Measures to Ease Plight of Developing Countries in Ongoing Global Financial Crisis Discussed in Assembly’s Economic Committee
Measures to Ease Plight of Developing Countries in Ongoing Global Financial Crisis Discussed in Assembly’s Economic Committee
|Department of Public Information • News and Media Division • New York|
Sixty-fourth General Assembly
8th Meeting (PM)
Measures to Ease Plight of Developing Countries in Ongoing Global
Financial Crisis Discussed in Assembly’s Economic Committee
Debt Relief, Regulatory Overhaul, Bretton Woods Adjustments Suggested
A debt moratorium for developing countries, policies to prevent excessive volatility in commodity markets, and a regulatory overhaul and stronger surveillance of international financial institutions, were urgently needed to restore global economic health and help developing nations overcome obstacles to achieving the Millennium Development Goals, several representatives told the Second Committee (Economic and Financial) this afternoon, as it began its consideration of macroeconomic policy questions.
Sudan’s representative, speaking for the “Group of 77” developing countries and China, said the negative impact of the financial crisis was forcing many developing countries to choose between spending money on social programmes or on debt payments, and many of them were at risk of experiencing another debt crisis. She supported the Secretary-General’s argument that a debt moratorium would liberate resources and provide countries the fiscal space to respond to the effects of the crisis. The crisis had also highlighted the need for States to play a larger role in the economy and in articulating and implementing social policies, she said. The international financial system needed an overhaul. It was particularly important for the Bretton Woods institutions to give fair representation to developing countries.
Indonesia’s representative, speaking for the Association of Southeast Asian Nations (ASEAN), said that today’s crisis, like the Asian financial crisis of 1997 and 1998, demonstrated the urgent need to strengthen and reform the international financial architecture. The fact that the world was not in a more precarious situation was proof of the benefits of collective action. Last year’s, High-level Conference on the World Financial and Economic Crisis and its Impact on Development was part of the necessary response, he said, expressing hope that as the severity of the crisis abated, political will to implement the Conference Outcome Document would not wane. The G20, which also played a critical role, must strengthen institutional links with non-members through, among other things, stronger involvement with regional groups.
Guyana’s representative, speaking for the Caribbean Community (CARICOM), said it was incumbent on the international community to provide sufficient liquidity, with no strings attached, to developing countries, while also restructuring the debt of heavily indebted, vulnerable small economies. With no available fiscal space, and some of the highest levels of indebtedness in the world, CARICOM countries had no way to respond to the crisis with counter-cyclical measures. They faced several hurdles, notably less demand for exports, rising capital costs, less foreign investment and declines in tourism revenue and remittances. Many countries in the region suffered severe recessions with little hope of recovery before the end of 2010.
She expressed concern that during this time of particular need, the flow of aid might be significantly reduced as a result of the crisis, and she urged donor countries to uphold long-standing commitments to maintain or increase development assistance.
Heeding that call for more aid, Sweden’s representative, speaking for the European Union, reaffirmed the Union’s commitment to meet the Official Development Assistance target of 0.56 per cent of gross national income by 2010 and 0.7 per cent of gross national income by 2015, and noted that the Union had increased its aid to almost €50 billion in 2008. He pledged increased European Union support for good governance and the rule of law through partnerships with developing countries, as they tried to strengthen public financial management and encourage private sector growth.
Canada’s representative, also speaking for Australia and New Zealand, added that the G20 had committed to making available an extra $850 billion in resources through multilateral financial institutions to support growth in emerging markets and developing countries. Canada, Australia and New Zealand were increasing their support to those institutions and to multilateral development banks.
On the issue of commodities, he said the Secretary-General’s report noted a dramatic increase in price volatility in the last 16 months. A concerted and collective response was needed. Canada recently announced the doubling of support to sustainable agricultural development with an additional $600 million committed over three years. That was part of the $20 billion announced at the recent L’Aquila Summit by the G8 and other leaders and heads of international organizations. For its part, Australia had committed $464 million over four years.
