Global financial institutions are to blame for failing UN development goals

Global health care spending approached $10 trillion in 2022, the last year for which full data was available. While the United States accounted for a striking 43% of this expenditure, around 75 of the poorest countries contributed only less than 4% of the global total. This vast contrast exists partially due to their debt obligations to international financial institutions that force governments to prioritize repayments to wealthier nations over public spending. This inequitable dynamic underscores a broader systemic issue: the global financial system allows creditors to impose terms on vulnerable countries without adequate oversight. 

The upcoming June and July 2025 summit in Seville, Spain, offers a critical opportunity to reform this system and secure funding for the United Nations Sustainable Development Goals (SDGs), particularly SDG3, which focuses on health for all. According to an article by the Nature publication, an estimated $2 trillion are needed annually to achieve the UN goals. Although this amount is far from the much smaller amounts currently pledged, delegates at the Seville summit must prioritize achieving these goals. 

Origins of the Current System

The current international financial architecture originated in the 1944 Bretton Woods Conference, which established the World Bank and the International Monetary Fund (IMF) to address post-World War II reconstruction and serve as a financial safety net. The United States, emerging as the most powerful post-war nation, became the dominant shareholder in both institutions, with veto power on major decisions. The US dollar was also established as the global reserve currency.

While effective for its time, this system has significant flaws. A key issue is that when central banks raise interest rates to combat inflation, borrowing countries face higher repayment pressures, often compounded by weakened local currencies against the dollar. This phenomenon worsened after the COVID-19 pandemic, leaving many nations struggling to remain solvent at a time when substantial financing is needed to meet SDG targets. “When they go to climate or biodiversity conferences, there’s little financing offered, with creditor countries saying they have to prioritize austerity at home,” the article explains.

Emerging Alternatives

In response, many low- and middle-income countries have sought alternatives to traditional lenders. For example, China has emerged as a significant global lender, offering grants and concessionary loans through institutions such as the Asian Infrastructure Investment Bank. Alongside other BRICS nations—Brazil, Russia, India, and South Africa—China has also helped establish the New Development Bank.

However, a lack of formal coordination between traditional and emerging lenders creates inefficiencies. This underscores the need for financial-governance reform, a key agenda item for the Seville summit. UN Secretary-General António Guterres has called for a coordinating body to oversee international financial institutions. “Lenders need to be supervised by regulatory bodies,” the editorial notes. It further argues for the introduction of an “honest broker” to advocate for indebted nations during negotiations with major lenders like the World Bank or IMF.

Need for Governance and Reform

The Seville meeting must also ensure that indebted countries are not punished for challenges beyond their control, such as inflation due to pandemics, natural disasters, or climate change. Governance reforms should draw lessons from the 2008 global financial crisis, when regulators recognized the importance of system-wide oversight. The editorial emphasizes, “It makes no sense that the largest institutions can still operate without anyone to report to other than their own boards.”

Decisions at the summit must also be informed by research and consensus. For example, evidence suggests that public financing is better suited than private capital for long-term infrastructure projects, as public sources do not require rapid or high returns on investment. This approach is particularly beneficial for projects requiring extended timelines to yield results.

The Seville summit presents a pivotal opportunity to secure financing for the SDGs and reform international financial governance. Achieving these objectives would address long-standing inequities in the global system and ensure that vulnerable countries are supported rather than exploited.

“Let’s make 2025 the year when international finance really does meet the needs of those who require it the most, without exploiting their vulnerabilities,” the article urges. Such reforms would not only advance the SDGs but also establish a more equitable and sustainable financial framework for the future.

By Nazrin Sadigova