The New Global Financial Compact, according to the IFAD President

The New Global Financial Compact must also serve small producers, who feed the world’s population but live in poverty, according to the IFAD president

The President of the International Fund for Agricultural Development (IFAD), Álvaro Lario, in his speech at the Summit for a New Global Financial Compactcalled on world leaders to find solutions to significantly increase funding for the rural poor and smallholders, whose contribution to global food security is essential.

The Summit that will take place in Paris on June 22nd and 23rd, seeks to bring together leaders representing Governments, international organizations, financial institutions, civil society and the private sector with the common purpose of debating and establishing the best way to restructure the global financial market. The aim is to ensure that low- and middle-income nations have access to the finance they need to achieve sustainable development, transition to a net-zero emissions model and adapt to climate change.

“This Summit gives us the opportunity to build consensus around a more inclusive global financial order. Currently, it is not just the world’s poorest countries that face serious difficulties in financing their own agricultural development, but above all the small producers that these countries depend on to feed national and local populations. Together, investments in the socio-economic well-being and resilience to climate change of these producers, who produce a third of the food consumed in the world, are essential for stability and global food security,” said Lario.

The New Global Financial Compact

Over the past two decades, the share of financial support going to agriculture has not increased significantly and continues to fluctuate between 4% and 6%. This has created challenges for developing countries when it comes to financing their agricultural sector. The global economy has experienced tight credit conditions, rising finance costs and inflation, leading at least 54 developing economies to face serious debt problems.

“Developing nations need greater access to highly concessional financing schemes. Multilateral organizations have to optimize their balance sheets, offer financing with more favorable conditions and have adequate instruments to face the new difficulties that arise”, stated Lario. “Developed countries must also be ambitious in providing resources to multilateral agencies so that they can achieve development results, reduce hunger and poverty, and build resilience through national programs.”

“When their resources are fully replenished, institutions like IFAD can obtain significant additional funding to make a difference in rural areas,” added Lario.

Since 1977, the International Fund for Agricultural Development (IFAD) has achieved a major milestone by investing six dollars in rural development for every dollar received from donors. This demonstrates its commitment to improving economic and social conditions in the world’s most disadvantaged rural communities. Investments are being directed towards improving food production, building resilience to climate change and facilitating access to knowledge, markets and technologies, thereby improving the lives of millions of families in rural areas. During the period 2019-2021, IFAD investments have had a positive impact on the lives of around 77.4 million people living in rural areas, increasing their income. In addition, its food security has benefited, improving the quality of life of approximately 57 million people.

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“The private sector has a critical role and role to play in development and climate action. We must design financial instruments and create an adequate regulatory and public policy environment that reduces risks and stimulates private investment”, said Lario.

Sustainable development goals

It is important that private sector investments are mobilized to achieve both the Sustainable Development Goals and the targets set out in the Paris Agreement on climate change. To achieve the goal of eradicating hunger by 2030 and mitigating the effects of global warming, collaboration between. The public sector alone does not have the required $330 billion. Furthermore, it was observed that smallholders receive less than 2% of the global funding available to address climate-related environmental issues. It is essential to work together to reach effective and equitable solutions.

During the summit, Álvaro Lario will advocate for the rapid implementation of major global initiatives, including the redistribution of International Monetary Fund (IMF) Special Drawing Rights across global financial institutions, to transform a liquid asset into a means of investing in the stock for climate and development.

O small producers they are crucial to global food security and economic stability. They are responsible for producing a third of the food consumed in the world and up to 70% in low- and middle-income countries. Therefore, its role is essential to guarantee access to adequate food at a global level. Unfortunately, many people often experience the devastating effects of poverty and food insecurity. In developing countries, the majority of the poorest population, which is 80%, live in rural areas. Furthermore, it is estimated that around 3 billion people live in rural areas and are already suffering from the impacts of climate change and extreme weather events.

With information from IFAD

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