Positive Money submission to International Development Committee

Proposal for International Development Committee to examine new financial architecture for tackling sustainable development, debt, and climate

December 2024

Positive Money welcomes the opportunity to submit a proposal for the International Development Committee to investigate the implications of new financial architecture for sustainable development.

Positive Money is a not-for-profit research and campaigning organisation, working towards reform of the money and banking system to support a fair, democratic and sustainable economy. We are funded by trusts, foundations and small donations.

Why should the International Development Committee (IDC) examine this area?

The current global financial system's reliance on the dollar and a few other major currencies creates pressures for Global South countries. These pressures include the need to accumulate dollars for imports and debt repayments, and challenges like capital flight, exchange rate volatility, and debt crises. This diverts resources away from sustainable development and climate action. Given its impact on the effectiveness of the UK’s development policies, examining the dominance of the dollar and the development of new money and payment systems is critical for addressing these challenges.

Digital currencies, such as Central Bank Digital Currencies (CBDCs) and new payment systems, offer a path toward reducing reliance on foreign currencies, increasing regional trade, and enhancing economic stability in the Global South. The committee should explore how these innovations align with the UK’s development goals and contribute to progressing the Sustainable Development Goals (SDGs), debt and climate.

Why is it the right time for the Committee to examine the area?

It’s a critical time for the Committee to examine trends in digital money, de-dollarisation, and new payment systems, as these developments are reshaping the global financial landscape for both advanced and developing and emerging economies (DECs). For instance, BRICS+ countries are already investing in alternatives, as announced at their 2024 summit. The Covid-19 pandemic, inflationary shocks, tariff and trade war risks, and geopolitical tensions have exposed the vulnerabilities of the dollar-based system, particularly for DECs. The potential for new tariffs and trade wars could undermine progress on SDGs and climate action in the Global South by disrupting trade flows, making costs of imports and borrowing more expensive, and triggering financial instability. CBDCs and new payments systems may become more important to shield DECs from the worst effects.

The IDC must engage with this shift to understand the potential consequences of fragmentation versus multilateral cooperation in the emergence of a new financial landscape; and how this will affect sustainable development, debt, and climate change in DECs, as well as the UK’s international development goals.

Why would this area benefit from parliamentary scrutiny (that is, the close investigation policies, actions and spending)?

Emerging financial systems like CBDCs and regional payment systems have potential to drive positive outcomes for poverty reduction, sustainability, and economic growth, supporting SDGs and the UK’s international development priorities. By improving financial inclusion, they can provide better access to credit and services, supporting poverty alleviation. They can also boost green financing by simplifying loan and investment distribution for green projects, and by reducing transaction costs, increasing transparency, and enabling faster cross-border payments, which could enable DECs to attract more public and private investment for sustainable initiatives. Additionally, DECs can reduce reliance on foreign currencies which creates financial instability and debt crises, promote regional economic integration and stimulate growth, which would free up financial resources for tackling debt, climate and development. Despite these benefits, it is unclear what the government's own assessment of the impact of these developments are for international development and government policy objectives in this area, and what, if any, steps the government will take to support the development of these systems.

Additional information

1. Have you ever engaged with Parliament before (e.g. made a submission to a select committee)?

Yes - Positive Money has given both written and oral evidence to select committees in the past.

2. Do you have personal or field experience related to international development issues?

Yes - Positive Money’s Head of Economics has recently published a report on the issues in our proposal.

3. If you are invited to pitch your idea to the Committee, would you be able to travel to London and back within the same day?

Yes

For more information on this proposal, please contact Ellie McLaughlin at ellie.mclaughlin@positivemoney.org.uk or 07554209640.

Positive Money is an international research and campaign organisation working to redesign our economic system for social justice and a liveable planet. Find out more: positivemoney.org

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