Rethinking the International Financial Architecture
The international financial architecture, crafted in 1945 after the Second World War, is undergoing a stress test of historic proportions — and it is failing the test.
The current international financial architecture was designed by and for industrialized countries at a time when neither climate risks nor social inequalities — including gender inequality — were considered preeminent development challenges. However, the global financial architecture has become increasingly unfit for purpose in a world characterized by unrelenting climate change, increasing systemic risks, inequalities, and conflict-related emergencies.
The existing architecture has also been unable to support the mobilization of sustainable public financing to combat the climate crisis, deliver on human rights and achieve the Sustainable Development Goals. Similarly, the international tax architecture has not kept pace with a changing world. While countries ultimately need to rely on national resources to finance investment in their sustainable and equitable development, global tax evasion and avoidance and illicit financial flows restrict their ability to do so. At the same time, persistent unfair terms of trade and unbalanced intellectual property regimes have continued to contribute to net South-North financial flows.
The current financial architecture exacerbates income, non-income, and wealth inequalities, and undermines the conditions for sustainable peace. Without urgent, ambitious action to change course, these challenges will multiply and will continue to drive violent conflicts, ecological crises and geopolitical fractures.
“80 years ago, the international financial system was set up to protect the world from deep economic and financial crisis. But today, the system is broken.” Dr. Volker Türk, United Nations High Commissioner for Human Rights, UN Human Rights Office (OHCHR)
“It has become apparent and imperative that the financial architecture, that is now outdated, has to be reformed if any prospect for achieving the SDGs is going to be achieved.” Honourable Dr. Solomon Ayele Dersso, Commissioner, African Commission on Human and People’s Rights (ACHPR)
“The single most important thing is to recognize that the current international financial architecture, the way it’s structured, the way it’s designed, is not delivering as it should for human rights and sustainable development.” Ms. Marcella Favretto, Chief of the Sustainable Development Section, UN Human Rights Office (OHCHR)
“We all know that the SDGs will bring a better life for all the people around the world […] More resources are needed. One of the key changing reforms is the reform of the governance of international financial institutions. This change should bring more representation to make the playing field equal among different countries.” Mr. Francisco Saffie Gatica, Ambassador and Permanent Representative of Chile to the OECD
“We need to scale up public investment […] We need reforms to increase public financing and channel revenues to multilateral development banks.” Mr. Richard Kozul-Wright, Director, Globalization and Development Strategies Division, UN Conference on Trade and Development (UNCTAD)
Sources
Our Common Agenda Policy Brief 6: Reforms to the International Financial Architecture (2023), United Nations
Financing for Sustainable Development Report (2023), United Nations Department for Economic and Social Affairs
Reforms to the global financial architecture: Proposals, conflicts and prospects on the way to the Summit of the Future 2024 and the Financing for Development Conference 2025 (2023), Global Policy Forum
World Bank reform: For whose benefit? (2023), Brot für die Welt, Global Policy Forum and misereor
Financing the Transformation and Sustainable Development: Reform of the international financial architecture (2023), German Council for Sustainable Development
Reform of the international financial architecture (2023), Germanwatch