Also today, presenting the reports before the Committee were Alexander Trepelkov, Acting Director, Financing for Development Office, Department of Economic and Social Affairs (DESA), who introduced the report of the Secretary-General titled “international financial system and development, and Yuefen Li, Head of Debt and Development Finance Branch, United Nations Conference on Trade and Development (UNCTAD), who introduced the Secretary-General’s report on progress entitled “Towards a durable solution to the debt problems of developing countries”.
Other speakers today were the representatives of Brazil, Peru, United States, China, Saudi Arabia, India, Japan, Singapore, Russian Federation and Algeria.
The Committee will meet again at 10 a.m. on Tuesday, 13 October, to hold a panel discussion entitled “Climate change negotiations: the road to Copenhagen”.
The Second Committee (Economic and Financial) met this afternoon to consider macroeconomic policy questions, including: the international financial system and development; external debt and development: towards a durable solution to the debt problems of developing countries; and commodities.
The Committee had before it the Secretary-General’s report on the International financial system and development (document A/64/178), which reviews recent trends in international official and private capital flows to developing countries and international policy challenges arising from the financial crisis.
The report notes the continued substantial net resource outflows from developing countries to developed countries, which reached $826 billion in 2008. That figure is expected to decline to $448 billion due to the global financial and economic crisis, which has also caused a sharp drop in net private capital flows to developing countries -- down by more than 50 per cent in 2008 to less than $500 billion -- as well as in foreign direct investment. Total net official development assistance from Development Assistance Committee members rose 10.2 per cent in 2008, to 0.3 per cent of the combined gross national income of donors, but official development assistance targets are still at risk for not being met.
The report concludes that the success of regulatory reform in a financially integrated world in large part depends on enhanced international cooperation, coordination and communication among regulators. It also stresses the need to improve surveillance over mature financial markets and advanced economies, and to build an effective framework for enhanced multilateral macroeconomic and financial policy coordination.
Work can still be done on how official liquidity is deployed, the report says, and highlights the importance of restoring, over the medium term, the quota mechanism as the primary basis of expanded International Monetary Fund (IMF) lending. The report also recommends that that the international community seize the moment to start working on the creation of a new, more stable and equitable international monetary and financial system, and advocates that governance reforms be more far-reaching in the future.
Also before the Committee was the Secretary-General’s report entitled Towards a durable solution to the debt problems of developing countries (document A/64/167), which contains a review of recent developments in the external debt of developing countries and economies in transition. The report analyses the impact of the financial and economic crisis on external debt sustainability for low-income countries and countries having access to international capital markets, and critically reviews related policy actions. It describes the progress of the Heavily Indebted Poor Countries (HIPC) Debt Initiative and developments in Paris Club rescheduling, as well as analyses trends and methods in multilateral financing.
The report concludes that low-income countries with high debt levels are particularly vulnerable to external shocks, such as a global economic crisis, and recommends that they be given alternative financing opportunities for Millennium Development Goals achievement. It recommends decisive and bold policy action to limit the setbacks in terms of increased poverty, including the provision of ample liquidity, with no strings attached, to developing countries hit by such external economic shocks. It notes that a debt moratorium or standstill immediately and unconditionally would liberate resources and give countries the fiscal space to respond to the specific circumstances they are facing.
The report also concludes that it would be advisable to develop aid delivery mechanisms with a built-in insurance component, which leads to an automatic increase in aid when recipient countries are hit by negative external shocks, and recommends that the international community help countries with market access to develop new debt instruments and institutions to alleviate the risk associated with external shocks. Finally, the report calls for a discussion of responsible lending and borrowing.
