|Department of Public Information • News and Media Division • New York|
Sixty-fifth General Assembly
8th & 9th Meetings (AM & PM)
Call Sounded for Mechanism to Ensure Debt Sustainability, as Second Committee
Begins Consideration of Macroeconomic Policy Questions
With developing countries having unfairly borne the brunt of the global economic and financial crisis while experiencing an effective worsening of their vulnerabilities, the international community must consider establishing a mechanism to help them overcome debt distress and achieve debt sustainability, several representatives stressed today, as the Second Committee (Economic and Financial) began its consideration of macroeconomic policy questions.
Yemen’s representative, speaking of behalf of the “Group of 77” developing countries and China, said the vulnerability of developing countries to exogenous shocks affected their capacity to continue servicing their debt obligations, regardless of past good practices. As of March 2009, the debt levels of almost 30 countries had exceeded 60 per cent of gross domestic product (GDP), he pointed out. Moreover, the situation of a number of completion-point Heavily Indebted Poor Countries (HIPCs) remained highly vulnerable to external shocks, while middle- and low-income countries not considered HIPCs faced long-standing problems that must be addressed, he said.
“Without international support, developing countries may face another debt crisis in the years to come,” he warned, emphasizing that a reduction in debt-service payments was not sufficient on its own to avoid the risk of debt distress. The establishment of a debt-resolution mechanism would help guarantee a speedy and fair resolution of the sovereign debt crisis, he said, noting that the Secretary-General’s report on external debt sustainability and development emphasized the need for international discussion on the design of such a mechanism.
Introducing that report, the Head of the Debt and Development Finance Branch in the Division on Globalization and Development Strategies of the United Nations Conference on Trade and Development (UNCTAD) stressed the importance of considering the debt crisis. “Debt sustainability of developing countries is not a non-issue. It should remain as an important item on the international agenda.”
Citing the latest World Bank/International Monetary Fund (IMF) report on the status of the HIPC Debt Initiative, the Multilateral Debt Relief Initiative and other documents, she noted that, out of 71 low-income countries, 7 were in debt distress, 13 faced a high risk of debt distress and 22 were at moderate risk. In that regard, crisis-mitigation policies could contribute greatly towards realization of the Millennium Development Goals, she said, adding: “Crisis prevention should not be forgotten during good times.”
Presenting the Secretary-General’s report on the international financial system and development was the Director of the Financing for Development Office in the Department of Economic and Social Affairs.
As the discussion continued, Nepal’s representative, speaking on behalf of the Group of Least Developed Countries, added that the average debt ratio of such countries was 50 per cent higher than the overall developing-country average. Least developed countries with balance-of-payment problems must have the right to resort to debt standstills, he said, calling for full cancellation of their multilateral and bilateral debt to private and public creditors. Furthermore, he called on the Bretton Woods institutions to extend the HIPC Debt Initiative to address the debt of least developed countries.
Expanding on that point, India’s representative called for a move towards a debt structure that would be linked to a country’s ability to pay. The international community should work to design policies that would promote safe debt instruments, reduce destabilizing capital flows and limit solvency crises by promoting responsible sovereign borrowing, he added.
Belgium’s representative, speaking on behalf of the European Union, said the regional bloc would continue supporting existing debt-relief initiatives, particularly the HIPC and Multilateral Debt Relief Initiative. Macroeconomic policy buffers built before the crisis had helped to shield middle- and low-income countries from short-term impacts, but it was essential for developing countries to strengthen their buffers at a pace consistent with supporting the current economic recovery, he added.
Also speaking today were representatives of Indonesia (on behalf of the Association of Southeast Asian Nations, ASEAN), Malawi (on behalf of the African Group), Jamaica (on behalf of the Caribbean Community, CARICOM), China, Brazil, Switzerland, Russian Federation, Singapore, Thailand, Iran, Ethiopia, Peru, Malaysia, Algeria, Bangladesh, Nigeria, Jordan, Pakistan, Kazakhstan, Dominican Republic, Sudan, Saudi Arabia andLibya.
A senior official of the International Labour Organization (ILO) also delivered a statement.
The Second Committee will meet again at 10 a.m. on Wednesday, 13 October, to begin its consideration of operational activities for development.
The Second Committee (Economic and Financial) met this morning to consider macroeconomic policy questions, an agenda item covering the international financial system and development, as well as external debt sustainability and development.
Before the Committee was the Secretary-General’s report on the international financial system and development (document A/65/189), which reviews recent trends in the net transfer of financial resources to developing countries and current efforts to reform the international monetary and financial system and architecture. Urgent challenges have arisen from the world financial and economic crisis and its impact on development, affecting key areas, including financial regulation and supervision, multilateral surveillance, macroeconomic policy coordination, global financial safety nets, the international reserve system and governance reform in the Bretton Woods institutions.
