(Bloomberg) – Zambia has reached an agreement in principle with bilateral lenders to restructure a $6.3 billion debt, a French official said at a summit in Paris on Thursday, setting a precedent for countries struggling to service their liabilities.
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French President Emmanuel Macron will host world leaders including Brazilian Luiz Inacio Lula da Silva and South Africa’s Cyril Ramaphosa, as well as US Treasury Secretary Janet Yellen and Chinese Premier Li Qiang to discuss new ways to increase climate finance.
The aim of the talks is to provide impetus for a revision of the global lending architecture so that multilateral institutions such as the World Bank can do more to help developing countries deal with climate change and boost private investment. Bloomberg Philanthropies is an official sponsor of the Summit for a New Global Financing Pact.
Important developments:
France and China commit to expanding their trade relations with a focus on climate protection
Yellen sees urgency in strengthening the IMF’s anti-poverty arsenal
World Bank wants to boost climate finance for emerging markets
Ruto promises to buy back half of Kenya’s $2 billion bond this year
Axa CEO says looming litigation is undermining insurers’ energy transition efforts (5:29 p.m.)
According to Thomas Buberl, CEO of Axa SA, the insurance industry’s efforts to work together on the energy transition are being undermined by looming lawsuits.
The industry has come together in the Net Zero Insurance Alliance “to define protocols and methodologies to focus our insurance capabilities on the energy transition,” he said. “But we were brutally and legally attacked, which prevented us from moving forward together.”
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Buberl also said Axa is interested in expanding its blue bond program. “We work a lot” on such products, he said. After Axa issued blue bonds in South America in 2021, Axa also wants to issue them in Africa.
Citigroup’s Collins laments little progress on climate finance (4:17 p.m.)
Jay Collins, vice chairman of Citigroup Inc.’s banking, capital markets and advisory division, expressed frustration that little progress has been made on climate finance over the past decade and a half.
“I’m embarrassed to say that 70-80% of what I say today I said 15 years ago,” he said at the summit. “We always talk about the same topics. We know the solutions, but we are not acting sufficiently.”
Collins said it was clear “the private sector needs to be at the table” to increase private financing for climate action in developing countries. “We need to step up tools that mitigate risk for the private sector to push them,” he said. “We need to look again at the tools and products of all multilateral development banks to say, ‘Are they fit for purpose to take this risk?'”
Senegal Receives $2.7 Billion G-7 Funding for Just Energy Transition (3:20 p.m.)
Senegal has secured a $2.7 billion financing package from the Group of Seven countries to support the clean energy transition, President Macky Sall said at the summit.
The so-called “Just Energy Transition Partnership” is modeled on an agreement South Africa has reached with the US, the European Union, the UK, France, Germany and several institutions for access to $8.5 billion, mostly in the form of loans.
According to Catherine Colonna, the French foreign minister, a JETP with Mongolia is also under consideration.
IMF chief congratulates Zambia on debt settlement (2:50 p.m.)
Kristalina Georgieva, chief executive of the International Monetary Fund, congratulated Zambia on a debt deal she said would be announced later in the day.
“Today we are going to talk about Zambia, which I think is a great cause for celebration because it makes the debt restructuring flexible and effective, and I would like to – well, tonight we will all acknowledge – my dear brother, the President of Zambia , thank you, congratulations for you,” she said during a panel discussion. “I’m very confident that when a country requests a debt restructuring, we get the wisdom to get a debt standstill – you don’t service your debt.”
Georgieva added that rich countries have finally made good on their promise to provide $100 billion in IMF funds to finance loans to the world’s poorest economies. This goal involves countries lending back reserve assets, called Special Drawing Rights, to the IMF’s Resilience and Sustainability Trust and Poverty Reduction and Growth Trust.
Ramaphosa says energy transition must be flexible (1:41 p.m.)
Plans to help countries transition to clean energy must take into account prevailing socio-economic conditions and help solve the challenges of unemployment, poverty and inequality, said South African President Cyril Ramaphosa.
Pretoria is implementing a so-called “Just Energy Transition Plan” to reduce coal consumption. The UK, US, France, Germany and the European Union have backed him with $8.5 billion in loans and grants. This was seen as a blueprint for other coal-dependent countries to cut their emissions.
“It has to be a flexible mode of travel,” Ramaphosa said. “Ninety percent of our energy is generated from fossil fuels and the country is currently facing a major energy challenge as our energy production is currently well below the country’s needs. That’s why we said that when we implement this JETP, we need to take into account that some of our fossil fuel power plants need to remain.”
EU supports emerging markets through green bonds and carbon markets (1:03 p.m.)
European Commission President Ursula von der Leyen outlined how the EU aims to help developing countries scale up climate finance by using its expertise on green bonds and carbon markets.
She said the EU, along with the European Investment Bank and similar institutions in member states, will provide €1 billion ($1.1 billion) to give private investors peace of mind when investing their money in riskier countries. That in turn could attract up to €20 billion in sustainable investment, she said on a panel at the summit.
Von der Leyen also praised the success of the EU Emissions Trading System, which she says has generated €142 billion in revenue since its launch in 2005 while cutting emissions by 35%. The world needs to think about making such a market global as it currently only covers 4% of global emissions, she added.
“The initiative I wanted to propose is that we look at global carbon pricing,” she told a panel at the summit. “Of course, that could generate much, much more money that could then flow into the climate finance that we so desperately need.”