Before the Committee was a Secretary-General’s note transmitting a report of the United Nations Conference on Trade and Development (UNCTAD) on world commodity trends and prospects (document A/64/184). The report analyses the trends since the last report in mid-2008, a dramatic period of commodity price booms and busts that began with a historical peak and continued into a dramatic downward spiral triggered by the global economic and financial crisis. Prices have started to recover since the beginning of 2009. After analysing possible future price dynamics, the report recommends an appropriate combination of regulatory and market instruments to achieve more stability in commodity markets.
It also highlights the need for a collective response to the current crisis through initiatives that address the commodity economy’s longer-term structural issues and integrate policies into wider development and poverty reduction strategies. To reinforce a consensus-based process, especially at the intergovernmental level, UNCTAD is initiating a series of forums and consultations.
Before the Committee was a letter dated 6 March 2009 from the Permanent Representative of the Sudan to the United Nations addressed to the Secretary-General (document A/64/65), which contains the Muscat Declaration on Water adopted by the first Ministerial Forum on Water of the Group of 77 developing countries and China in February. The Declaration reflects on the vital importance of water to development of the South and lays out a goal of sharing water resources data, scientific and technological know-how among developing countries.
Also before the Committee was a letter by the Permanent Representative of Namibia to the United Nations addressed to the Secretary-General (document A/64/81), which transmits four resolutions adopted by the120th Assembly of the Inter-Parliamentary Union in Addis Ababa on 20 April 2009. The resolutions are titled “The role of parliaments in mitigating the social and political impact of the international economic and financial crisis on the most vulnerable sectors of the global community, especially in Africa”; “Advancing nuclear non-proliferation and disarmament, and securing the entry into force of the comprehensive nuclear-test-ban treaty: the role of parliaments”; “Climate change, sustainable development models and renewable energies”; and “Freedom of expression and the right to information”.
Introduction of Reports
ALEXANDER TREPELKOV, Acting Director, Financing for Development Office, Department of Economic and Social Affairs, introduced the report of the Secretary-General entitled “International financial system and development (document A/64/178). He highlighted the key findings of the report, including the high level of net transfers of the financial resources of developing and transition economies to developed economies, the sharp drop in net private capital flows to developing countries and the rise in net official development assistance. The pattern of the increasing net outward transfers of financial transfers from developing to developed countries continued to increase, to a record $828 billion in 2008. That figure was expected to decline in 2009 to $448 billion, an indication of the deteriorating net export balance of developing economies due to collapsing demand, employment and income caused by the financial crisis.
The section of the report on strengthening the international financial architecture listed five key areas urgently in need of progress, he said. They included international financial regulation, multilateral surveillance and policy coordination, lending and resources of IMF, the international financial system of payments and reserves, and governance reforms at the Bretton Woods institutions.
YUEFEN LI, Head of Debt and Development Finance Branch, United Nations Conference on Trade and Development (UNCTAD), introduced the Secretary-General’s report on progress titled “Towards a durable solution to the debt problems of developing countries” (document A/64/184). She said the recently released Development Committee communiqué had stated that, as a result of the economic crisis, by the end of 2010, some 90 million more people would risk being pushed into extreme poverty. Unemployment was rising. The financial crisis was becoming a social and human crisis. Global gross domestic product was expected to fall by 2.5 per cent in 2009. Debt sustainability was a major challenge for developing countries, particularly those who entered the crisis in a weak position in terms of current account position and external debt. Many of them were paying more to service their debt.
Many countries were expected to issue public debt in 2010, she said. Also next year, there should be tighter monetary policy and higher interest rates. That would create a difficult market situation and make it costlier for developing countries to obtain funding. Low-income countries, including the HIPC Debt Initiative, had been hard hit by the crisis. UNCTAD’s 2009 least developed countries report stated that the debt burden was unsustainably high in most least developed countries, representing 42 per cent of gross national income, versus 26 per cent in other developing countries.