According to the report, a notable decrease in the level of net financial transfers of developing countries in 2009 reflected a disorderly unwinding of macroeconomic balances. With persistent structural problems underlying the imbalances, the current path of economic recovery is expected to result in an increase in net-outward transfers from developing countries. The evolving regulatory framework, therefore, must take due account of systemic risk and the overall stability of the financial system. Along with country-level analysis, multilateral surveillance should provide greater coverage of macrofinancial issues, capital flows and systemic risks, including closer examination of members and institutions critical for global stability.
The report concludes that there is need for close coordination of macroeconomic policy decisions with other areas of global governance; for an appropriate balance and effective coordinating mechanisms among multilateral, regional and bilateral arrangements; and for and self-insurance. Ongoing reform of the governance structures of the international financial institutions offers an opportunity to make important progress on such issues, but it must be backed by strong political commitment on the part of Member States.
Also before the Committee was the Secretary-General’s report on external debt sustainability and development (document A/65/155), which places a special focus on the impact of the global financial and economic crisis on the external debt sustainability of developing countries. It also discusses policies aimed at reducing the prevalence and cost of debt crises, describes progress on debt relief and official development assistance (ODA), and analyses new multilateral financing trends and methods.
According to the report, the resilience shown by several developing countries after the crisis — though a positive surprise — risked being short-lived if those countries exhausted their limited policy space. Least developed countries and small, vulnerable low- and middle-income economies were particularly at risk of running out of fiscal space. The international community should therefore continue to support them with grants, increased access to concessionary financing and, when necessary, debt relief, it states, adding that budgetary problems in advanced economies should not be used as an excuse for cutting foreign aid.
Policies to mitigate the prevalence and cost of debt crises could yield large pay-offs in terms of poverty reduction, while playing a key role in helping to achieve the Millennium Development Goals, the report says. Such policies involve the promotion of newer and safer debt instruments, regulation to reduce destabilizing capital flows, and the creation of an effective international lender of last resort, among other measures. A review of existing policies and frameworks, such as the Debt Sustainability Framework, will also be needed.
The report also identifies several easy-to-implement actions to reform the international financial architecture that could have a positive impact on systemic stability, including data collection and reporting. It states that the official sector should intensify efforts to collect and disseminate cross-country data on the level and composition of domestic debt by currency and maturity. Moreover, donors should increase their support of technical cooperation programmes aimed at increasing the capacity of debt-management offices to report timely, comprehensive and accurate debt statistics.
Also before the Committee was a letter dated 27 September from the Permanent Representative of Singapore addressed to the Secretary-General (document A/65/395), which transmits a document entitled “Global Governance Group Inputs to the G-20 Working Group on Development”.
Introduction of Reports
ALEXANDER TREPELKOV, Director, Financing for Development Office, Department of Economic and Social Affairs, presented the report on the international financial system and development, noting that net private capital flows to developing countries and those with economies in transition had fallen sharply in the wake of the crisis, largely due to declining foreign direct investment (FDI). While total net ODA from member countries of the Organisation for Economic Cooperation and Development’s Development Assistance Committee (OECD/DAC) had risen slightly in real terms from 2008 to 2009, to reach $119.6 billion, net ODA for 2010 was projected to fall short of existing internationally agreed aid commitments. The shortfall would be particularly glaring in assistance to Africa, estimated to be $11 billion as compared to the initial $25 billion pledged at the G-8 Summit at Gleneagles in 2005, he said.
Turning to efforts to strengthen the international financial architecture, he said progress had been made in governance-reform efforts to enhance the legitimacy and effectiveness of international financial institutions. The crisis had shown that prudent regulation alone could not ensure financial stability. Monetary and fiscal policies were also needed to help mitigate the build-up of financial imbalances. Multilateral surveillance remained central to crisis-prevention efforts, he said, welcoming the substitution of the G-20 for the G-8 as the major forum for global discussions on international economic cooperation. However, several Member States were still excluded, and the G-20 process must therefore develop greater legitimacy, including by forging stronger institutional links with non-G-20 members. Moreover, close coordination of macroeconomic policy decisions with other areas of global governance was required, and the United Nations had a prominent role to play in that regard, he said.
He said much of the debate surrounding the international monetary system centred on the sustainability of an international monetary regime in which the United States dollar was a primary reserve asset. Many believed that the current international reserve system had contributed to the absence of a smooth adjustment in imbalances, volatile capital flows and lopsided provision of liquidity. There was a need for reform, thus the importance of continuing deliberations on the feasibility of moving towards a more balanced and stable global reserve system, including an enhanced role for International Monetary Fund (IMF) Special Drawing Rights. Global economic governance must be addressed in order to promote change in the international financial architecture, he emphasized. International financial institutions needed a more representative, responsive and accountable governance system, and ongoing governance reform of the Bretton Woods institutions offered an opportunity to make further progress on critical issues. To turn that opportunity into reality, strong political commitment by Member States was crucial, he said.
