InterAction, the largest U.S.-based alliance of international NGOs and partners working on development and humanitarian issues, is alarmed that the House is proceeding with a woefully inadequate FY2024 State, Foreign Operations bill.

We appreciate the work of the Appropriations Committee, but we are disappointed that it drafted a bill that cannot be effectively conferenced with the Senate or signed by the President.

Foreign Operations Bill: Dubious Maneuver

To achieve an overall funding level of $52.5 billion—which is still inadequate—the bill relies on a $11 billion rescission that is outside the jurisdiction of the subcommittee and will likely be rejected by the Senate and the White House. This dubious and untenable rescission maneuver results in a staggering 22% shortfall within the bill, raising concerns about the feasibility of meeting all the recommended funding allocations.

Moreover, we find it disheartening that the bill not only falls short of providing adequate funding for critical international programs but also imposes substantial cuts of nearly one-third to key development accounts—jeopardizing existing programs and relationships with local populations and governments.

The bill would decrease USAID Operating Expenses by nearly one-third and put the efficient and effective allocation of resources and the implementation of crucial programs at stake. This reduction would raise major concerns regarding the agency’s ability to respond promptly and appropriately to evolving global challenges.

Furthermore, the bill’s proposed reduction in funds allocated to address mounting humanitarian crises is alarming. Rather than shrinking, these crises demand increased attention and support.

345 million people are facing severe hunger—that is more than double the 2020 number. 900,000 people are suffering catastrophic hunger or are one step away from famine. There are 100 million forcibly displaced people—that is more than the populations of California, Texas, and New York combined.

We have said it before and will say again: the math does not add up.

America is Surrendering Its Role as a Global Leader

The inadequate funding levels will forcefully cut short life-saving programs and weaken the United States’ position as a global leader. When America surrenders its role as a global leader, we create a vacuum that our competitors are eager to fill.

U.S. leadership, diplomacy, and national and economic security cost money. Through these cuts, the bill actively withdraws the U.S. from the world stage, surrendering America’s position as a leader and a force for good in the world while making Americans less safe.

Statement on Woefully Inadequate FY2023 Foreign Operations Bill

The world is facing three global disasters all at once: climate change, extreme global debt, and COVID-19.

As we grapple with the defining public health crisis of our time, the global economy is experiencing the worst economic collapse since World War II, all while climate change continues to threaten the world’s most vulnerable populations.

The 2020 UNEP Adaptation Gap Report estimated that climate adaptation needs will grow between $140-300 billion by 2030 and to $500 billion by 2050. During this time, when the world needs to mobilize trillions of dollars for a low-carbon economic transition and prepare for the costs of adaptation, the economic collapse spurred by COVID-19 has left countries with exorbitant levels of debt, forcing seven countries to default on their loans and pushing an estimated additional 88 to 115 million people into extreme poverty, with the total rising to as many as 150 million by 2021.

On March 23, InterAction convened three sustainable finance experts during Forum 2.1 to explore this convergence and possible solutions. This article summarizes that session, highlighting the interconnections between climate change, global debt, and COVID-19, as well as the core challenges and the financing options to address the problems.

Climate change continues to pose increasingly dire threats to our planet. As we quickly approach a “climate tipping point” of global warming of 1.5 degrees Celsius above pre-industrial levels, we have no more time to waste. Serious action to mitigate and adapt to climate change is needed now. Prior to the COVID-19 pandemic, the global community committed to an accelerated development plan by 2030 to transition the world to a low-carbon and more socially just economy through the Sustainable Development Goals. Now, as the world continues to grapple with and recover from the impacts of COVID-19, the transition risks of inaction on climate are becoming even more daunting. This is the most important decade of our times, and we cannot afford to push these crises down the road any longer.

The world economy needs to utilize tools and strategies that invest in a low-carbon transition and climate adaptation and provide debt relief and assistance to the world’s most vulnerable populations.