This year’s report on debt highlighted the problem of private external debt and its vulnerabilities, he said. To resolve and prevent crises in low-income countries, UNCTAD had, in recent months, consistently called for a temporary debt moratorium of official debt in poor countries, thus giving them breathing space to spend their money on socio-economic areas. That could be quickly implemented. Those countries’ debt servicing for 2009 and 2010 was $26 billion. Although the IMF agreement permitted a debt moratorium, it had never been utilized. The recent IMF interest freeze on concessional lending was a step in the right direction. Similar to an increase in official development assistance (ODA), a broader moratorium would potentially benefit all countries, as scarce foreign exchange earnings could be used to buy imports instead of servicing debt.
NADIA OSMAN (Sudan), speaking on behalf of the “Group of 77” developing countries and China, said that the current global financial and economic crisis highlighted the need for States to play an enlarged role in the economy and in articulating and implementing social policies. The international financial system needed an overhaul, with reform of financial institutions, their mandates and governance. With respect to the Bretton Woods institutions, ambitious and expedient reform, to include fair representation of developing countries, was particularly important, she said.
On the subject of the debt problems of developing countries, she said that, because of the negative impact of the financial crisis, many developing countries might be faced with the choice of either spending money on social programs or on debt payments. There was a risk of another debt crisis for developing countries and she welcomed the Secretary-General’s argument that a debt moratorium would liberate resources and provide countries the fiscal space to respond to the effects of the crisis. She also called for an international mechanism for a sovereign debt standstill and restructuring.
Many developing economies depended on primary commodities, she said, adding that such dependence was a particular concern, because it made the countries especially vulnerable to the effects of trade fluctuations, and she called for policy actions to address excessive price volatility. To conclude, she said there was a potential for innovation, improvement of productivity and promotion of non-traditional exports, and that South-South cooperation was important, in this respect.
HARALD FRIES (Sweden), speaking on behalf of the European Union, said that he supported the global initiatives to deal with climate change, the economic recession, food and energy security, and gender inequality, and that the European Union was taking wide-ranging and coordinated action to help developing countries, especially the poorest and most vulnerable. The Committee played a pivotal role when it came to development, he added.
At a time when the attainment of the Millennium Development Goals (MDGs) was threatened, implementation of the Monterrey Consensus was particularly important, he said, and reiterated firm commitment to this “landmark agreement for development”. The Union would increase its support for good governance and rule of law by partnering with developing countries, as they tried to strengthen public financial management and encourage private sector growth. The Union also supported international cooperation on tax matters and the expansion of the Organisation for Economic Cooperation and Development (OECD) Global Forum on Transparency and Exchange of Information to include the participation of developing countries.
With respect to economic recovery, he reaffirmed the Union’s commitment to attain the official development assistance target of 0.56 per cent of gross national income by 2010 and 0.7 per cent of gross national income by 2015, and he noted that ODA from the Union increased to almost 50 billion euros in 2008. In conclusion, he said that the economic and financial crisis highlighted the need for reform of global economic governance, and he welcomed recent measures to strengthen regulation and supervision of the financial system.
MARTY NATALEGAWA (Indonesia), speaking for the Association of South-East Asian Nations (ASEAN), said a series of measures were needed to alleviate the global economic crisis and spur sustainable levels of economic growth. It was necessary to find the right time and ways to implement exit strategies from a government-stimulus driven economy, and to put in place policies and measures to prevent a recurrence of a similar crisis. For South-East Asia, today’s crisis, like the Asian financial crises of 1997 and 1998, demonstrated the urgent need to strengthen and reform the international financial architecture. The fact that the world was not in a more precarious situation was proof of the benefits of collective action.
In that context, he said the United Nations last year played a significant role when it convened the High-level Conference on the World Financial and Economic Crisis and Its Impact on Development. He expressed hope that as the severity of the crisis abated, political will to implement the Conference outcome document would not wane. The Group of Twenty (G20), which also played a critical role, must strengthen institutional links with non-members through, among other things, stronger involvement with regional groups. Reform should include the strengthening of financial regulatory framework, and enhancing governance and surveillance as well as the resources of international financial institutions, in order to ensure long-term growth and stability of the world economy.
