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A-G: Building Resilience Can Bring Certainty to Economies

‘We need to bring new tools, new perspectives and new mindsets in tackling our world’s greatest development challenges’
20 Oct 2019 11:45
A-G: Building Resilience Can Bring Certainty to Economies
Attorney-General Aiyaz Sayed-Khaiyum addressing the World Bank and International Monetary Fund in Washington DC, in the United States.

 

Attorney-General and Minister for Economy Aiyaz Sayed-Khaiyum says only by building resilience can we bring certainty to economies.

He adds that it will also empower growth and create a stable and growing demand for goods and services that fuels domestic, regional and international markets.

He says the growing severity of the climate threat has driven us into a complex and challenging landscape.

73rd Plenary of the Boards of Governors of the World Bank Group and International Monetary Fund

“We need to bring new tools, new perspectives and new mindsets in tackling our world’s greatest development challenges,” he says.

Mr Sayed-Khaiyum made the remarks yesterday in his capacity as chairman of the Boards of Governors at the 73rd Plenary of the Boards of Governors of the World Bank Group and International Monetary Fund in Washington DC, United States.

It is 75 years on from the Bretton Woods Conference which marked the inception of these institutions and the multilateral system.

“My fellow Governors, the Bretton Woods System undoubtedly restored stability to the international economic order in the aftermath of World War II. But we’re not living in the world as it was in 1944,” he said.

“Our world is rapidly warming, new inequalities are arising, and the climate crisis is exposing those gaps and, in some cases, ripping them wide open.

“We need to bring new tools, new perspectives and new mindsets in tackling our world’s greatest development challenges. If we do so, we are confident that at the ripe age of 75, our rules-based multilateral system will still be agile enough to live up to its highest founding ideals and, indeed, leave no nation behind.”

“Ladies and gentlemen, when our predecessors gathered in New Hampshire in the summer of 1944, the world was suffering from monumental failures of its political and economic systems. With the fires of the Second World War still raging and decades of devastating conflict behind them, those leaders rightfully shut the door on the painful folly of unilateralism.

“Instead, they looked to co-operation – through a visionary multilateral system – as the ultimate guarantor of global peace and economic stability.”

Attorney-General Aiyaz Sayed-Khaiyum (fifth from left), with delegates to the World Bank and International Monetary Fund meetings.

Attorney-General Aiyaz Sayed-Khaiyum (fifth from left), with delegates to the World Bank and International Monetary Fund meetings.

Lessons from history

But, he said, while multilateralism had shown impressive endurance over the past 75 years, recent trends had proven, it was only as strong as the faith world leaders held in global solutions.

“We’ve seen the damage that inward-looking policy-making is having on market sentiment and business confidence. As the growth of the global economy slows, those who turn away from multilateralism give way to the same forces that once drove our world into devastating conflict,” he said.

He said they could not dismiss the lessons of history and squander the power of global partnerships – “we must harness that potential for the sake of our young people and to foster enduring cooperation between the nation-states of the world.”

“The truth is multilateralism matters even more today than it did in 1944. We may not be in the throes of a world war, or just come out of one, but we face a threat of even deadlier potential: The intensifying fury of a changing climate.”

He said the Bahamian and the Japanese people were the latest to suffer the tragic reality of climate change, following the suffering wrought by Hurricane Dorian and Typhoon Hagibis (Hah – Gee- Bis). In 2016, he said, Tropical Cyclone Winston claimed the lives of 44 Fijians and, within 36 hours, wiped off one-third of the value of our GDP.

But, he said, existential threats posed by the climate crisis were not contained by the shorelines of island states.

As the Climate Action Summit last month made clear: “this threat is global.” He said whether it was the super-storms wreaking havoc in Asia and the Southern-eastern regions of the United States of America, the desertification across Africa, changing weather patterns in the Mediterranean, the melting glaciers in Pakistan, or the rising seas lapping at the coastlines of cities from Miami to Jakarta and Dakha, the entire world was vulnerable.

“As the Fijian Prime Minister Frank Bainimarama often reminds us, ‘we are all in the same canoe’ when it comes to dealing with climate change.”