Currently, most debt relief is not linked to climate goals. However, there are upcoming opportunities to help countries create additional fiscal space through debt relief while channeling any available financing to climate goals.

Doing this at scale will require coordination and effort by all relevant creditors. Currently, about a third of global debt is held by bilateral creditors, a third is held by private institutions, and a third is held by international institutions. While international financial institutions such as the International Monetary Fund (IMF) and multilateral development banks (MDBs), such as the World Bank, have supported debt relief through actions such as IMF Special Drawing Rights (SDR) allocations and increased World Bank financing due to COVID-19, they are ultimately limited in their impact on debt relief because two-thirds of global debt is held by more than 463 regional development banks, bilateral sovereign creditors, and private creditors. The constellation of creditors has become increasingly more complex, making it that much more difficult to involve and manage all aspects of global debt.

Advocacy and incentives are needed to bring other creditors, especially private ones, to the table to both participate in debt relief and support climate finance.

In this process, we must also acknowledge the history of hypocrisy in response to major global recessions in the past. In the face of past economic disasters, economies of wealthy Western states have infused massive amounts of financing, and this “counter-cyclical” approach proved to be successful. However, when the same economic downturns hit lower-income countries, they have been told to tighten their budgets, decrease government spending, and raise interest rates—characteristics of austerity conditionality. This puts the burden of a struggling economy on everyday citizens. To address climate change and global debt effectively and equitably, non-conditional financing, low interest rates, and stimulus packages are needed. If this approach is carried out, it would be a major change and achievement for the global community and a step forward in not repeating past hypocrisy.

Regardless of fiscal space, ensuring climate priorities do not fall off the agenda is also essential. This can be especially challenging in places where the major means of exchange are oil and coal. Additionally, support for a structural transformation is necessary in order to support people who will lose their livelihoods as a result of the green economic transition.

International finance institutions can support this transformation by taking a longer view of economic forecasts to effectively and accurately predict what investments will yield over time.

What are the Options for Climate-Resilient Debt Management?

The tools exist. Now is the time to apply them in a climate-resilient way, packaging them in a complementary way and applying them on the right timescale to effectively address both climate change and lack of fiscal space.

These packages should include different combinations of new liquidity, such as through:

IMF special drawing rights (SDR) allocations whereby portions of the IMF’s international reserve asset (SDR) are given to member countries to boost liquidity.

Additional climate financing through the Organization for Economic Cooperation and Development’s (OECD) official development assistance (ODA), which is government aid that promotes and specifically targets the economic development and welfare of developing countries.

The G20’s Debt Service Suspension Initiative (DSSI), which allows for the temporary suspension of debt-service payments owed to their official bilateral creditors for the 73 most debt-burdened countries.

Application of the G20 Common Framework for Debt Treatment, in which debtors and creditors agree on a cheaper price for the current debt.

All of these existing tools can be coordinated with green climate investments in order to address both crises.

There are conversations involving future SDR allocations related to climate and environmental actions. There is also anticipation from the global community that the IMF will announce a platform that links climate and nature to debt through a finance facility in the near future.

“Debt management for climate and nature” encompasses an existing tool that provides debt relief while advancing climate or nature goals known as “debt-for-climate/nature swaps.” “Debt-for-nature swaps” have existed since the 1980s and are now being utilized to relieve debt and promote nature or climate projects in developing countries.

Debt-for-climate/nature swaps occur through the restructuring of debt between debtor and creditor, where a portion of the restructured debt goes toward a nature or climate outcome in the debtor country. This finance tool has proven successful in the past, but due to the overwhelming level of debt countries are now faced with, a degree of debt relief needs to be incorporated into these swaps as well. These swaps are most effective when utilized by countries facing debt distress rather than a complete debt disaster.

We cannot afford to ignore climate change or extreme debt any longer. Strong, definitive action is necessary immediately, and climate-resilient debt management will be a crucial tool to address both crises. The finance tools exist, but we now must package them together in a way that promotes debt relief and transformation as well as climate mitigation and adaptation in an equitable and just way. There is an important role for NGOs to play in advocating for further adoption of climate-resilient debt management.