This year, he said, the impact of the financial crisis on the economies of ASEAN countries varied, with half of them shrinking. The ASEAN economies most dependent on trade were hit the hardest. Aggregated gross domestic product for the region next year was expected to reach 4.3 per cent. The crisis had underscored the importance of building ASEAN’s regional resilience. ASEAN was doing that by improving macroeconomic cooperation and standing firm against protectionism. It set up a regional self-help financing mechanism by creating a regional pooling reserve arrangement under the $120 billion Chiang Mai Initiative Multilateralization, as well as regional mechanism to monitor, analyse and support the decision-making processes of the Initiative. ASEAN’s Joint Declaration on the Attainment of the Millennium Development Goals, adopted 1 March, outlined key areas of action.
DONNETTE CRITCHLOW ( Guyana), speaking for the Caribbean Community (CARICOM), said that the region faced a number of particular hurdles; global developments over the past year had challenged an ambitious cooperative move toward a single market and economy. Among the region’s trials were less demand for exports, rising cost of capital, less foreign investment and declines in tourism revenue and remittances. Many countries in the region suffered severe recessions with little hope of recovery before the end of 2010. “The crisis is intensifying not abating,” she said.
With no available fiscal space and some of the highest levels of indebtedness in the world, the region’s countries had no way to respond to the crisis with counter-cyclical measures, she said. It was the international community’s duty and obligation to provide sufficient liquidity, with no strings attached, to developing countries while also restructuring the debt of heavily indebted, vulnerable small economies. With regard to global economic governance, she urged the international community to continue with reforms that would allow for more equity and social justice.
To conclude, she expressed concern that during this time of particular need, the flow of aid might be significantly reduced as a result of the crisis, and she urged donor countries to uphold long-standing commitments to maintain or increase development assistance. Growing inequality threatened global security, she said, noting that it was a real paradox that, despite the unprecedented wealth in the world today, this was also a time of widespread deprivation.
JEREMY ADLER (Canada), speaking also for Australia and New Zealand, said the global financial and economic crisis clearly underscored the international community’s interdependence and he called for quick, substantial and collective responses that tackled challenges head-on, and ensured that the crisis did not further undermine socio-economic development in developing countries. It was encouraging to see that many economies had already started to recover and that prospects were for a global recovery in 2009 and moderate growth in 2010. Since the recovery was still fragile, it was necessary to stay on course. As Canada prepared to host the summit of next G20 leaders in June 2010, as well as the Group of Eight (G8), it would build on progress made to ensure a durable recovery and secure a future for sustainable and balanced growth. While managing the crisis and nurturing the early signs of recovery, it was important not to lose sight of financing for development commitments.
International financial institutions had a critical role to play in responding to the crisis, he said. The G20 had committed to making available an extra $850 billion in resources through multilateral financial institutions to support growth in emerging markets and developing countries. Canada, Australia and New Zealand were increasing their support to those institutions and to multilateral development banks. Discussions on capital needs should be supported by institutional efforts for more effective governance, a strong focus on the poorest and most vulnerable, and a clear division of labour. He supported ongoing efforts to reform and modernize international financial institutions, so that they could help members and shareholders effectively face challenges.
On commodities, he said the Secretary-General’s report noted a dramatic increase in price volatility in the last 16 months. A concerted and collective response was needed. Canada recently announced the doubling of support to sustainable agricultural development with an additional $600 million committed over three years. That was part of the $20 billion announced at the recent L’Aquila summit by the G8 and other leaders and heads of international organizations. Australia had committed $464 million over four years.
GUILHERME DE AGUIAR PATRIOTA ( Brazil) said that both developed and developing countries must increase efforts to address the economic crisis through broad-based counter-cyclical policies that would consolidate the recovery and ensure inclusive, sustained growth. Only through a jobs-intensive recovery that promoted decent work for all and established adequate social protection could its negative effects be overcome in a timely manner. He said that developing countries were still under-represented in international financial institutions, and that the international reserve system remained a source of concern. IMF and the World Bank must reflect new economic realities and better respond to the interests of developing countries.
