Barbados wants to reform the way rich countries finance poor countries in a climate crisis. Image: Unsplash/Brian Yurasits
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- Barbados wants to reform the way rich countries finance poor countries in a climate crisis.
- The island’s Bridgetown Initiative, led by Barbadian Prime Minister Mia Mottley, sets out three ways to change how development finance works.
- Rich countries are able to borrow at interest rates of between 1% and 4%, while it’s around 14% for poorer countries, Mottley says.
Barbados is one of the Caribbean’s most vulnerable nations to climate change.
Hurricanes are more frequent and intense and the island is also at risk from rising sea levels, storm surges, coastal erosion, droughts and flooding.
Now the government of Barbados, led by Mia Mottley, the island’s first woman prime minister, is championing a radical initiative that could transform how lending is made to developing nations in a climate crisis.
Named the Bridgetown Initiative, after the island’s capital city, the project is being compared to the Marshall Plan of 1948, when the United States provided more than $13 billion of foreign aid to help Western Europe recover after World War II.
What is the Bridgetown Initiative?
The Bridgetown Initiative is a proposal to reform the world of development finance, particularly how rich countries help poor countries cope with and adapt to climate change.
Barbados sets out three key steps in the Bridgetown Initiative. The first involves changing some of the terms around how funding is loaned and repaid. The aim is to stop developing nations spiralling into a debt crisis when their borrowing is forced up by successive disasters like floods, droughts and storms.
For example, suspending interest payments on finance while a country is tackling a pandemic or natural disaster would give that nation breathing space to invest in rebuilding, reports news agency AP.
Barbados calls for more climate cash
Secondly, Barbados asks for development banks to lend an additional $1 trillion to developing nations for climate resilience, according to Climate Change News. This should include discounted lending focused on “building climate resilience in climate-vulnerable countries”, the Barbados Government says.
The third step in the Bridgetown Initiative is to set up a new mechanism – with private-sector backing – to fund climate mitigation and reconstruction after a climate disaster.
Barbados believes this Global Climate Mitigation Trust could leverage $3-4 trillion of private funding, explains the Bretton Woods Project, a campaign organization focused on global economic and development policy.
Why is the Bridgetown Initiative needed?
Mottley argues that development banks – financial institutions that provide loans and grants to developing countries to fund economic and social development – are outdated and need reform.
For example, rich countries are able to borrow capital with interest rates of between 1 to 4%. But for poorer countries – which are seen as riskier investments – interest rates are around 14%.
Without access to concessional funding – finance offered below market rates – there is “no way” developing countries can fight climate change, Mottley told the COP27 United Nations Climate Change Conference in Sharm el-Sheikh, Egypt.
She specifically called for reform of the World Bank and the International Monetary Fund, which were both set up in 1944 to repair economies and promote co-operation after World War II and the Great Depression of the 1930s.
Barbados and other so-called “small island developing states” aren’t the only ones in the frontline of tackling climate change, says Mottley’s climate envoy, Avinash Persaud. He believes around 3.3 billion people between the Tropics of Cancer and Capricorn are affected, according to a podcast from The New York Times.
Is the Barbados plan progressing?
Barbados’ Bridgetown Initiative generated a lot of interest at COP27. Persaud said he had “never before” seen such “consensus and momentum” around one set of ideas.
The New York Times says leaders at the climate conference who indicated their support of development bank reform included French President Emmanuel Macron – France is one of the biggest stakeholders in the World Bank – and IMF managing director Kristalina Georgieva.
John Kerry, the United States special presidential envoy for climate, and the chief executive of Bank of America also indicated their support. This is significant because the US is the biggest shareholder in the World Bank.
What’s the World Economic Forum doing about climate change?
Climate change and other global crises including the war in Ukraine and spiralling food and energy prices will be discussed at the World Economic Forum’s 53rd Annual Meeting this month in Davos, Switzerland.
Under the theme “Cooperation in a Fragmented World,” the event from 16-20 January 2023 will convene leaders from government, business and civil society to address the state of the world and discuss priorities for the year ahead.
The Davos programme contains more than 300 sessions that aim to accelerate progress and tackle global challenges. The Forum continues this work year-round with a range of initiatives via its centres and platforms.
Successes during Davos 2022 included the creation of a new Resilience Consortium to strengthen the resilience of countries to external shocks such as environmental, economic, geopolitical, or health-related crises. The Forum also launched a new report on the importance of investing in social sector jobs, Jobs of Tomorrow: The Triple Returns of Social Jobs in the Economic Recovery.
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The views expressed in this article are those of the author alone and not the World Economic Forum.
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