Furthermore, some proposals entail no additional funds. Development finance flows could be restructured so they are channeled through mechanisms like the International Finance Facility for Immunization, which binds official development assistance commitments over a long period and securitizes them in order to generate funds for immediate use.
Similarly, debt-conversion schemes such as Debt2Health and debt-for-nature swaps would allow countries to redirect debt service payments to development projects. Some worthwhile new risk-management proposals include advance commitments for new vaccines, subsidies to drug manufacturers to make their products more affordable and regionally pooled catastrophe insurance.
Over the plast six years, about US$6 billion has been allotted to innovative sources of financing, compared with the current annual official development assistance of more than US$120 billion — and far less than the almost US$20 trillion committed to by G20 countries to economic recovery, including bailouts, since 2008. However, some recent proposals promise to raise far more resources for sustainable development.
An internationally-coordinated carbon tax could raise US$250 billion annually, while a small financial transaction tax could raise another US$40 billion. Likewise, regular special drawing rights emissions to keep pace with the growth of global liquidity could yield approximately US$100 billion annually for international development cooperation. Such emissions would reduce demand for US Treasury bonds and other liquid assets of preferred currencies.
At the same time, if the world’s most powerful countries stopped promoting full capital account liberalization, developing countries would feel less pressure to protect themselves by accumulating foreign exchange reserves. By investing the funds in development projects instead, they could address both savings and foreign exchange constraints.
Finally, innovative strategies are needed to align development finance with national development goals, transforming the multilateral system operationally so that it works more effectively with stakeholders on the ground. One model is the Montreal Protocol on Substances that Deplete the Ozone Layer, which has succeeded spectacularly in reducing levels of chlorofluorocarbons, highlighting the continue d potential of inclusive multilateralism.
Jomo Kwame Sundaram is assistant director-general of the UN Food and Agriculture Organization.
Copyright: Project Syndicate