For decades, the architecture of global development finance has been dominated by institutions and ideologies rooted in the Global North. Institutions such as the International Monetary Fund (IMF), World Bank, and the OECD have set the tone and tempo of development priorities, often imposing conditionalities that reflect the political and economic interests of the wealthiest nations.
But today, amid global economic fragmentation, rising debt distress in low- and middle-income countries, and the slow pace of climate finance delivery, it is time for the Global South to assume leadership in reimagining development finance on its own terms.
The Global South is no longer the passive recipient of aid and development dictates. It now encompasses dynamic economies, youthful populations, and innovative financial institutions that are increasingly shaping global discourse.
The emergence of institutions like the New Development Bank (NDB), the Asian Infrastructure Investment Bank (AIIB), and regional development banks in Africa, Latin America, and Asia signals a growing determination to build an alternative system that prioritizes local needs, values equity, and is more responsive to the developmental aspirations of the majority world.
Taking the lead does not mean retreating into isolation or rejecting multilateralism. On the contrary, the Global South has the opportunity to revitalize multilateralism by making it more inclusive and fit for purpose.
The current global financial architecture was designed in the aftermath of World War II, and its foundations remain stuck in a post-colonial worldview.
Development finance under this model has too often been marked by a top-down approach. Wealthier nations dictate terms, disburse loans, and attach structural adjustment policies that frequently undermine domestic priorities and democratic ownership.
Moreover, global financial institutions have been slow to respond to new global crises. The COVID-19 pandemic laid bare the failures of multilateral institutions to provide timely and sufficient support to the countries that needed it most.
Climate finance has fared no better—despite repeated promises, wealthy countries have failed to deliver the pledged $100 billion annually to help developing nations mitigate and adapt to climate change. These failures are not just technical; they are symptomatic of a deeper legitimacy crisis.
In response, countries of the Global South have begun to chart their own course. The BRICS bloc—Brazil, Russia, India, China, and South Africa—established the New Development Bank with a mandate to mobilize resources for infrastructure and sustainable development in emerging economies.
Unlike traditional multilateral banks, the NDB places more emphasis on equal voting rights, local currency lending, and South-South cooperation.
The Asian Infrastructure Investment Bank, with over 100 member countries, has rapidly become a key player in financing large-scale infrastructure, demonstrating efficiency and flexibility.
Africa’s own development finance institutions, like the African Export-Import Bank and the African Development Bank, are increasingly stepping into leadership roles in addressing the continent’s financing gaps and investment priorities.
These institutions are not without flaws, but they represent a fundamental shift: agency is moving to the South. The emphasis on mutual respect, knowledge-sharing, and context-sensitive investment reflects an understanding that development cannot be imposed from above.
Taking the lead in development finance means more than creating parallel institutions. It means fundamentally rethinking what development means. The Global South must lead the transition from a debt-driven, extractive model to one based on equity, sustainability, and solidarity.
That means pushing for a new set of priorities: climate resilience, food sovereignty, health systems, education, and infrastructure that connects people rather than just markets.
Critically, the South must also push for more democratic global governance of financial institutions. Proposals for a new Global Debt Authority, sovereign debt workout mechanisms, and international tax cooperation are examples of initiatives where leadership from the South is vital.
The African Union’s growing diplomatic assertiveness at global financial summits is a welcome development, as is the G77’s recent push for reform of the global financial architecture.
The moment is ripe for a rebalancing of power in development finance—not as a rejection of international cooperation, but as a necessary correction. The Global South has waited long enough for a seat at the table—it is time to build a new table, and invite the world to join on equal footing.
Southern countries can also lead by example in implementing innovative financing mechanisms—from diaspora bonds and climate-resilient debt instruments to digital finance for inclusion. The use of green sukuk in Indonesia and SDG-linked bonds in Latin America shows that financial innovation is not confined to Wall Street or the City of London.
Taking the lead does not mean retreating into isolation or rejecting multilateralism. On the contrary, the Global South has the opportunity to revitalize multilateralism by making it more inclusive and fit for purpose.
South-South cooperation must go hand in hand with genuine North-South dialogue—one that is not defined by paternalism but by partnership.
Furthermore, rising powers in the Global South—particularly China, India, Brazil, and South Africa—must recognize their responsibility to promote a fairer order, not replicate the power imbalances of the past.
Development leadership must be inclusive, especially of the least developed countries and small island developing states whose voices are often the first to be ignored and the last to be heard.
The world is at a critical juncture. The polycrisis of climate change, inequality, debt, and conflict cannot be solved by 20th-century tools or mindsets. The call for a new Bretton Woods has grown louder, but what is needed is not just reform—it is transformation.
The Global South is uniquely positioned to lead that transformation, bringing fresh thinking and lived experience to the table.
The moment is ripe for a rebalancing of power in development finance—not as a rejection of international cooperation, but as a necessary correction. The Global South has waited long enough for a seat at the table—it is time to build a new table, and invite the world to join on equal footing.
(The writer is Former Senior Advisor, Office of the President and Deputy Director General, South Asia, Asian Development Bank. Global thought leader on economic policy, infrastructure, and development finance, with a focus on inclusive growth and reimagining global institutions. Views are personal.)
Comment