Because of declining foreign investment, trade flows and remittances, the financing gap faced by developing countries in 2009 was estimated at between $350 billion and $635 billion and would likely remain large in coming years. There was a clear and present risk that many developing countries soon could face difficulties in rolling-over and rescheduling their external debt commitments. Developing countries must not be penalized for a situation for which they were not responsible, he said. The international community must be sensitive to the needs of developing countries, including middle income countries.
An expeditious, durable and comprehensive solution, such as the HIPC Debt Initiative and the Multilateral Debt Relief Initiative (MDRI), must be found to the external debt problem to avoid a new debt crisis, he said. The economic crisis had severely affected developed countries, but had been catastrophic for the developing world. A hundred million people were being pushed into poverty and hunger, placing the number of hungry people worldwide at more than 1 billion for the first time. With only five years to go to achieve the Millennium Development Goals, developing countries needed additional international support.
GONZALO GUTIÉRREZ REINEL ( Peru) spoke of the international financial system, external debt of developing countries, and commodities, and said that in order to overcome the current global financial crisis and prevent recurrence, it was necessary to “articulate an integrated vision” that extended beyond banking and financial regulation, and instead should focus on the revival and expansion of multilateralism.
While the United Nations needed to play a fundamental role in the reform process, he said, it was also essential to have effective feedback from “outcome mechanisms” established by the General Assembly and the Economic and Social Council to monitor the crisis. These outcomes could then be incorporated into the deliberations of the G8 and the G20, among others.
In finding a durable solution to the debt problems of low-income countries, he said, the issue of insolvency related to sovereign debt, so the development of a structural solution to prevent reoccurrence was needed. A discussion on responsible lending and borrowing also needed to be implemented. Peru, in responding to international price instability and reduced demand in world markets, was engaged in diversification in foreign markets, and called for fairer and transparent rules in multilateral and regional coordination.
JOHN SAMMIS ( United States) said that there were clear signs that the world was on the road to recovery, helped by countries’ expedient and resolute action. “Twelve months ago we discussed the very real possibility of another Great Depression; today we come together as a world that has stepped back from the brink of economic collapse,” he said. His country had taken unparalleled steps to create jobs, restore growth and repair the domestic financial system, with Congress passing a stimulus package equivalent to roughly 2 per cent of the gross domestic product this year and 2.5 per cent next year. Furthermore, the Government had sought to modernize and close existing gaps in the regulatory system.
On the global stage, leaders had taken similarly decisive measures, collectively mobilizing more than a trillion dollars toward the world’s economic recovery. Development banks for their part had increased lending targets by more than $100 billion above planned pre-crisis levels. Furthermore, the international community had made significant strides in terms of oversight, transparency, risk‑management and supervision of the international financial system. However, it would be premature to declare victory as many countries were still affected by the global recession, and he warned that States had to pull back from their fiscal stimulus packages prudently.
With respect to the Millennium Development Goals, he said it was critical to respond to the needs of the most vulnerable and he welcomed the current discussions on attaining sustainable and balanced growth. The response to the global economic and financial crisis had made it apparent that formal and informal international communication worked, and that countries had the ability to create profound change through collaboration.
LI KEXIN ( China) said reform of the international financial architecture should focus primarily on enhancing the representation and voice of developing countries. At the Pittsburgh Summit last month, the G20 leaders committed to increasing the voting power and quota share of developing nations in the World Bank and the International Monetary Fund (IMF) by at least 3 per cent and 5 per cent, respectively. He expressed hope that they would soon make good on those promises. They should also take concrete steps to increase the ratio of their staff from developing countries, especially in middle and senior management. The World Bank should put more emphasis on poverty reduction and development, increase its capital ratio, and give more funding for mid-term and long-term development in developing countries. The IMF should continue to improve its governance structure to ensure its legitimacy and representation, and create mid-term and long-term automatic quota adjusting mechanisms to reflect, in a timely way, changes in the world economic pattern.
