<\/p>\n
Over 190 governments have adopted a \u201conce-in-a-decade\u201d UN pledge to renew the global framework for development finance, outlining a detailed plan to help mobilise private sector capital alongside public funding.\u00a0<\/span><\/p>\n Following a year of research, talks and redrafting, the Sevilla Commitment was adopted by all but one of the UN\u2019s members last week, concluding four days of discussions in the Spanish city. \u00a0<\/span><\/p>\n The only absentee is the US, which rejected the pledge and withdrew from negotiations on June 17, citing concerns over interference with the governance of international banks.\u00a0<\/span><\/p>\n The commitment says that an additional US$4tn in financing per year is needed to meet the UN\u2019s Sustainable Development Goals, with investment hampered by underdeveloped financial markets, a high cost of capital and misalignment between short-and long-term incentives.\u00a0<\/span><\/p>\n International trade serves as an \u201cengine for inclusive growth and poverty eradication\u201d, yet the multilateral trading system is under increasing threat from trade restrictions and rising tariffs, it adds.\u00a0<\/span><\/p>\n In response, signatories pledge to strengthen the use of blended finance instruments to encourage greater investment from the private sector, including through risk-sharing instruments, greater access to multilateral development bank support, and a recognition of the changing role of export credit agencies (ECAs).\u00a0<\/span><\/p>\n Li Junhua, UN under-secretary for economic and social affairs, says the commitment represents \u201ca once-in-a-decade opportunity to shift the tide\u201d.\u00a0<\/span><\/p>\n \u201cIt is a new framework and a renewed global promise \u2013 to mobilise finance at scale, to reform the international financial architecture, and to put people\u2019s needs at the centre of development,\u201d he says. \u201cIt is a launchpad for a new era of implementation, accountability, and solidarity.\u201d\u00a0<\/span><\/p>\n UN secretary-general Ant\u00f3nio Guterres told the conference last week the commitment is \u201ca global promise to fix how the world supports countries as they climb the development ladder\u201d.\u00a0<\/span><\/p>\n The adopted text sets out plans to address structural barriers to finance faced by SMEs in developing countries, with a focus on trade-related measures.\u00a0<\/span><\/p>\n It calls for multilateral development banks and development finance institutions to encourage private investment by expanding the use of tools such as guarantees, securitisation and insurance.\u00a0<\/span><\/p>\n It adds that supporting early-stage finance would also improve the bankability of projects in these markets.\u00a0<\/span><\/p>\n Multilateral development banks should expand local currency lending, explore the use of innovative instruments such as portfolio guarantee platforms, and establish pools of capital with simplified and standardised access requirements, it says.\u00a0<\/span><\/p>\n The commitment also formally recognises the role of ECAs, including the provision of untied guarantees and working capital financing, and encourages greater cooperation with other agencies and financial institutions.\u00a0<\/span><\/p>\n The Sevilla Commitment has been welcomed by industry groups and experts. Paul Heaney, secretary general of the Berne Union, says in a statement the association is \u201cdelighted\u201d that the role of ECAs has been formally recognised by the 192 governments.\u00a0<\/span><\/p>\n ECAs play a critical role in \u201cfinancing the real economy in destination markets, crowding in private lenders, de-risking and reducing the cost of capital for critical investments, as well as guiding structural change towards sustainable economic development including support for climate finance\u201d, he says.\u00a0<\/span><\/p>\n Berne Union members, which include numerous ECAs and other credit and investment insurers, supported US$140bn of long-term capital flows into developing countries last year, according to a report publish ahead of the UN conference.\u00a0<\/span><\/p>\n Paul Mudde, a strategic business consultant who previously held roles at Dutch ECA Atradius DSB and ABN Amro, says the commitment is \u201can important milestone\u201d in helping bridge gaps between ECAs and development finance institutions.\u00a0<\/span><\/p>\n \u201cThere\u2019s a knowledge problem,\u201d he said. \u201cAll the different official finance agencies tend to operate in their own silos, and that\u2019s an issue because there is a huge overlap in their operations.<\/p>\n \u201cMobilisation is a very important topic, but it assumes everyone is fully aware about who the other players are, and how they can cooperate with each other in the interest of the Sustainable Development Goals agenda.\u201d\u00a0<\/span><\/p>\n The agreement also addresses concerns raised by heads of the International Chamber of Commerce (ICC) and World Trade Organization (WTO) in the build-up to the summit in Seville.\u00a0<\/span><\/p>\n In a joint statement on June 30, ahead of the text\u2019s adoption, the ICC\u2019s John Denton and the WTO\u2019s Ngozi Okonjo-Iweala urged participants to affirm the importance of the multilateral trading system.\u00a0<\/span><\/p>\n The Sevilla Commitment addresses this point, stating that \u201ca universal, rules-based, fair, open, transparent, predictable, inclusive, non-discriminatory and equitable multilateral trading system should contribute to the achievement of sustainable development\u201d.\u00a0<\/span><\/p>\n Denton and Okonjo-Iweala\u2019s statement also called for governments to tackle \u201cconstrained access to trade finance and working capital\u201d as a result of international lenders terminating or reducing correspondent banking relationships in markets considered high-risk.\u00a0<\/span><\/p>\n Governments should address \u201cas a priority, the erosion of correspondent banking networks and the unintended impacts of financial crime compliance regimes that have led to de-risking, particularly in regions most in need of trade finance\u201d, they said.\u00a0<\/span><\/p>\n The adopted text includes a call to support correspondent banking relationships through technical assistance, as well as increased digitalisation for developing countries worst affected by de-risking.\u00a0<\/span><\/p>\n Alongside the UN conference, the International Trade and Forfaiting Association (ITFA) launched a task force aimed at halving the trade finance gap by 2030 and eliminating it by 2040.\u00a0<\/span><\/p>\n ITFA unveiled plans to launch the task force at November\u2019s inaugural Trade Finance Conference of Parties meeting in Washington, DC, where the association issued a declaration urging the UN to recognise the trade finance gap as a critical obstacle to meeting the Sustainable Development Goals.\u00a0<\/span><\/p>\n Task force members include several developing finance institutions, such as the Asian Development Bank, European Bank for Reconstruction and Development and World Bank financing arm Miga.\u00a0<\/span><\/p>\n Trade bodies participating include Baft (Bankers Association for Finance and Trade), the Berne Union, FCI and the International Credit Insurance & Surety Association, as well as a group of lenders, law firms and other private sector companies involved in trade finance.\u00a0<\/span><\/p>\n The task force aims to create and implement innovative solutions for widening access to trade finance, including through working groups and pilot projects.\u00a0<\/span><\/p>\n <\/p>","protected":false},"excerpt":{"rendered":" Over 190 governments have adopted a \u201conce-in-a-decade\u201d UN pledge to renew the global framework for development finance, outlining a detailed plan to help mobilise private sector capital alongside public funding.\u00a0 Following a year of research, talks and redrafting, the Sevilla Commitment was adopted by all but one of the UN\u2019s members last week, concluding four 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