How the Bridgetown Initiative envisions global financial system reform

The Bridgetown Initiative rests in large part on a moral argument that many of the countries most drastically affected by climate change are among the historic lowest carbon emitters — and that a rethink of the global financial system is needed to better meet the modern moment, including ending cycles of heavy debt burdens. The climate problems were exacerbated by the sharp economic hits many countries suffered during the COVID-19 pandemic, the fallout from the war in Ukraine, and the rapid rise in inflation and subsequent sharp increases in borrowing costs. “What we’re trying to solve for is the challenges of countries that are vulnerable to climate change, and vulnerable to many other issues, through an increase in financing for mitigation, a huge increase in financing for climate adaptation, and addressing issues of loss and damage,” said Pepukaye Bardouille, the director of the Bridgetown Initiative Unit of the Barbados government. The initiative is named for the capital city of Barbados, a Caribbean island nation. Bardouille, a former development specialist, was speaking as part of a Devex Pro event discussing the initiative Monday. Barbados spearheaded the initiative under its Prime Minister Mia Mottley, who has emerged as a forceful proponent of global financial reform. The agenda is spurred by the fact that island nations face huge economic damage from natural disasters, but international aid is dwarfed by the size of the repayments on their debts. “The debt problem is really acute,” said María José Romero, a manager at the European Network on Debt and Development, or Eurodad, a group that focuses on this issue. “The roots of the debt crisis predate the pandemic,” she noted, arguing that to truly solve the issue “some level of debt cancellation is needed.” This goes beyond the core demands of the Bridgetown Initiative, which focuses on providing additional financial support to countries and helping with debt restructurings. The initiative also seeks to draw in $1.5 trillion in private capital per year for green projects in low- and middle-income countries. So far, big institutions have been middling, at best, in mobilizing private capital. Rishikesh Bhandary at the Global Development Policy Center at Boston University, stressed that both the International Monetary Fund and the World Bank need reform. “There really has to be a system-wide transformation of the international and financial architecture,” Bhandary said. The Bridgetown Initiative is also hoping to change the governance structures at the Bretton Woods institutions, where the wealthiest countries are the biggest shareholders. Romero spoke about her disappointment with the recent summit in Paris, organized by French President Emmanuel Macron on a new global financial pact, arguing that no new money was pledged by the major players. “The hope for reform was merely a repackaging of already existing commitments. It ended up lowering the ambition of the extent of action needed to secure the levels and the quality of public finance needed for development and climate action,” she said. Bardouille, while sympathetic to the point, said her view was more optimistic, as the summit represented a new platform where global voices were “able to speak the same language” on the need for reforms. The panelists argued that upcoming global events this year — the United Nations General Assembly, the World Bank annual meeting, and the United Nations Climate Change Conference — will be critical to move the initiative forward. Bhandary said a key issue is the willingness of high-income countries to address calls for “fresh new injections of money into the system.” This would include a capital increase at the World Bank and more concessional finance. “The math simply suggests that you need more capital,” he added. And this is why Bardouille has faith in the Bridgetown Initiative — because it is building a coalition. “It’s a movement. It’s intended to be ambitious,” she said, arguing that this is what will drive change.