A wide view of the General Assembly Hall during the opening of the Summit of the Future. Credit: UN Photo
By Dawn Clancy
UNITED NATIONS, Sep 30 2024 – While most world leaders who attended the United Nations inaugural Summit of the Future—a two-day high-level event at UN headquarters in New York meant to address the most pressing global challenges of the 21st century—agree that the world’s aging multilateral system needs modernizing, not all agree on how to get there.
“We will not succeed in overcoming our existential challenges if we are not prepared to change the global governance structures that are rooted in the outcome of World War II and have become unsuited to today’s world,” said Mia Mottley, the prime minister of Barbados, at the summit on September 22. “What the world needs now is a reset.”
For the countries that make up the global South—while not a monolith—the path to reform begins with overhauling the current international financial architecture that has trapped developing countries in an untenable cycle of debt. Still, there is doubt that the blueprint for reform presented in the summit’s non-binding outcome document, the Pact for the Future, goes far enough to rally the political will needed for change.
Despite months of fraught negotiations and a last-minute amendment tabled by Russia that was rejected, the pact was adopted by consensus on the first day of the summit.
“The Pact for the Future designed an excellent building, but it didn’t leave that many instructions for the construction of the building,” said Tim Hirschel-Burns, policy liaison for the Boston University Global Development Policy Center.
With its 56 action items, the pact, a 42-page document, addresses five areas of global concern: sustainable development and financing, international peace and security, digital cooperation, youth and future generations, and global governance. It also includes two separate annexes, a Global Digital Compact and a Declaration on Future Generations.
But while Hirschel-Burns describes the language in the pact as “weak” and “fairly vague,” he told IPS there is still room for some optimism considering that “the pact is signed from leaders [and] heads of states representing the peoples of the world,” and so “you have a really high mandate” for action, he added. Notably, no leaders from the P5 countries—the United States, United Kingdom, France, China and Russia—spoke at the summit.
One promising action item in the pact calls on signees to close the Sustainable Development Goals (SDG) financing gap—estimated at 4.2 trillion annually—in developing countries. Established in 2015, the SDGs act as a blueprint to eliminate a wide range of global challenges, including poverty, hunger and inequality, by 2030.
However, progress on the SDGs has fluctuated for countries drowning in debt and who are without sustainable options for affordable financing. The most recent SDG report estimates that “only 17 percent of the SDG targets are on track,” in some cases, progress has stalled or even regressed.
Still, Hirschel-Burns told IPS, “Even if the Pact for the Future doesn’t have a clear roadmap for addressing unsustainable debt, the bigger outcomes pledged in the pact [including SDG funding] won’t happen unless there is meaningful action on debt relief.”
When accessing financing, global South countries are traditionally met with much higher interest rates than their neighbors in the West. According to the latest UN Conference on Trade and Development (UNCTAD) report, “developing regions—in Asia, Latin America, the Caribbean and Africa—borrow at rates that are 2 to 4 times higher than those of the United States and 6 to 12 times higher than those of Germany.”
This dynamic has led to developing nations racking up USD 365 billion in external debt—money owed to foreign investors, governments and multilateral institutions in 2022.” The report found that 3.3 billion people “live in countries that spend more on interest payments than education or health.” That is nearly 40 percent of the total global population of 8 million.
A separate 2023 report published by Debt Justice, an organization based in London that aims to end unjust debt practices, found that “lower-income country debt payments in 2023 hit their highest level since 1998.” And external debt payments “for 91 countries will average at least 16.3 percent of government revenue in 2023, rising to 16.7 percent in 2024, an increase of over 150 percent since 2011.”
In addition to high interest rates and lack of political will, however, there are additional structural causes for developing countries’ high debt levels, said Iolanda Fresnillo, policy and advocacy manager for the European Network on Debt and Development (EURODAD), such as unfair trade relations, technology dependence on China and the global North, along with the impact of exogenous shocks such as major climate events, pandemics and war.
When countries already drowning in debt do not have the tools to deal with the consequences of a hurricane, an earthquake or a change in oil or other commodity prices, they have to borrow more, Fresnillo told IPS. So, to repay their growing debt, countries cut health and education expenditures and investments in climate adaptation and mitigation, leaving them unprepared for the next major climate event. “We call it the debt and climate vicious cycle,” she said.
Notably, it is the countries of the global North that emit an excess of the emissions that drive climate change, but it is the underdeveloped nations of the global South that suffer consequences that compound the debt cycle.
“The international community [must take] much more ambitious action to address this climate crisis,” said Ralph Gonsalves, prime minister of Saint Vincent and the Grenadines, at the Summit of the Future on Sept. 22. “Otherwise, all of us here—we are going to go to hell in a handbasket. You know it, and I know it.”
Meanwhile, Fresnillo told IPS that before any multilateral system or blueprint for the future can tackle the issue of debt reform, a “common framework” must be established. “So when we say that the debt architecture needs a reform, what we mean is that we need a debt architecture,” as there are no rules when developing countries face a crisis and need to restructure their debt.
“It’s crazy,” Fresnillo said. “When a company goes bankrupt, there are rules that the company has to follow in order to address that bankruptcy,” but that doesn’t exist for countries. “It’s terribly unfair because then who bears the burden is the people in the country.”
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