Lula Says Brazil Has Moral Authority to Discuss Climate Change (12:50 p.m.)
President Luiz Inacio Lula da Silva said Brazil, home to the world’s largest rainforest, has “moral authority” to speak out on climate change and accused developed nations of destroying their own forests in previous centuries.
He urged “those who defend the Amazon but don’t know it” to visit the region and understand that protecting the rainforest should not prevent the 28 million people who live there from having better economic conditions .
The comments were made to reporters in Rome shortly before he left for Paris. Asked about a trade deal between the European Union and South America’s Mercosur countries, Lula praised France for defending its farmers but stressed that other countries had the right to do so too.
Le Maire sees progress on Zambia and Sri Lanka debt restructuring (12:15 p.m.)
French Finance Minister Bruno Le Maire said talks on Zambia and Sri Lanka’s debt restructuring could potentially yield a “positive outcome”.
“As far as debt restructuring is concerned, we are moving in the right direction, we want to move faster,” he told Bloomberg Television’s Francine Lacqua at the summit. “We could get a positive outcome on Zambia’s and Sri Lanka’s debt.”
He said it was good news that China’s top creditor Li Qiang was in Paris speaking with heads of state and US Treasury Secretary Janet Yellen.
Le Maire added: “We don’t want the poorest countries in the world to have to choose between fighting extreme poverty and fighting climate change.”
Ethiopia’s Abiy Calls for Increase in Africa Funding (11:44 am)
Ethiopian Prime Minister Abiy Ahmed said grants and concessional finance for African countries struggling simultaneously with climate change, high debt, instability and rising costs of living need to be increased.
“What makes it unique in Africa is the scale of the crises and the interconnectedness of the crises,” he said. “Today, for many Africans, a daily meal is the biggest problem. Private and public debt has reached new heights.”
Abiy also called for funding for low-carbon investments such as wind, solar and geothermal projects, and for reform of the World Bank and other multilateral development institutions to ensure they direct more capital to low-income countries.
World Bank offers crisis-hit countries a moratorium on debt repayments (11:23)
The newly appointed World Bank president said the development lender will allow countries hit by disasters to suspend debt repayments.
The move is part of plans to significantly expand its toolbox to help nations prepare for and respond to crises, Ajay Banga told a panel at the summit. This includes providing new types of insurance for development projects and allowing countries to redirect some of their funds to deal with emergencies.
The World Bank will “offer a pause in debt repayments so that countries in a crisis can focus on what is important to their leaders and stop worrying about the bill this crisis will bring.” he said.
Banga added, “We want to incorporate catastrophe insurance into our lending products – with the intention of covering insurance premiums and interest through the generosity of others. This would ultimately provide countries with recovery resources without increasing their debt.”
Barbados leader says world order is beginning to change (10:34am)
Mia Mottley, Prime Minister of Barbados and co-host of the summit with Macron, said change is beginning as she described the extreme weather conditions threatening her country. “We come to Paris with heavy hearts but hope,” Mottley said.
She has championed the Bridgetown agenda, named after her island nation’s capital, which includes currency guarantees, catastrophe-related debt-forgiveness clauses and expanding the multilateral development bank’s reserves for far greater lending
It is a “comprehensive and very ambitious” plan to reorient global capitalism to tackle climate change and enlist the support of multinational corporations, she said.
“We are not asking for the bankruptcy of private companies,” she added. “But we ask everyone to share the burden so we can share the bounty.”
Macron calls on private investors to get involved (10:03 a.m.)
In his speech opening the summit, the French President called for a massive increase in private sector funding to both fight poverty and tackle climate change problems in developing countries.
To facilitate this shift, he reiterated his call for changes in the international financial architecture to remove some of the risk financial institutions face and to introduce guarantee mechanisms that would allow them to go where they are currently are not active.
“We will not meet this challenge without the private sector, sovereign wealth funds and philanthropic institutions,” Macron said.
Yellen Says Keeping China Links Open Is Crucial (9:10am)
Treasury Secretary Janet Yellen said she and President Joe Biden both believe that maintaining communications is critical to managing US-China relations and “resolving misperceptions and misperceptions.”
“We need to work together where possible, but we have differences, and we also openly admit where we have differences,” she said at a press conference in Paris. Yellen was asked if she agreed with an off-the-cuff remark by Biden this week comparing Xi Jinping to a “dictator.”
“I am definitely pleased that China is attending this summit,” she added. “I think it’s important, as President Biden is doing, that the world’s two largest economies work multilaterally and together in addressing global challenges.”
Le Maire says reform could bring in “hundreds of billions” (9:07)
France will urge delegates to examine the feasibility of new taxes on maritime transport, how debt restructuring can be improved and the clout of international institutions strengthened, Finance Minister Bruno Le Maire said on RFI radio ahead of the summit.
The French minister said multilateral development banks could raise around $200 billion to fight climate change in the coming months by expanding their balance sheets and taking on more risk. He also said countries “can and will honor” their pledge to reuse $100 billion of the International Monetary Fund’s Special Drawing Rights to fund lending to poor countries.
“All in all, we’re dealing with hundreds of billions of dollars,” Le Maire said.
– With support from Yinka Ibukun, Ania Nussbaum, Alan Katz, Simon Marks, Amogelang Mbatha, Samy Adghirni, John Ainger and Natasha White.
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