UK calls for fundamental reset of global financial system for developing countries
Foreign Secretary Ed Miliband said the current system is failing developing economies and holding back shared global prosperity
- Foreign Secretary uses World Bank and IMF Annual Meetings in Bangkok to call for urgent reform of the international financial system for developing countries
- UK proposes action on debt facing developing countries, private investment, support for fragile states and resilience to shocks set to be intensified by El Nino
- Ed Miliband says reform is a matter of both values and national interest, helping support prosperity and protect the UK’s security
The UK has today [14 October] called for a fundamental reset of the global financial system, warning that the current system is failing developing economies and holding back shared global prosperity.
Attending the World Bank and IMF Annual Meetings in Bangkok as the UK’s Governor to the World Bank, and to support the Chancellor John Healey’s drive for economic growth for the UK, Foreign Secretary Ed Miliband argued that action is needed on developing countries’ debt, to unlock private investment and help countries withstand climate, economic and security shocks set to be intensified by an El Nino forecast expected to be the strongest in living memory.
In a speech hosted by the Rockefeller Foundation, he pledged to carry the same bold ambition as the UK-hosted Gleneagles Summit in 2005, which secured the most significant action on development for a generation, while acknowledging the constraints of the national and global fiscal context. He set out four priorities for reform: action on unsustainable debt through the multilateral development banks; much greater flows of private investment ; a stronger focus on resilience and preparedness; and better approaches in countries affected by conflict and instability.
The Foreign Secretary said reform is a matter of both values and national interest, helping support prosperity and protect the UK’s security. Debt distress, climate shocks and instability prevent countries from investing in jobs, public services and economic growth. Their consequences cross borders, disrupting trade and supply chains, driving up costs and increasing risks to the UK’s security and prosperity.
He argued that far greater ambition is needed across the international system. Developing countries face historically high debt-servicing burdens, while global capital continues to flow overwhelmingly towards richer economies, despite significant investment needs and opportunities elsewhere.
The Foreign Secretary’s speech is available to read in full on GOV.UK. In it, he called for:
- Action on debt, working through the MDBs to tackle high debt service pressures by providing longer repayment terms and better rates where appropriate, accelerating restructuring for those requiring deeper relief and freeing up space for governments to invest in jobs, growth and public services.
- More investment for stronger growth, by helping attract more private investment to developing economies. For example, UK support has helped the International Finance Corporation to mobilise over $1 billion of private capital into emerging markets through the London Stock Exchange.
- Better preparation for disasters, with money ready before crises hit, more resilient infrastructure and the option to pause debt repayments after major shocks. Currently only two percent of finance is pre-arranged despite 35 percent of crises being predictable. The UK is collaborating with insurers on this agenda. This year a £25 million investment through UK funding has mobilised over £150m of private finance for climate insurance in low-income countries.
- Faster action in countries affected by conflict, with international organisations working together to coordinate earlier, while simplifying their processes to cut delays.
The UK will put the priorities at the heart of its engagement with international financial institutions.
The Foreign Secretary stressed that reform must be shaped in genuine partnership and give the Global South a stronger voice in decisions that directly affect people’s futures.
Debt servicing costs are at a 25 year high. In Sub-Saharan Africa, over three and a half times more is spent on debt servicing than education. While many are not defaulting on their payments, they are being forced to default on the lives of future generations.
Notes for editors
- Ed Miliband is the first British Foreign Secretary to attend the World Bank Annual Meetings as Governor to the World Bank.
- This delivers on a commitment he made in his first week as Foreign Secretary, when he stressed his appetite to take personal leadership of the UK’s engagement on development and climate finance.
- Today follows the Foreign Secretary’s call at the UN General Assembly for climate change and nature loss to be recognised as a national security challenge.
- This week British International Investment, the UK’s development finance institution, has announced [link] that it will deliver $1.6 billion (£1.2 billion) of climate finance across South-East Asia over the next five years. Approximately half of this will be capital from BII, with a similar amount mobilised from private investors.
- The investment will support cleaner energy and more resilient infrastructure in countries including Vietnam, Indonesia, the Philippines, Malaysia and Thailand. Projects are expected to cover renewable power, electricity networks, electric-vehicle infrastructure, waste management and water infrastructure, adding 1.8GW of clean-energy capacity and avoiding nearly 1.7 million tonnes of carbon emissions.
- British International Investment is the UK’s development finance institution and impact investor. It invests commercially in businesses in developing countries and recycles returns from successful investments into future projects.
- BII has generated more than £1.3 billion in returns for the UK taxpayer over 10 years, which it uses for further investments in international growth and development.
- The World Bank’s International Development Association (IDA) provides grants and low-interest finance to the world’s poorest and most vulnerable countries. The UK has committed £1.98 billion to IDA21 over three years, helping the World Bank support around 1.9 billion people. The UK contribution also has a significant leveraging effect, with up to $4 available for spending for every $1 pledged by donors.
- The UK is continuing to prioritise multilateral support for sub-Saharan Africa, with more than £1 billion a year of UK multilateral ODA expected to go to the region. This includes the UK’s increased contribution to IDA, which delivers around two-thirds of its work in Africa.
- The UK is also a major supporter of the African Development Fund (ADF), the concessional finance arm of the African Development Bank. The latest ADF replenishment secured a record $11 billion to support 37 low-income African countries, focused on areas including resilience to conflict and economic shocks, regional integration, inclusive growth and job creation. The UK was the largest donor and co-hosted the replenishment in London.
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