Western countries must join the effort to transform multilateral financial institutions, even if it means ceding some of their own influence to others who have previously been marginalized. And those pursuing systemic reforms must resist the temptation merely to tweak current arrangements.

Lack of investment for sustainable development in the world’s poorest, most vulnerable countries is one of the most pressing global issues today, especially now that many of these countries are in debt distress, or will be soon. The fallout from the COVID-19 pandemic, Russia’s war on Ukraine, and ongoing climate-driven disasters are preventing many developing economies from achieving liftoff and exacerbating the global economy’s structural asymmetries.

This is the decade when we should be ratcheting up investments in sustainable development. In Sub-Saharan Africa, an additional two million decent jobs must be created each month until 2035, just to keep up with growth in the working-age population. Yet major powers like the United States, the European Union, and China are paying scant attention to such challenges. Instead, they are focused on their own technological competition, reindustrialization, decarbonization, and zero-sum strategic maneuvering, all of which could aggravate conditions in developing countries.

As Barbadian Prime Minister Mia Mottley warns, the Global South, including its emerging economies, remains in critical financial condition, much like Europe after World War II. Back then, the US committed reconstruction funding equal to 3% of the recipient countries’ combined national incomes, because it knew that the investment would pay off both economically and geopolitically. Now, the Western countries that still dominate the Bretton Woods institutions must recognize that they, too, have an interest in effectuating global financial and institutional transformative, not just incremental, reform.

Otherwise, the consequences would be catastrophic. The stage would be set for the proliferation of humanitarian disasters in many parts of the world, ecological breakdown, and China’s rise as the main power behind an alternative bloc of multilateral institutions that exist to serve its own interests. This scenario would ultimately leave everyone worse off, with fragmentation and competition between different rule-setters and institutions introducing zero-sum dynamics and destroying global public goods.

To prevent such outcomes, Western countries must join the effort to transform multilateral financial institutions, even if doing so means ceding some of their own influence to others who have previously been marginalized. Those pursuing systemic reforms must resist the temptation merely to tweak current arrangements. The entire conversation about development should be reframed to account for neglected issues such as infrastructure and the role of the private sector and non-public financial flows.

This is what the June 22-23 Paris Summit for a New Global Financing Pact aims to do. But as important as the gathering is, it is also risky. If the only result is a hollow political declaration, the broader reform effort could lose credibility. That is why those in attendance must deliver a concrete blueprint that is ambitious but also realistic and feasible.

The summit is asking the right questions, and it presents an opportunity for everyone to think imaginatively about novel solutions to today’s unprecedented challenges. The discussion should focus on three time horizons. The first is the day of the gathering, when governments must agree, for example, to a suspension of debt-servicing obligations for countries facing catastrophic climate events – as was done at the height of the COVID-19 pandemic.

The second time horizon spans the next 18 months, through the rest of India’s and then Brazil’s G20 presidencies. Since it has been only six months since the Paris summit was announced, there has not been enough time to negotiate finalized agreements on critical political issues.

Even so, the summit can create an impetus for such deal-making in the months ahead as governments find ways to overcome domestic obstacles to more robust action. For example, a preliminary agreement to improve the efficiency with which multilateral development banks deploy existing capital could open the door for greater capital contributions by donor countries in the future.

The third time horizon covers the next few years, when far-reaching reforms to the global financial system will need to be implemented. To prepare the ground, the summit should explore the options for mobilizing different kinds of donors and tapping new funding sources, with an emphasis on creating new international taxation mechanisms.

This would help broaden the debate beyond official development finance. Not only does the current financial system still favor carbon-intensive investments over sustainable projects; it also favors pure speculation (usually on arcane financial instruments and real estate) over productive investments in poorer countries.

Recognizing how deep these problems run, UN Secretary-General António Guterres recently proposed a comprehensive program of measures to redirect “unproductive and unrewarding” finance and rebalance structural asymmetries in the global economic system. The Paris summit should help launch this debate so that it delivers tangible results – including public money to support developing countries – in the months and years ahead.

This is the moment to articulate a reform agenda that is ambitious enough to give the Global South real hope for the future.

Sébastien Treyer is Executive Director of the Institute for Sustainable Development and International Relations (IDDRI).

Bertrand Badré, a former managing director of the World Bank, is CEO and Founder of Blue like an Orange Sustainable Capital and the author of Can Finance Save the World? (Berrett-Koehler, 2018).

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