Climate Resilient Debt Management: Can there be a green recovery from COVID-19?

Senior Manager for Climate and Environment, GDPL

InterAction is a convener, thought leader, and voice for international nongovernmental organizations (NGO) working to eliminate extreme poverty, strengthen human rights and citizen participation, safeguard a sustainable planet, promote peace, and ensure dignity for all people.

Our mission is to be the convener and unified voice of the NGO community, so that no one ever stands alone when trying to change the world.

Overall, the papers focus on how the WBG’s policy and programmatic interventions can be best focused to result in tangible change in the lives of affected communities and to ensure that no one is left behind. Among the recommendations put forth, the most consistent across the five thematic papers include: 

Expand partnerships with NGOs and meaningfully engage refugees, host communities, and local civil society to strengthen institutional response and coordination. Among the IDA18 Regional Sub-Window for Refugees and Host Communities (RSW) projects, only four projects acknowledged the importance of partnerships with NGOs. 

Conduct contextualized analysis of forcibly displaced populations and identify barriers that hinder access to basic social services and economic opportunities. The analysis should include socio-political aspects and other non-legal barriers that impede displaced persons from accessing services and opportunities. The analysis should also identify where integrated approaches across relevant sectors are required. This can help the Bank better understand how to strengthen project interventions and identify areas where it can better support government policies and practices. 

Share existing evidence and lessons learned in managing forced displacement crises across Bank teams and external actors to build capacity and expertise on what works in a diverse range of fragile and forced displacement settings. 

Leverage internal resources and knowledge to ensure a more coherent WBG approach is adapted to and applied to forced displacement settings. The WBG has rich experience and extensive resources in addressing issues like gender and legal identity through a variety of frameworks, tools and initiatives. These resources should be expanded to cover the forcibly displaced in all their diversity. By harmonizing and improving linkages across resources within the WBG, programming and financing will be more effectively designed and implemented to respond to displacement challenges.

Thematic-Papers-on-Fragile-Forced-Displacement-Contexts.pdf

Thematic Papers on Fragile & Forced Displacement Contexts: Recommendations for the World Bank Group and Other Investors 

That is why, for the 11th year in a row, InterAction has prepared Choose to Invest as a public resource for understanding the accounts that fund development, health, humanitarian action, climate, and democracy. The Multilateral Assistance accounts are featured here, please follow the link above to see all accounts.

This resource attempts to demystify what and how the U.S. Government funds overseas by providing information across 52 accounts funded through the annual appropriations process, primarily in the State, Foreign Operations, and Related Programs Bill. 

Each account includes its funding history and a recommended funding level for this year based on the experience and expertise of InterAction’s coalition—the voice of nearly 200 humanitarian and development non-governmental organizations (NGOs).

The funding recommendations made here do not represent the actual amount required to address the world’s hardships—those numbers would be far higher, even before accounting for losses and increased need resulting from COVID-19 and climate change. However, the numbers provided are an attempt to strike a balance between global need and responsible American spending.

As the pandemic made clear, other countries’ ability to manage and respond to threats directly impacts the health and prosperity of the United States. Choose to Invest’s recommendations represent a down payment toward long-term impacts on development progress and reflect the need to build resilience against the next global shock.

The world is more interconnected than ever. It’s time to think of foreign aid as one of several tools that promote vital development abroad for the benefit of all, here and overseas.

Aid programs deliver results for the American people and demonstrate American leadership around the globe.

InterAction

Contacts

Claudia Sanchez de Lozada

Statement on Woefully Inadequate FY2023 Foreign Operations Bill

Climate Resilient Debt Management: Can there be a green recovery from COVID-19?

Thematic Papers on Fragile & Forced Displacement Contexts: Recommendations for the World Bank Group and Other Investors

Choose to Invest 2022: Multilateral Assistance