Bridgetown Initiative: Rethinking Sustainable Economic Growth for the Developing World
July 14, 2023

By N.K. Ezeobele, 2022 Jan Schori Fellow, BCSE

In June 2023, French President Emmanuel Macron convened a groundbreaking Summit for a New Global Financing Pact, hosting a gathering of world leaders. This high-level summit provided an unprecedented platform for discussions on crucial reforms to global financial institutions, with a particular focus on addressing the pressing challenges posed by climate change and other developmental concerns.

Notably, a significant representation of leaders from the Global South attended the summit, making their voices heard and contributing to the crucial dialogue. Central to these discussions was the prominent topic of the “Bridgetown Initiative,” capturing widespread attention and generating substantial deliberation among the esteemed attendees.

The Bridgetown Initiative is a policy proposal announced by Barbadian Prime Minister Mia Mottley at COP 27. This groundbreaking plan acknowledges the critical imperative of securing adequate funding for climate action while simultaneously bridging the gaping infrastructural gaps that plague low- and middle-income countries. The plan reflects a growing consensus among stakeholders that climate finance can play a pivotal role to help developing countries achieve multiple priorities: restore fiscal balance, grow their economies in a sustainable manner, advance the energy transition, and adapt to a changing climate.

At its very core, the Bridgetown Initiative dares to reimagine the conventional mechanisms of global financing, envisioning a future where equity and effectiveness are not mere aspirations but tangible realities. It represents an unwavering commitment to reshape the landscape of international financial systems, unleashing the transformative power required to drive meaningful change and propel the world toward a sustainable and prosperous future.

The driver for global financing reform is the steep costs of implementing vital economic development projects. Debt financing has been traditionally viewed as a more affordable option, but this is truer for affluent nations than for less-affluent countries in desperate need of concessionary finance, grants, and credit guarantees. Previously, policymakers lauded public-private partnerships as the panacea, only to discover that the burden of costs cannot always be conveniently shifted to private entities or third-party balance sheets. Instead, it falls upon federal governments to carry these costs, but fiscal space is often constrained by a limited tax base, budget deficits, high debt levels, etc.

This results in a steep cost of capital, and credit risk assessment becomes an insurmountable hurdle. As a result, the consequence is a woefully inadequate level of investment in climate adaptation by developing countries. This is resulting in the accumulation of climate impacts into what is now viewed as surging levels of “loss and damage” expenses.  Addressing these costs invariably stifles economic growth and hampers overall country development. Thus, the call for reform in global financing is imperative, demanding swift action and innovative solutions to alleviate this predicament.

Historically, low- and middle-income countries have struggled with high borrowing costs due to how banks and financial institutions assess the risks involved in lending money. The International Monetary Fund (IMF) currently determines lending rates using the Special Drawing Right (SDR) interest rate, which is based on the average interest rates of major currencies. The SDR is a special type of money created by the IMF, and it’s made up of a mix of currencies like the U.S. dollar, euro, Chinese yuan, Japanese yen, and British pound.

This system often disadvantages poorer and middle-income countries. However, risk assessments are sometimes not evenly applied, as some countries with a history of poor financial management, such as Greece and Italy, have managed to secure lower interest rates despite their track record.

The Bridgetown Initiative proposes a three-pronged approach to tackle economic challenges head-on: immediate emergency funding from the IMF for countries in dire need, harnessing the power of private sector savings to drive climate efforts and combat environmental degradation, and a bold expansion of multilateral lending to governments by a staggering $1 trillion.

Anchored in the belief that some nations possess substantial reserves and SDRs that can be reallocated to support those most in need, this initiative seeks to unleash the full potential of these resources, effectively directing them toward countries requiring urgent financial assistance. Furthermore, the establishment of the Global Climate Mitigation Trust, bolstered by an impressive $500 billion in SDRs, promises to be a formidable force in financing climate change-related projects and fostering sustainable development on a global scale.

The Bridgetown Initiative signifies a transformative step toward reforming global financing and addressing urgent challenges such as climate action and infrastructure gaps. It has been compared to the Marshall Plan, which the United States implemented to boost Western Europe’s post-World War II recovery by providing more than $13 billion in foreign aid.

By harnessing private sector savings, expanding multilateral lending, and reallocating existing resources, this initiative offers a beacon of hope for a more equitable and sustainable future. Its potential to unlock patient capital, channel funding to middle income countries, and reshape risk assessment models showcases its transformative power.

It calls upon world leaders and stakeholders to embrace innovative solutions, reimagine global financing, and fulfill our shared commitment to a resilient and prosperous world. The Bridgetown Initiative presents an opportunity to create lasting change and propel us towards a brighter tomorrow.


About the author: Odinaka (“N.K.”) Ezeobele is a recent EMPA graduate of the Columbia University School of International and Public Affairs (SIPA), where her focus was on International Economic Policy and Sustainability. As BCSE’s 2022 Jan Schori Fellow, she conducted research on climate finance discussions at COP 27.

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