Avinash Persaud, special envoy on climate finance to Prime Minister Mia Mottley of Barbados, made a detailed presentation to G20 sherpas on measures that would reshape the international financial system and unlock $2 trillion a year in development financing.
Called the ‘Bridgetown Initiative’, the seven-step proposal includes a new ‘Just Green Transition Financing Investment Trust’ at the centre of multilateral development banks (MDBs).
The Bridgetown Initiative was first proposed by Mottley in 2022 and that included suggestions on debt relief and affordable long-term financing for development.
The seven steps include greater leverage of the International Development Association (IDA) balance sheet and its ambitious replenishment.
The IDA brings together $23.5 billion of contributions from 48 high- and middle-income countries, capital markets financing, repayments, and the World Bank’s own contributions to create a resource pool.
Doubling of lending by MDBs and the use of new instruments to bring forward public investments in climate change risk countries are also part of the measures discussed. These instruments include 50-year term loans and borrowing at the same rate as the MDBs.As per the proposal, MDBs would use “diversification, economies of scale, patient capital, and SDR liquidity” to direct private sector savings through risk-reducing measures to raise funds for Just Green Transition Financing Investment Trust.
To provide relief to disaster-hit countries, the initiative proposed supported provision of country crisis liquidity by encouraging natural disaster clauses in all borrowing instruments.
The meeting deliberated steps for developing a cross-border carbon market by externally funding climate loss and damage through new international taxes on emissions.
On the debt sustainability issue, the idea discussed was to encourage countries with unsustainable debt to restructure with the support of the International Monetary Fund (IMF) by reducing the fear many countries have of going to the fund.
It considered “reforming the IMF’s debt sustainability analysis to support investments in resilience, increasing IMF emergency liquidity access limits, and temporarily removing IMF surcharges in international debt crises”.
All these measures are expected to be deliberated in detail to present a plan at the leaders’ summit in September for follow up and adoption later.
India is keen to show progress on green transition and debt relief for stressed countries during its G20 presidency.