Letter to G7 Finance Ministers

Dear G7 Ministers,

The G7, representing 26% of the world's GDP and providing 76% of total official development assistance (ODA), has significant economic and political influence, despite the ongoing geopolitical and economic shifts globally. With 25% of the global energy demand and 21% of global emissions, the G7 has the responsibility and the power to take decisive action on climate change and development needs and to drive meaningful progress on these issues.

In the past, the partnership with Africa has been at the heart of the G7 engagement with the world. This partnership has become even more critical in view of its demographic development, with sub-Saharan Africa’s economic growth projected to surpass China's economy in about a decade. By enhancing productivity growth through investment, the region can lift itself out of poverty, becoming a destination for global investors and fostering sustainable development. However, this will only be possible with significant support, including from G7 partners. Addressing climate change and nature-related development goals in Emerging Markets and Developing Countries (excluding China) requires investment of $2.4 trillion by 2030 and $5-7 trillion annually to achieve the SDGs by 2030. Much of the financing needs pertain to Africa and require global action.

On behalf of Global Citizen, I am writing to encourage you to use the upcoming G7 Finance Ministerial as an important opportunity to build trust with the Global South and in particular Africa. In addition, it is crucial that the G7 shows global leadership and responsibility when it comes to development and global public goods, and unlock additional financing desperately needed to address issues such as extreme poverty, the climate crisis and hunger.

• ODA: G7 countries must reaffirm the essential role of official development assistance (ODA). They should reaffirm the 0.7% ODA/GNI target as well as the commitment to increase ODA to the Least Developed Countries (LDCs) and to better target ODA towards countries where the needs are greatest.
• IDA21 and Gavi, the Vaccine Alliance: In the next 6 months, there are two major opportunities to support the poorest countries, the IDA21 and the Gavi replenishments. IDA serves as a highly cost-effective channel for ODA, resulting in donor contributions up to 3.5 times over through the issuance of AAA-rated bonds, with an average return of investment of 22%. Gavi is a key actor in the global health landscape and has vaccinated more than 1 billion children and averted more than 17.3 million future deaths between 2000 and 2022. The G7 contributions will be critical to ensure the success of both replenishments. G7 members should commit to increase their contributions in real terms to both instruments and call on other nations to do the same.
• Climate Finance: The ministerial must also prepare for success in Baku and Bélem. Concrete progress on the financing agenda and the new round of NDCs is essential to encourage climate ambition in line with the 1.5 degree goal. The G7 should support an ambitious, well defined and structured NQCG for climate finance beyond 2025, to be agreed this year, with clear subgoals for the different types of financing sources and instruments, with a balanced allocation for adaptation, resilience, mitigation and loss and damage. To give this new goal credibility, a new transparent tracking system which monitors additionality and coherence with other development financing flows must also be implemented. In parallel, the G7 needs to lead on publishing timely and verifiable data to show the delivery of the targets of $100B in climate finance and of doubling adaptation finance. Finally, the G7 must deliver on their loss and damage pledges in a transparent manner and further increase financing.
• Additional Sources of Funding: Innovative financing sources need to complement ODA and climate financing coming from national budgets. The G7 should support initiatives to tax highly polluting and undertaxed sectors, such as the international taxation task force, and ensure progress on the G20 Presidency initiative on a so-called minimum global tax on high-net worth individuals. Concrete tax and levy options to scale financing for climate and development needs are available and tested and could mobilize hundreds of billions in grant financing every year.
• Special Drawing Rights (SDRs): The G7 has the opportunity to write history in paving the way for the use of SDRs by multilateral development banks (MDBs). Now that the IMF board decided on May 10th to allow the use of SDRs for hybrid capital, the G7 should take the lead and build a coalition of five countries ready to reallocate SDRs via the African Development Bank and, where relevant, support it through a guarantee under the Liquidity Support Agreement. Rechanelling SDRs via MDBs will leverage them fourfold and allow to scale support for the green transition and socio-economic development on the African continent.
• Debt Pause Clauses: Debt pause clauses are a great means to quickly free funding in case of an external shock. In 2020, it first needed a G20 decision to agree on the DSSI (debt service suspension initiative) to help poorer countries address the immediate impacts of COVID. Such an initiative would become obsolete if debt clauses (which are NPV neutral) are generalized. While some G7 creditors have gone ahead, all G7 creditors should introduce debt pause clauses for existing and new loan agreements. They should also ensure that these apply in the case of natural disasters as well as pandemics and health emergencies, for small island developing states (SIDS) and low-income countries (LICs).
• Fossil Fuel Subsidies: The G7 has pledged to phase out inefficient fossil fuel subsidies every year since 2009 and in 2016 committed to do so by 2025. Not only is it clear that this deadline will not be met, but we’re in fact severely off track, with global fossil fuel subsidies having reached an all-time high of more than USD 1.5 trillion in 2022. The G7 countries need to commit to domestic action plans and timelines, and redirect funding for climate and development action at home and abroad. In addition, agreement must be reached on a clear definition of 'inefficient' and to provide transparency via a joint public inventory of all fossil fuel subsidies, including rationale of why they are considered efficient and why the same objectives cannot be achieved with alternative clean energy.

As key decision-makers, the G7 have the potential to catalyze global efforts towards a sustainable and equitable future and to ensure that the financial resources needed for transformative change are made available. Thank you very much for taking our recommendations into consideration and we stand ready to discuss any of our proposals in more detail with your team.

Sincerely,

Friederike Röder,
Vice-President, Global Policy & Advocacy
Global Citizen

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