Ninth Annual Meeting of the Board of Governors of the New Development Bank – Opening Session
First, I would like to extend my cordial greetings to:
His Excellency Enoch Godongwana, Minister of Finance (South Africa)
His Excellency Mohamed Bin Hadi Al Hussaini, Minister of Finance (United Arab Emirates)
My dear friend Her Excellency Dr. Rania Al-Mashat, Minister of Planning, Economic Development and International Cooperation (Egypt)
His Excellency Ivan Chebeskov, Deputy-Minister of Finance (Russia)
His Excellency Liao Min, Vice-Minister of Finance (China)
His Excellency Guilherme Mello Vice-Minister of Finance (Brazil)
Her Excellency Manisha Sinha, Secretary, Department of Economic Affairs (India)
Her Excellency Shahriar Kader Siddiky, Secretary of Economic Relations (Bangladesh)
On behalf of the New Development Bank, I would like to warmly thank the Government of South Africa for hosting us in the beautiful city of Cape Town. Also, I would like to greet all the authorities, representatives of our member countries, international organizations, multilateral development banks and business leaders present at this opening session of the Ninth Annual Meeting of the NDB.
The central theme of this meeting — “Investing in a Sustainable Future” — is at the core of the Bank’s activities and is one of the most priorities for the international community.
It is rooted in the idea that economic growth, social inclusion, and environmental protection are interconnected and should be pursued simultaneously. This is the meaning of sustainable development. This vision was crystallized in the 2015 United Nations Sustainable Development Goals (SDGs), which provide a comprehensive framework for addressing this global challenge.
For our countries, sustainable economic development requires also an industrial basis and capacity in science, technology and innovation that contribute to an expansion of productivity and better jobs. It also calls for collaboration among governments, businesses, and individuals to create systems that are both economically viable and environmentally friendly. On the other hand, systemic changes, especially in the international financial architecture, are urgently needed.
As we know, emerging markets and developing countries face significant challenges to achieve sustainable development, such as inequality, extreme poverty, inadequate infrastructure, and an insufficient access to education, health, and housing. For us just transition requires a huge amount of resources and long term financing.
However, it seems unlikely to mobilize more investments to sustainable development without tackling the issue of indebtedness. According to World Bank estimation, the tenth developed economies on the planet have a combined debt of around US$ 87 trillion. Financing such high public debts drains a significant portion of the huge liquidity available in international markets. This liquidity could otherwise be channeled into financing the debt of EMDC and thus the necessary investments to sustained development.
For developing countries, indebtedness becomes an excessive burden. As we know, fiscal space is essential to ensure that governments can simultaneously invest in development actions, combat climate change, and achieve the Sustainable Development Goals (SDGs). Nevertheless, the debt of developing countries is growing too much and too fast. For instance, interest payments in developing countries have increased more quickly than public spending on infrastructure, health, education, and housing over the past decade. External shocks, such as rises in interest rates in international markets, and excessive depreciations of their currencies, end up fueling a vicious cycle of indebtedness. The mismatch between debt in strong currency and the income generated by the projects criate a barrier to sovereign and non-sovereign investment in developing economies.
For that, we need to put in place two actions: i) firstly, it is necessary to channel the international liquidity to developing countries and reduce the burden of high interest rates; ii) secondly, develop alternatives like the financing in local currency to provide to wider the fiscal space to invest.
So new financial solutions are needed for EMDC. Diversifying funding sources and using a broader currency basket improves economic resilience against shocks associated with monetary policy decisions. It can strengthen the fiscal situation to enabling financing logistic, social and digital infrastructure, housing, water and sanitation, education and health.
The use of local currency is therefore one strategic option. The availability of credit in local currency and/or currency swaps helps to tackle exposure to exchange rate and interest rate risks. The fact is that the hegemonic currency has two roles: an international and a domestic one. When the US faces inflation the monetary policy is used raise interest rates, creating a lot of trouble to EMDCs. If the US economy needs, they can use a strong dollar what can provoke a debt soar on EMDCs. The volatility is the rule not the exception.
By promoting transactions in local currencies, we also facilitate investment growth, helping governments and the private sector overcome the cash flow mismatch between projects and financing. This approach provides greater predictability and reduces the high costs associated with hedging needs.
That is the reason why expanding the use of local currencies is one of the New Development Bank’s (NDB) key strategic objectives for the 2022-2026 period. The bank is putting in place local currency sustainable development-oriented platforms and recognizes the urgency of making green financing available to the member-countries. Therefore, it aims to provide 30% of total financing in the local currencies of borrowing members.
For this annual meeting, the challenges of just transition and finance for development will be brought to center stage. Discussions and presentations on cutting-edge financial systems for sustainable development, prospects for sustainable investment and strategies for local currency financing as well as thought-provoking panel discussions and keynote addresses by prominent figures will take place. We will have the opportunity to discuss and examine cooperative initiatives that address urgent social and environmental issues and promote best practices for cultivating new engines of sustainable growth.
I am confident that we will have particularly fruitful discussions around these themes and advance both the understanding and practice of financing sustainable development.
I’d like to thank you all again for being here with the NDB team in our ninth year of existence. I’m sure the event will be a success.
Thank you very much.