Summit for a new global financing pact: assessing the urgency

The Sustainable Development Goals (SDGs), adopted by the United Nations in 2015, represent to date the most ambitious international framework to promote sustainable and inclusive international development. These 17 goals aim to, among other things, eliminate poverty, hunger, gender inequality and promote good health, education, respect for the environment and peace by 2030.

Thanks to the efforts of the international community, real progress has been made since 1990 in many areas: reduction of poverty, better schooling rates, increase in life expectancy, suggesting a convergence between living conditions in the most fragile and the most industrialized countries.

Nevertheless, since 2020, a slowdown in progress, or even a reversal, has been observed, driven by the health, economic and social consequences of the Covid-19 pandemic, the war in Ukraine, and the ever more obvious manifestations of climate change. These global crises have caused an unprecedented shock: while the achievement of the SDGs was already uncertain, their success now seems largely compromised, notes the United Nations with regret.

While these crises have affected all countries, their consequences have not been felt equally. The most fragile countries have been hit much harder than others. The latter have to cope with a growing proportion of their expenditure on interest payments and debt repayments, restricting their ability to finance public policies that contribute to achieving the SDGs.

The United Nations Development Program (UNDP) warns that 52 developing economies, including more than 25 of those most threatened by the consequences of climate change, are experiencing serious debt problems.

According to Oxfam, $27 trillion will have to be mobilized to "fight poverty, inequality and climate change in developing countries" by 2030, or about $3.9 trillion per year.

In this context, France will organize Summit for a New Global Financing Pact in June 2023, with the ambition to push for a structural transformation of the global financial architecture in order to finance the climate emergency while continuing to fight poverty. Below is an overview of the main issues to which the Summit intends to provide solutions.

1. Fight against poverty: the end of progress

719 million people lived below the extreme poverty line in 2020, compared to 648 million in 2019

Since the 1990s, most development indicators have shown positive dynamics. The fight against poverty, symbolized by SDG 1, is a significant example. In 30 years, the number of people living below the extreme poverty line (set at less than $2.15 per day by the World Bank) has decreased significantly, from almost 2 billion in 1990 to 648 million in 2019. Nevertheless, in 2020, this number increased for the first time in 20 years, and its decline has largely slowed since then according to World Bank estimates.

In 2023, the number of people living in extreme poverty is estimated at 647 million, returning to 2019 level. The Covid-19 pandemic and the rise in food and energy prices, accentuated by Russia’s invasion of Ukraine and climate shocks in some major producing countries, have had a tangible impact on the number of people living below the extreme poverty line, considerably slowing down the efforts made for several decades. The achievement of SDG 1 now appears to be under serious threat: 255 million people will still be living below this threshold in 2030.

In addition to the issue of poverty, the SDGs also aim to improve the living conditions of the entire world population in all their aspects: food, education, health, access to water, gender equality, etc. These issues are closely linked, and all have been affected by the recent international crises.

2. The rise of food insecurity

190 million more people suffer from hunger since the Covid-19 pandemic and the war in Ukraine started

SDG 2 aims to eliminate hunger by 2030. However, according to a 2021 UN estimate, the crisis caused by the Covid-19 pandemic has led to an additional 118 million people being undernourished, on top of the 693 million people already affected before the pandemic. In 2022, the UNDP estimated that 71 million people would also be suffering from hunger, only three months after the beginning of the Ukrainian conflict. Thus, if this war affects primarily Ukrainians, its consequences aggravate food insecurity on the whole planet.

3. Global health: a step backwards

For the first time in 100 years, global life expectancy declined from 73 to 71 years between 2019 and 2021

Global health, promoted by SDG 3, has been largely impacted by the Covid-19 pandemic. Excessive mortality rate (at least 20 million deaths associated with Covid-19 since the start of the pandemic in 2020), shortages of medical supplies, and vaccine inequities are all consequences of the pandemic that have stalled global progress towards achieving good health and well-being. Global life expectancy has declined for the first time in a century, from 72.8 years in 2019 to 71 years in 2021. Similarly, the number of people in urgent need of care has increased in 2023 (339 million), mainly due to the many humanitarian crises underway, notably in Ukraine, Yemen and Afghanistan.

4. Worsening gender inequalities

At the current rate of progress, gender equality will not be achieved until 2154, a 30-year setback compared to pre-Covid-19 estimates

In 2019, the World Economic Forum estimated that it would take another 100 years to achieve gender equality worldwide. While this figure already reflected great difficulty in achieving SDG 5 by 2030, the Covid-19 pandemic has pushed that deadline back another generation, to 132 years in 2022. Women have been more affected by the consequences of the pandemic than men: they are more likely to live below the extreme poverty line, more likely to be employed in informal jobs (and thus deprived of social protection), more likely to be victims of gender-based violence in their own homes, etc. The United Nations already believes that the humanitarian and economic consequences of the war in Ukraine will only aggravate these conclusions.

