Debt crisis in affluent States threatens developing economies, UN officials warn

Abulkalam Abdul Momen. UN Photo/Evan Schneider

24 October 2011 – Two top United Nations economic bodies held their first ever joint meeting today to discuss the serious risks to developing countries and economies in transition stemming from the sovereign debt crisis currently affecting some developed countries.

“We must remain mindful of the fact that developing countries are especially vulnerable to external shocks, and often have limited capacity to cope,” Bangladesh’s Permanent Representative Abulkalam Abdul Momen, Chairperson of the General Assembly’s Second Committee, which deals with economic and financial issues, told a joint session with the UN Economic and Social Council (ECOSOC).

“The slowdown in economic growth in developed economies, coupled with this on-going financial turmoil and uncertainty, could further impede efforts to eradicate poverty and to achieve the Millennium Development Goals (MDGs),” he said.

The MDGs, set during the UN Millennium Summit of 2000, seek to slash hunger and poverty, maternal and infant mortality, a host of diseases, and lack of access to education and health care, all by 2015, but many countries have fallen behind schedule in many or all of the targets.

Mr. Momen noted that while the momentum of global economic growth is diminishing, with heightened risks for some major developed economies to slide into a double-dip recession, growth in developing countries and countries in transition has remained strong, yet moderated.

But these countries also face challenges brought on by a deteriorating international economic environment, including renewed turbulence in global financial markets, reversal of capital inflows, heightened volatility in commodity prices, and weakened external demand.

“While globalization has brought increased opportunities for prosperity, it has also made countries more vulnerable to external financial and economic shocks and challenges,” he stressed, noting how the financial meltdown three years ago in one part of the world turned into a global crisis, affecting all countries.

“This year, a new form of financial crisis now confronts the global economy. At the heart of this problem, similar to three years ago, is the interconnectedness of international financial markets. This time, however, rather than being an issue of private debt, it is an issue of government debt.

“The sovereign debt crisis currently affecting some developed countries poses serious challenges, and there is a significant risk of spreading financial and economic distress to the rest of the global economy, including developing countries and economies in transition.”

Closing the meeting, ECOSOC President Lazarous Kapambwe, Zambia’s Permanent Representative, called on the UN to take up the mantle of forging a global economic policy.

“We need strong international policy coordination and action, similar to the concerted reaction in 2008 and 2009, to address the global financial crisis,” he said.

“Unfortunately, we are not seeing this in practice. Given the continuing risks and threats to the international economy, the United Nations must assert its global leadership role in coordinating international policy and in strengthening global economic governance.”

Joseph Stiglitz, Professor of International Affairs at Columbia University and the 2001 Nobel Economics Prize laureate, also addressed the meeting.

The two bodies will hold another joint meeting on Thursday to hear a panel discussion on investing in productive capacity to promote job growth.


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