At their annual meeting, Commonwealth Finance Ministers were urged to take action to change the current development finance architecture, enhance access to finance for countries vulnerable to climate change and address debt sustainability.
Chairing this year’s virtual 2021 Commonwealth Finance Ministers Meeting (CFMM), the Rt Hon Gaston Browne, Prime Minister of Antigua and Barbuda said: “It is high time that climate vulnerability is included in the allocation of concessional finance.
"Vulnerability should be the core basis for allocation of development finance not income status, especially for Small Island States. Small Island States have witnessed development gains being decimated in seconds due to catastrophic natural disasters.
“They are ‘a special case’ which require special treatment. There is an urgent need to reform the financial architecture; the reformed architecture should be inclusive and cognisant of inherent vulnerabilities.”
The meeting focussed on post-pandemic recovery in Commonwealth nations and gave Commonwealth Finance Ministers an opportunity to consider the impact of the COVID-19 pandemic and climate change on economic growth trajectories, national debt vulnerabilities and to assess the effectiveness of global debt relief measures.
Speaking at the opening of the meeting, Commonwealth Secretary-General, the Rt Hon Patricia Scotland QC said: “The impact of climate change and the COVID-19 pandemic calls for us to review how we grant access to concessional financing.
“International Financial Institutions must strive to grant access to finance based no longer only on Gross National Income per capita but also consider the unique vulnerabilities of countries. Tropical Cyclones Harold and Yasa and Hurricane Elsa wreaked havoc in the Pacific and Caribbean.
“The heightened vulnerabilities brought on by these disasters further point towards the importance of providing finance to vulnerable countries. We are all in the same storm, but not in the same boat. As Commonwealth member states we must come together and join hands to map out a sustainable recovery for all.
“This calls for continued collaboration and support as we strive to learn from each other on the best practices and next steps.” With many countries at risk of debt distress, it is important to carefully manage debt levels and return economies to sustainable growth.
To support countries to reduce debt and inform policy decisions the Commonwealth Secretariat introduced a new, complementary Debt Sustainability Analysis (DSA) Toolkit that is expected to begin a phased rollout in 2022. The toolkit aims to provide a simple, user-friendly and robust framework to conduct debt sustainability assessment in the presence of uncertainty.
The Commonwealth Secretariat is also currently developing its Universal Vulnerability Index (UVI) which enables an evidence-based understanding of the needs of vulnerable states when allocating concessional financing. The UVI can play a major role in helping small states dealing with the wide array of challenges, which they have not created, but which they now face.
With the UN Climate talks (COP26) only weeks away, Finance Ministers also underscored the need for the $100bn annual climate finance commitment to be delivered, more than ten years after it was first made. Innovative financing tools such as debt-for-climate swaps and climate-resilient debt instruments were also on the CFMM agenda.
The Commonwealth Climate Finance Access Hub is utilizing such tools to address climate vulnerabilities and to ensure the availability of the development finance needed for true climate action.