Five Realistic Goals for Global Economic Governance in 2025
2025 admittedly presents a dubious landscape for achieving substantive global economic governance reforms. The scale of needs is large—achieving development and climate goals demands trillions more in annual financing and a reorientation of our economic system—while our political context is trending in the wrong direction, with countries cutting international investments and geopolitical tensions deterring international cooperation.
Still, making progress matters. On climate change, every fraction of a degree makes a difference, and the scale of development challenges are so large that even small increases in inclusive growth or public service provision can improve the lives of millions of people. Actions taken now can also set the stage for more ambitious reforms when circumstances become more favorable in the future.
So, what are five realistic goals for global economic governance in 2025?
1. Establish principles for MDB resource needs reviews and initiate them at each MDB
Right now, decisions on multilateral development banks’ (MDBs) financing capacity are largely driven by inertia and political whims, rather than a regular, evidence-based assessment of how their ability to provide finance matches up with the financing needed to meet goals and the international community. Resource needs reviews would change that, and they are one of the key recommendations of the Group of 20 (G20) Roadmap on Better, Bigger, and More Effective MDBs, which G20 leaders endorsed in November.
That Roadmap sets a near-term goal of establishing principles for resource needs reviews, and South Africa can push for these principles to be decided under its G20 presidency next year. The G20 can simultaneously push MDBs to each initiate their own resource needs review—in the World Bank’s case, the 2025 shareholding review provides a moment to launch an assessment of its capital needs. Carrying out these reviews will generate an analysis of what mix of capital adequacy reforms, hybrid capital and capital increases would add up to financing needs, putting MDBs on a strong footing to increase the supply of finance..
2. Lay the groundwork for increasing developing countries’ voice and representation
There are three key moments for governance reforms of international financial institutions in 2025. First, the International Monetary Fund (IMF) set a June 2025 deadline for making progress on approaches to quota realignment after the last quota review ended without changes in voting power. Second, voice and representation will be one of the topics at the Fourth International Conference on Financing for Development (FfD4), taking place from June 30-July 3. Third, the World Bank’s International Bank for Reconstruction and Development and International Finance Corporation are undergoing a shareholding review in 2025.
None of these processes would immediately lead to changes in voting power—IMF and World Bank reviews require subsequent changes to quotas or capital, while FfD4 doesn’t have direct jurisdiction over the Bretton Woods Institutions as a UN conference—but they need to lay a path to addressing developing countries’ underrepresentation in the IMF and World Bank. Failing to propose concrete reforms, such as the vague promises that have filled communiqués for over a decade without leading to action, would give the impression that the institutions are incapable of evolving to reflect today’s world. While geopolitical tensions between the US and China make any outcome difficult, there are measures that would increase small economies’ representation while having relatively even effects on major shareholders, such as increasing the weight of the compression factor, certain ad hoc increases or increasing basic votes—the latter of which made it into the FfD4 elements paper.
3. Map out the path to $1.3 trillion in the Baku to Belém Roadmap
COP29, the most recent UN climate conference, came to a new climate finance agreement, but that agreement left a number of ambiguities. Its inner layer is a commitment for developed countries to generate $300 billion per year for developing countries by 2035, while there is a broader commitment of $1.3 trillion per year in climate investment in developing countries from all sources. To flesh out this vague $1.3 trillion goal, the agreement set up the “Baku to Belém Roadmap to 1.3T.”
Developed countries have implied private finance would power the $1.3 trillion sum, but even the International High Level Expert Group on Climate Finance—whose work was influential in shaping the $1.3 trillion figure—only projected that external private flows would amount to $500 billion. The Baku to Belém Roadmap is the moment to outline a realistic path to the $1.3 trillion climate investments developing countries need. The agreement should set a pathway to debt relief, new international taxes and IMF reform that could scale up climate investments. Committing to a $1.3 trillion goal without the ambition to match not only risks further eroding trust between developing and developed countries, but it also leaves the door open to dangerous levels of warming. A substantive Baku to Belém Roadmap is a must.
4. Roll back investor-state dispute settlement
In recent years, actors across the political spectrum have investor-state dispute settlement (ISDS), a mechanism written into many international investment agreements that give foreign investors a special right to bring claims against governments in arbitration tribunals. Recognizing the threat ISDS poses to climate action, the European Union withdrew from the Energy Charter Treaty (ECT), one of the largest investment treaties covering the energy sector. Motivated more by national sovereignty concerns, the Trump administration scaled back ISDS when it negotiated the US-Mexico-Canada Agreement (USMCA) in 2018 to succeed the North American Free Trade Agreement. Last year, Honduras withdrew from the World Bank’s arbitration tribunal, with a recent case against Honduras highlighting how ISDS can harm developing countries’ fiscal space and policy space.
There is ample space for further rolling back of ISDS in 2025. Countries can take bilateral and regional action: Colombia and the UK’s bilateral investment treaty could be renegotiated, Nigeria is reviewing its bilateral investment treaties, and countries that withdrew from the ECT remain party to a number of active treaties posing a similar threat to climate action. There are also opportunities for multilateral action through the United Nations Commission on International Trade Law’s working group on ISDS reform, the FfD4 conference and South Africa’s G20 presidency—and South Africa is a natural ISDS leader, having withdrawn from over a dozen treaties with ISDS provisions over a decade ago and not having experienced a decrease in foreign investment since.
5. Expand South-South cooperation
South-South cooperation has expanded rapidly in the last decade, and with Global North countries turning inwards and potentially stalling progress in multilateral institutions, Southern countries may have to turn to other venues. Developing countries have little access to the Global Financial Safety Net other than the IMF, an institution in which they also have little representation. Regional financial arrangements (RFAs) provide an alternative—countries could strengthen existing RFAs like the Chiang Mai Initiative Multilateralization (CMIM) or the Latin American Reserve Fund (FLAR), or they could build new RFAs for African countries. Another set of Southern institutions that could be strengthened are national development banks, and the Finance in Common Summit—taking place in February 2025 in South Africa—provides an opportunity.
Also, with the US likely raising tariffs and the EU seeking to protect its market, China will be seeking new buyers for its mass buildout of renewable energy technology. For many Global South countries, this could mean lower prices and an opportunity to accelerate the green transition. And while Northern countries are disregarding World Trade Organization (WTO) rules and its Appellate Body remains dysfunctional for the time being, Southern countries might also take the opportunity to lean into green industrial policies of their own.
The last few years have seen green and development-centered international financial architecture reform move up the global agenda. Even if political circumstances will be challenging in the coming year, meaningful progress is still possible—and these five areas would be a good place to start.
*
Never miss an update: Subscribe to the Global Economic Governance newsletter.