand capacity of development banks around the world to scale up lending in low- and middle-income countries in line with the new G20 Capital Adequacy Review Commission recommendations.
- Multilateral Development Banks (MDBs) have a critical role to play in providing affordable financing to support economic recovery and to help achieving SDGs in a post-pandemic context. MDBs’ scope to leverage shareholders’ capital contributions to provide such financing is determined by their capital adequacy frameworks (CAFs).
- Financing a big investment push in emerging markets and developing economies for sustainable, resilient and inclusive recovery and growth.
- As the world seeks an end to the Covid-19 pandemic and to start a recovery that averts the next pandemic, we must reimagine that decades-old global economic order and unlock the full potential of its institutions. Just as World War II established these organizations, this crisis now requires us to urgently reimagine them and put them to better use.
- The ravages of Covid-19 are well known. Just as the entire world shared in the spread and pain of the pandemic, we must now share in orchestrating its end, and a transition to a just, equitable, and sustainable recovery. This will require an immediate burst of revitalized multilateralism and creativity utilizing the financing tools and institutions readily at hand.
- The Rockefeller Foundation thanks the International Monetary Fund’s Board of Governors for its approval yesterday of a general allocation of $650 billion in Special Drawing Rights (SDRs). Right now, too few countries have the necessary liquidity to respond to the health and economic crises created by the Covid-19 pandemic.
- The wealthiest nations have the vaccines to give their people a chance against Covid-19, while the poorest do not. Nations in the Global North have the means to stave off economic calamity and social disruption with massive stimulus packages, while hundreds of millions of people in the Global South have been driven into extreme poverty.
- The Covid Charter calls for donor governments, Multilateral Development Banks (MDBs) and International Financial Institutions (IFIs) to mobilize development finance at pace and scale needed for humanity to meet these goals, and catalyze trillions in private capital toward addressing crises, supporting human development and fighting climate change.