Ms Karol Balfe:

I thank the Chairman, Deputies and Senators for the opportunity to appear before the committee today. As Ms McKenna highlighted, there is huge importance in retaining, developing and growing Ireland's strong track record on development assistance and meeting our target of 0.7%. This comes in the context of a major global focus on development. On 30 June, in Seville, Spain, the UN will host the International Conference on Financing for Development, which the Minister of State, Deputy Richmond, will attend. This is a key moment to bring about transformative change to the international financial architecture. It is an opportunity to redefine global economic governance, support sustainable and inclusive development and reaffirm the importance of multilateral co-operation. Structures and mechanisms must be put in place that are truly inclusive, democratic and representative.

Top of the agenda at the summit will be the issue of debt. In 2025, 54 countries are in debt distress, which means they must cut spending on basic public services and climate action to pay external debts. Lower- and middle-income countries have a total external debt of $1.45 trillion between them. In 2023 alone, they paid $138 billion just to service those debts, thereby sacrificing people's rights and sustainable development for wealthy creditors. More than 75% of lower- and middle-income countries spend more on debt than they do on healthcare. In 55% of those countries, expenditure on servicing debt is more than double what is spent on healthcare.

This has a devastating impact on the majority of people but particularly women, young people and people on low incomes.

There is growing consensus around this issue of fairness and justice and that there is a series of historical, practical or moral debts that rich countries owe, related to climate change, colonialism, slavery, illicit financial flows or failures to meet our ODA commitments since the 1970s, as agreed collectively by the United Nations.

In a major study, it is calculated that rich countries have achieved up to 70% of their economic growth by appropriating more than their fair share of the atmospheric commons, or to put it simply, by overshooting their global carbon share. The climate debt they are liable to pay, by very conservative estimates, would be $107 trillion. That is 70 times what they owe in debt. If that climate debt was repaid, it would involve transferring over $4 trillion per year to lower- and middle-income countries.

These external debts that lower- and middle-income countries face accelerate the climate crisis. They lock countries into a negative spiral, forcing governments to shape their economies and societies to pay back their debts in foreign currencies and exporting products, further harming the climate in the process. In contrast, lower- and middle-income countries, who owe a fraction of the amount owed by rich countries, are forced to sacrifice the health, education, social protection, well-being and future prospects of their citizens, often having to follow strict austerity policies imposed by the International Monetary Fund. Women and girls are the first to suffer. They lose access to those services and to decent work the services might provide, and they pick up the share of unpaid care that is not there when public services fail.

The issue of illicit financial flows is also hugely important here. The State of Tax Justice 2024 report showed that multinational corporations are shifting on average $1.13 trillion worth of profit into tax havens, causing governments around the world to lose an average of $294 billion a year in direct tax revenue. A further $145 billion in direct tax revenue is lost to offshore wealth tax evasion. Unfair global trade rules lock low-income countries into dependency on commodity exports, enabling this extraction of goods and profits.

What this means in human terms is that in 48 countries with a collective population of 3.3 billion people across the world, governments are spending more on external and domestic interest repayments than on health or education. This unjust global financial architecture is dominated by institutions like the IMF and World Bank, which really have colonial-era structures. They were established in 1944 when many of these lower- and middle-income countries were still colonies. This preserves the interests of rich nations and large corporations, continuing to enforce them to pay external and often illegitimate debts as the top priority.

There is an urgent need to revamp these deeply unfair systems and institutions. A fairer and inclusive system managed by a democratic institution where all countries have an equal say, such as the United Nations, is crucial. In Seville, we urge Ireland to play a role within the European Union to agree to a common framework for debt cancellation and restructuring, and to put political support behind a UN mechanism on debt. This would allow governments to invest more money in public services in their countries, sustainable development, human rights and climate action.