Summit of the Future Explainer: Time to accelerate reform of the international financial architecture
Some of the world’s poorest countries spend more on debt repayments than on health, education and infrastructure combined, severely hampering their chances of developing their economies. At the Summit of the Future, reducing inequality and improving people’s lives by reforming the international financial system will be high on the agenda.
“The international financial architecture is outdated and ineffective and we are simply not equipped to take on a wide range of emerging issues,” UN Secretary-General António Guterres briefed on 12 September, as part of a global call for action to support the Summit.
The issue of sustainable development and financing for development is a core theme of the flagship event, which begins on 22 September, reflecting an urgent global situation for many poor countries facing unsustainable levels of debt that are crippling key areas for development, such as social protection and health care.
Targets missed
The need for reform has been given added urgency by the rapidly approaching deadline to achieve the Sustainable Development Goals which make up the 2030 Agenda for Sustainable Development, created to set out measurable targets for building a better future by the end of the decade.
The Goals were adopted by UN Member States in 2015, which means that in 2023 the halfway point was reached. The milestone was marked at last September’s SDG Summit, which was designed to give the Goals a much-needed shot in the arm, at a time when official UN statistics showed that only 15 per cent of the Goals had been met.
© US National Archives
Bretton Woods Conference delegates, July 1944.
A new Bretton Woods?
In his policy brief on the subject, published in May 2023, the UN chief lays out proposals that could enable countries to pull their citizens out of poverty and reach their full potential, and calls for a “new Bretton Woods moment”, a reference to the groundbreaking post-World War Two international agreement that led to the creation of the International Monetary Fund (IMF) and the World Bank, organizations which provide critical finance to developing countries to weather crises and invest in their long-term development..
The context in which the IMF and World Bank were created is practically unrecognizable from today’s political and economic environment. For a start, only 44 delegations were present, compared to the 193 nations that make up today’s United Nations.
The world economy is now twelve times the size it was in the 1940s, yet the resources of the international financial institutions have not grown at the same pace. Countries must contend with a growing number of challenges and investment needs, including responding to the climate crises and pandemics, and are exposed to a growing range of shocks. As a result, the “financing gap” between the resources countries invest and those they need to meet the SDGs has ballooned.
The system, says Mr. Guterres, is now “entirely unfit for purpose in a world characterized by unrelenting climate change, increasing systemic risks, extreme inequality, entrenched gender bias, highly integrated financial markets vulnerable to cross-border contagion, and dramatic demographic, technological, economic and geopolitical changes.”
The answers, according to the UN chief, involve ramping up financing to eradicate poverty and support sustainability, making the main decision-making bodies of the IMF and World Bank more democratic and representative, and strengthening the global safety net to shield countries equitably and effectively during crises.
The Secretary-General has commended the current leadership of the IMF and World Bank for taking important steps but called on the global community to urgently accelerate reforms to address today’s challenges.
WHO/Diego Rodriguez
Everyone has the right to a healthy environment, free of pollution and its harmful consequences.
A Pact and a pledge
These issues are a key focus of a series of discussions at the Summit of the Future, a landmark conference taking place at UN Headquarters in late September.
They are also reflected in the Pact for the Future, which represents, according to António Guterres, a pledge by all countries to “use all the tools at your disposal at the global level to solve problems – before those problems overwhelm us.”
In the Pact, signatory nations commit to accelerate the reform of the international financial architecture to “turbocharge implementation of the 2030 Agenda” through a wide-ranging series of actions.
The Summit will build momentum towards the International Conference on Financing for Development (Ffd4), due to be held in Spain in June 2025.