Turning to the debt problem, he said the financial crisis had eroded the debt-servicing capacity of developing countries. In 2008, the total volume of developing countries’ external debt increased by $176 billion, to $3.8 trillion. Relieving the debt burden of developing countries was a prerequisite for them to eliminate poverty and to achieve the millennium targets. For its part, China, within the framework of South-South cooperation, had assisted more than 120 countries, cancelled debts for 49 heavily indebted poor countries and least-developed countries, and extended zero-tariff treatment to commodities from more than 40 least developed countries. On commodities, he said the international community should reinforce policy coordination as well as financial monitoring and control, and combat market speculation, avoid acute fluctuations in commodity prices and set an early date for a fair, equitable international order for commodity trade.
TARIQ AL-FAYEZ ( Saudi Arabia) said his country paid special attention to issues relating to international trade, as it was a powerful medium of development in developing countries. Concerted international and regional efforts were therefore important, to achieve the appropriate atmosphere to face the global economic and financial challenges. Such efforts were also important to enable developing countries to maximize the advancement of their economies by improving economic systems and financial markets, and to open the markets for all products of developing countries.
He said the world was witnessing speedy and complicated economic variables. All States, therefore, should act in genuine cooperation, under the umbrella of the United Nations, to create a healthy investment environment that built balanced economic relations between developing and advanced countries.
A cursory glance to the prevailing economic conditions in the world showed how grave the situation was, he added, and the only way to avoid those dangerous consequences was by achieving transparency in economic transactions and the appropriate investment environment for all States.
Saudi Arabia attached great importance to the adequate liberalization of international trade, he continued. It had exerted significant efforts to provide an investing environment that attracted capital, and which reached out to the economies of developing countries and cooperated with them. For example, the Saudi Fund for Development administered a number of grants provided by his Government, to help some countries with development projects, the fight against poverty, and other development issues. In addition, Saudi Arabia contributed to the initiatives administered by the International Monetary Fund (IMF) related to providing debt reduction for poor countries.
SAIFUDDIN SOZ ( India) noted that developing countries, where the international financial crisis did not originate, had been the ones hit hardest by the crisis. Although stimulus measures to counteract impact on developing countries were beginning to show some success, he urged that such efforts not be withdrawn prematurely. He also called for international assistance to developing countries that were not in a position to implement counter-cyclical measures, which were crucial to economic recovery. India’s own economy had shown greater resilience and he had hopes that it would “resume its robust grown shortly.”
It was encouraging to see the total external debt of developing countries as a share of their gross national income decrease from 25 per cent to 21.8 per cent in 2008. However, this figure hid disparities and the situation had worsened for some countries. Special measures were needed to help such countries. There was also a need for more transparent and objective debt sustainability analysis frameworks. Such framework must also distinguish between solvency and liquidity problems. He said the crisis underscored the need for not just international governance structure reform, but deeper change. He called for an initial 7 per cent transfer in quotas at the International Monetary Fund (IMF) to developing countries.
KENJI MURAKAMI ( Japan) said the world financial crisis had provided the opportunity to think about how to develop a more robust and stable international financial system, to prevent a crisis of such magnitude from happening again. Building on the achievements of the Doha Review Conference and the High Level Conference on the World Financial and Economic Crisis, the international community must continue to work together and ensure that recovery also took place on a global level.
Similarly, deliberations at the G8 and G20 summit meetings, and at the United Nations, should not be considered to be mutually exclusive, but rather as mutually reinforcing. The “human faces” behind the crisis should also be kept in sight, with the adoption of “people-centred” measures to protect and empower individuals and communities. For its part, he said, Japan was making every effort to bring the economy back to solid recovery, as the priority of fiscal expenses was shifted from public investments to human capital development such as child rearing and education. It would also foster new industries that contributed to a low carbon society.