5. The global decline in the Human Development Index (HDI)

The Covid-19 pandemic has had a negative impact on the human development index in 90% of the world’s countries

The measurement of the global decline in human development can be summarized in a single indicator, the Human Development Index (HDI). Calculated by the United Nations Development Programme (UNDP), this index measures the economic development of countries and the quality of life of their inhabitants by aggregating GDP per capita, life expectancy at birth and the level of education of children. A negative impact of the Covid-19 pandemic on the HDI has been observed in 90% of the world’s countries according to the UNDP’s Human Development Report 2022. After an overall increase since 1990, the HDI actually declined for the first time between 2019 and 2021.

This graph also highlights the historical inequality in development between different geographic and economic zones. For example, the difference in HDI between the least developed countries and the OECD countries is very large and has hardly been reduced in 30 years (0.40 points difference in 1990 versus 0.38 in 2021). These data thus highlight a two-speed development, which does not allow low- and middle-income countries (particularly in the Global South) to reach the quality of life levels of industrialized countries (mainly in the North), undermining the promise of the 2030 Agenda.

6. Climate change affects countries unequally

45% of the world’s population live in regions vulnerable to climate change

The latest report from the Intergovernmental Panel on Climate Change (IPCC), released in March 2023, paints an alarming picture of the progress of climate change. While the 2015 Paris Agreement aimed to limit global warming to 1.5°C above pre-industrial temperatures, IPCC experts have estimated that this level could rise to 3.2°C by 2100.

This is all the more worrying as global warming directly threatens a large part of the world’s population: 3.3 to 3.6 billion people live in regions particularly vulnerable to climate change, and are thus 15 times more likely to die from the direct or indirect impacts of floods, droughts and storms than people living in less vulnerable regions, as shown in the map below. Many vulnerable countries are also low-income countries, and several of them are on the African continent.

The decade 2020-2030 is, according to the IPCC, a "critical decade", during which ambitious policies and sufficient funding must be mobilized to limit global warming. In 2009, industrialized countries pledged to mobilize $100 billion a year from 2020, a promise that has so far not been kept: only $89 billion has been allocated for 2020. As the graph below shows, industrialized countries have historically emitted the most greenhouse gases contributing to climate change.

It is now crucial for high-income countries to provide financial support to the most fragile countries so that they can take measures to adapt to climate change and mitigate its impacts, while coping with the losses and damage caused by climate disasters. The aim of the Summit for a New Global Financial Pact is to examine the various financing options that could be put in place to meet these challenges (adaptation and mitigation) without diverting resources from development aid aimed at supporting people’s essential needs (health, education, gender equality, etc.).

7. An unsustainable debt

52 developing economies face serious debt-related challenges

According to the UNDP, 52 developing economies are facing serious debt-related difficulties, affecting their ability to finance essential public services such as health, education, access to drinking water or the fight against climate change. The Covid-19 pandemic, rising commodity prices, or the increase in global interest rates have steepened their financing needs while raising the cost of borrowing. As a result, developing countries are now allocating an ever-increasing share of their income to debt repayment.

According to Debt Justice, countries with the highest debt payments (i.e., more than 15 percent of government revenue) saw their government spending decrease by 3 percent on average between 2019 and 2023. 37 countries are in this situation in 2023.

In 2020, three countries were devoting at least 50% of their revenues to the repayment of their sovereign debt; at this rate, they will be four in 2024, including two countries (Sri Lanka and Dominica) that will devote more than 75% of their revenues to it.

8. What are the financing needs for developing countries?

To meet the development, debt and climate challenges facing low- and middle-income countries, Oxfam estimates that $27.4 trillion will need to be mobilized by 2030, or $3.9 trillion per year:

• 8.5 trillion dollars for health, education and social protection, in order to fight against economic and gender inequalities
• 13.7 trillion dollars for mitigation, i.e. investment in green energy, transportation and agriculture to slow climate change
• 2.8 trillion for loss and damage, to repair the destruction caused by climate disasters
• 2.4 trillion for adaptation, the investments needed to make infrastructure resilient to climate change.

Mobilizing such amounts requires political decisions at both the national and international levels. Indeed, in comparison, official development assistance mobilized only $204 billion in 2022, or 5% of the annual needs identified by Oxfam. This is the main objective of the Summit for a New Global Financing Pact, which aims to spur an overhaul of the international financial architecture and strengthen national ambitions to allocate new financing to meet these challenges.