He said the growing severity of the climate threat had driven the world into a complex and challenging landscape.

Attorney-General Aiyaz Sayed-Khaiyum with Commonwealth Secretary-General Patricia Scotland QC

Attorney-General Aiyaz Sayed-Khaiyum with Commonwealth Secretary-General Patricia Scotland QC

Opportunities from our evolved global frameworks

But, he said, if we showed the courage and creativity to evolve our global frameworks, there were opportunities waiting to be unlocked.

In the case of small states, he said, tragedy had taught us that economic development and climate resilience must be one and the same.

He said the investments we made in adaptation saved lives and saved us the costs of continuous rebuilds many times over – granting our economies the resilience to bounce back after climatic events without restarting and recharting our progress.

But, he added, adaptation investments were not conventional outlays. The upfront costs were far higher and the returns paid back over a far longer haul. “We cannot build stronger bridges, bury electrical cables or relocate entire communities with the expectation of immediate financial pay-offs. These are investments that build long-term durability, stability and sustainability into our economies, even as the seas rise, worsening storms bear down upon us and changing weather patterns diminish agricultural output and food security,” he said.

“But the traditional metrics used to measure debt sustainability do not capture the intrinsic benefits of adaptation nor the opportunity costs of failing to build resilience now.

“This narrow focus has forced some states to make the impossible choice between what is currently considered debt sustainability and desperately needed investments in adaptation.

“It is becoming clear that the old frameworks for measuring debt sustainability cannot stand the heat of a warming world. With every notch in global temperature rise, these systems will struggle to address climate realities they were never designed to solve.”

He said we needed to recalibrate and revamp the development finance architecture to keep pace with the rapid changes in our climate and the resulting effects on nation-states.

The indisputable benefits of adaptation, he said, must form the basis of new metrics and measures of debt sustainability.

“MDBs and financial institutions must sharpen the frameworks they employ to assess a nation’s ability to service debt and recognise that debt-to-GDP ratio is never the full story. Asset values and other underlying indicators in our economies should be considered. And the system must accurately reflect the rising costs of climate impacts and the long-term value of effective adaptation.”

He said the World Bank Group and the IMF must keep those realities in mind when re-designing finance frameworks.

Attorney-General Aiyaz Sayed-Khaiyum with Irish Minister for Finance, Public Expenditure and Reform Paschal Donohoe at the World Bank and International Monetary Fund Boards of Governors meeting in Washington DC.

Attorney-General Aiyaz Sayed-Khaiyum with Irish Minister for Finance, Public Expenditure and Reform Paschal Donohoe at the World Bank and International Monetary Fund Boards of Governors meeting in Washington DC.

Bring innovation to the conversation

He urged the new leadership of the World Bank Group and the IMF to give this issue urgent attention.

He said the world’s larger economies must also continue to play their role to grow the pool of accessible and affordable finance.

“And we look forward to the replenishment of IDA 19 and beyond.

But even the full weight of public-sector finance, coupled with MDB financing, cannot fill every gap in resilience. We must also enlist the resources, expertise and ingenuity of the private sector.”

He said as ministers for finance and economy, and leaders of financial institutions, it is on them to bring innovation to this conversation. Their business-as-usual mentality had unlocked only a tiny fraction of private finance in the adaptation space.

“Let’s re-engineer the conventions. Let’s market the real opportunities in resilient investments. Let’s ramp up liquidity support and credit guarantees. Let’s create new markets for insurance. Let’s develop new means of assessing risks. And let’s build new tools and make smarter use of the ones already at our disposal.”

He said international financial institutions could also wield their convening power to leverage support from new partners; investment funds, sovereigns, and philanthropic organisations to lighten the burden of the costs on nations without disrupting the securities market.

They could also encourage conscientious investing that supported resilient sustainability, he said.

He said these were vital pathways to a vibrant and resilient global economy.

He said if they brought new tools, new perspectives and new mindsets “we are confident that at the ripe age of 75, our rules-based multilateral system will still be agile enough to live up to its highest founding ideals and, indeed, leave no nation behind.”

Edited by Jonathan Bryce

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