He said Japan welcomed the swift response of the International Monetary Fund (IMF) and the World Bank to the crisis, and welcomed the G20’s promise to treble the resources to a “renewed and expanded IMF New Arrangements to Borrow.” The next quota review process of the IMF should be accelerated, so that quota shares appropriately reflected the current global economic reality. He also said the crisis carried the possibility of undoing years of hard work and gains made in relation to the debt of developing countries, and it was important to remain vigilant about debt sustainability and guard against a new debt crisis. Sustainable debt management was thus more important than ever.
WU YE-MIN ( Singapore) said the G20 had become a “driver of change” and its ensuing swift and decisive actions after the Washington and London Summits had helped avert an economic depression. Nonetheless, she called for better coordination and cooperation, especially between the United Nations and the G20.
To that end, she offered three possibilities. The first was the utilization of a “variable geometry” in the configuration of its membership and decision-making process. Next was a greater consultation between the G20 and total Membership of the United Nations, to take place before and after each G20 Summit. Finally, the United Nations could consider some of the decisions of the G20 through more thorough debate. She said there was a need for greater transparency, representation and legitimacy as the G20 evolved further; by implementing these three approaches those goals would be attainable.
DMITRY I. MAKSIMYCHEV ( Russian Federation) said that numerous calls for reform and improvement of the world financial architecture had long remained on paper, while many sound recommendations, agreed upon inter alia within the United Nations, had yet to be implemented. As a result, the global regulatory system had proved unable to prevent financial shocks which jeopardized the achievement of international development goals that would affect millions of people. Further inaction was unacceptable, he said. The basic benchmarks for multilateral efforts towards the recovery of the international financial system had been set forth, in particular, in the Doha Declaration on Financing for Development, the decision of the United Nations Conference on the world financial and economic crisis, and its impact on development and final communiqués of the G20 summits.
Based on those agreements, he said, the Second Committee should focus on developing common approaches to specific reform of the international financial system. Adjustment mechanisms must be found to deal with global financial and economic imbalances, taking into account the recommendations in the Secretary-General’s report (document A/64/178). New international financial arrangements should incorporate an automatic stabilization system, facilitated by an international agreement to promote debt instruments denominated in the currencies of developing countries, with increased lending to developing countries in their national currencies. A wider use of “currency swap” operations could also reduce global imbalances, as would expanding the scope of reserve currencies, including regional ones.
He said all Member States of the United Nations should support G20 reform initiatives. There should be a comprehensive and equitable solution to the external debt problem, and he noted that, among all donors, Russia’s contribution to the settlement of foreign debt was the largest against its gross domestic product. He also advocated the establishment of predictable and stable commodity markets. The Russian Federation had participated in the implementation of projects in developing countries, through the Common Fund for Commodities, covering every phase of production. Russia had made a tangible contribution to ensuring global food security as a member of the International Grains Council since 2007.
NOR-EDDINE BENFREHA (Algeria) said that a failure of macroeconomic management had led to the global economic and financial crisis, and he encouraged countries to focus on global economic policy as the current system of governance was not suitable to the challenges of today. The magnitude of the crisis called for an unprecedented level of cooperation, and Algeria encouraged the development of sound policy response to include equitable representation in the Bretton Woods Institutions for developing countries.
Furthermore, he said, international financial institutions should support socio-economic development by providing short- and long-term liquidity to developing countries. He said Algeria believed that only a constructive approach would generate healthy growth and real development. With respect to the Millennium Development Goals, he said the food and economic crises had hampered the realization of the targets, especially among developing African countries; countries should stand by the commitments of the 2005 Gleneagles Summit.
He said the international community should provide new and additional financial support, apply full debt relief and improve access to credits and markets for African countries in order to help them balance their budgets. Algeria believed that in the framework of the United Nations agenda, economic and social development was a key objective.
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