The US says the World Bank should add disaster clauses to debt agreements with poorer countries.
Treasury Secretary Janet Yellen said on Thursday that such clauses could be part of a broader reform of the World Bank to free up more funds.
Yellen spoke ahead of a summit in Paris that will discuss how to boost crisis financing for low-income nations.
“We would also like to see the World Bank offer borrowers the option to add climate resilient debt clauses to their loan agreements. These clauses would help ease pressures on countries if a natural disaster strikes,” she said.
‘Multilateral banks should be reformed’
Yellen, whose country is the World Bank’s biggest shareholder, added multilateral development banks should be reformed to become more efficient before shareholders think of injecting more money into them.
“Even with the capital that the World Bank and the MDBs have there is clearly potential …to increase financing capacity,” she said, adding an additional $200 billion could be unlocked over a decade.
“We are certainly not ruling out at some later stage a capital increase. But I think that these banks need to function better individually and as a system first, expand their mission to address global challenges, better utilize the capital they have.”
Macron urges private sector to do more
Meanwhile, French President Emmanuel and UN Secretary General António Guterres both expressed hope that more funds could be found to counter climate change.
“We need to mobilise the private sector a lot more, there is a lot of liquidity, a lot of money in that world,” Macron said.
Guterres welcomed moves to restructure global funding, saying: “It is clear that the international financial architecture has failed in its mission to provide a global safety net for developing countries.”
New World Bank president Ajay Banga said recently that he wants to encourage private investors to do more to help developing countries deal with climate change.
He says the institution needs to undertake “informed risk-taking” to help enable the leap beyond fossil-fuel energy sources.
- Reuters with additional editing by Jim Pollard