The Russian invasion of Ukraine in February continues to create massive human, economic, and physical losses. We must remain hopeful for an end to this conflict in 2023, but Ukraine and the international community then face the monumental task of rebuilding what has been destroyed.
The Russia-Ukraine conflict has also further exacerbated the world’s food crisis, which greatly escalated during the pandemic: the estimated increase in food insecurity in 2020 was equal to that of the previous five years combined. In Haiti, Afghanistan, and Pakistan, natural disasters and humanitarian crises have been compounded by volatility in food and energy markets. NGOs, multilateral organizations, and their partners have faced new demands on their resourcefulness to execute missions in these catastrophes.
While meeting the challenges of today is critical, so too is laying the foundations for the future. Digitization and the adoption of environmental, social and governance (ESG) objectives are two trends gaining widespread recognition as key to countries’ future success. Digitized payments are an important driver of economic efficiency and financial inclusion. Brazil’s Pix instant payment system has delivered on all fronts. Launched during the pandemic, by September 2022 there were almost 137 million registered users out of a population of 213 million. Other countries in the region hope to emulate its success.
In the longer term, central bank digital currencies (CBDCs) could be used for both domestic and cross-border payments. CBDC initiatives are certainly gathering pace, with 105 countries, representing over 95% of global GDP now exploring this digital form of money. However, the consequences of adoption need to be carefully thought through. CBDCs are not a panacea and, in reality, they are likely to be one of many types of digital money: interoperability should be a priority.
Digital innovation has a central role to play in achieving many ESG objectives. Blockchain technology can enable the scaling up of carbon credit markets by simplifying the monitoring, reporting, and verification of greenhouse gas emission reduction claims. Developments in the capability to validate and standardize ESG claims will be essential to fight greenwashing and enable countries to finance and monetize net-zero aligned projects.
This year’s COP27 conference marked a shift from pledging to implementation of net zero commitments. Governments, especially in emerging markets, face the task of attracting billions in international climate capital into their most needed adaption and mitigation projects. Private sector, development finance, and public sector stakeholders must work together to scale blended finance structures and bridge the gap between committed capital and projects. Many could look to Egypt’s new project-centered Nexus of Food, Water, and Energy (NWFE) model as a platform to replicate in achieving their Nationally Determined Commitments.
As economic growth stalls, government budgets are likely to come under pressure, especially in countries with high levels of debt. But it is important that ESG objectives are not seen as a nice-to-have: bringing women into the workplace not only enables them to accumulate assets but benefits the economy and society, for example. And protecting biodiversity and nature safeguards future prosperity and helps to mitigate natural disasters. Fortunately, solutions such as debt-for-development swaps can help sovereigns not only reduce their debt burden but also realize social, development and green objectives.
This 2023 edition of Citi Perspectives for the Public Sector showcases our expertise across all these topics – and more –as well as providing practical guidance and highlighting real examples where our solutions have made a difference. We hope you enjoy these articles and welcome your feedback on the issues raised or suggestions of topics you would like to see covered in future editions.