LI YUEFEN, Head of the Debt and Development Finance Branch, Division on Globalization and Development Strategies, United Nations Conference on Trade and Development (UNCTAD), presented the report on external debt sustainability and development (document A/65/155), saying it continued to alert the world to the negative impact of the crisis on the debt sustainability of developing countries, and to the consequent reversal of their progress towards realizing the Millennium Development Goals. It was important to disaggregate developing countries since some of them had shown resilience to the crisis, while others had exhibited structural weakness, she said.
While macroeconomic conditions were still favourable in many African countries, not all of them were recovering from the crisis, she continued, pointing out that some small economies, although classified as middle income, lacked the capacity to absorb external shocks and had been pushed into debt-servicing difficulties. Some Caribbean Community (CARICOM) countries had fallen into that category, she said, recalling that recent analysis by IMF and the World Bank suggested that several low-income countries could move into higher debt-risk categories. Several small but vulnerable middle-income States and some economies in transition already had debt-servicing difficulties.
Debt ratios for countries that had reached the post-completion point to qualify for the Heavily Indebted Poor Countries (HIPC) Debt Initiative had increased on average in 2008 and 2009, she said. The latest World Bank/IMF report on the status of the HIPC Debt Initiative, the Multilateral Debt Relief Initiative and other documents noted that, out of 71 low-income countries, 7 were in debt distress, 13 faced a high risk of debt distress and 22 were at moderate risk. Seven out of thirty post-completion point HIPC countries were at high risk of debt distress, while four out of six decision-point HIPC countries were in debt distress. “It is of great importance to remind ourselves that debt sustainability of developing countries is not a non-issue,” she stressed. “It should remain as an important item on the international agenda.”
She went on to note that IMF had already decided not to extend further the sunset clause on the eligibility of highly indebted countries, which meant that the HIPC Debt Initiative window would not be open to completion-point countries falling back into the debt trap or new low-income countries facing debt distress. “The international community must avoid complacency and remain vigilant in monitoring the debt situation and coping with increasing debt vulnerabilities, and take steps to ensure that grant and concessionary financing is readily available,” she said. In that context, the steps to enhance IMF’s lending toolkit, increase flexibility and further strengthen financing facilities available to low-income countries were commendable, as was the creation of the Post-Catastrophe Debt Relief Trust, she added.
Describing the current report as forward-looking, she said a major segment was devoted to the means to mitigate the cost and reduce the prevalence of debt crises, which tended to be costly and disruptive, particularly for the poor and other vulnerable social groups. Crisis-mitigation policies could yield large payoffs in terms of poverty reduction and contribute greatly towards realization of the Millennium Goals. “Crisis prevention should not be forgotten during good times,” she said, calling for the promotion of newer, safer debt instruments; regulation to reduce destabilizing capital flows; and guidelines to limit solvency crises by promoting responsible sovereign borrowing and lending. The outcome document from the 2009 United Nations Conference on the World Financial and Economic Crisis and Its Impact on Development called for exploring enhanced approaches to restructuring sovereign debt, she recalled, adding that such a process should involve all important stakeholders.
The representative of Brazil commented that it was still very important for the international community to ensure the sustainability of the continuing economic recovery. Welcoming the discussion on short-term capital volatility and its effects in developing countries, he called for both the Department of Economic and Social Affairs and UNCTAD to incorporate the mitigation of those effects as a critical element of their work.
KHALED HUSSEIN ALYEMANY (Yemen), speaking on behalf of the “Group of 77” developing countries and China, said the developing world had still not recovered from the social and economic effects of the global financial crisis. Having borne the brunt in terms of human and social development, they lacked the fiscal space required to implement the necessary counter-cyclical measures to ensure sustained recovery. The outcome of the United Nations Conference on the World Financial and Economic Crisis and Its Impact on Development recognized that many developing countries faced severe foreign-exchange constraints, and called for a mechanism to ensure the provision of adequate resources, especially to least developed countries, he said.
Citing World Bank estimates, he said developing countries had faced an external financing gap of approximately $350 billion in 2009. Many had been forced to curb domestic demand, draw down on their international reserves and rely heavily on borrowing from international markets and financial institutions. Against such a backdrop, the Group of 77 urged international development and financial institutions, particularly the World Bank, to refrain from exercising non-technical considerations and conditionality, he said, adding that short-term liquidity and long-term development finance and grants must be made available to developing countries, in order to respond adequately to the crisis and address its long-term effects.
Pointing to the failure of multilateral surveillance, a lack of early warning systems, overconfidence and overreliance on market self-regulation that had resulted in serious deficiencies in the global financial and economic architecture, he said the unfolding crisis had highlighted the urgent need for substantive and comprehensive reform of the international financial system. Regarding the Bretton Woods institutions, the Group of 77 stressed the importance of ambitious and expeditious reform, based on the full and fair representation of developing countries. As for national debt, developing countries were vulnerable to exogenous shocks, he said, adding that their vulnerability affected their capacity to continue servicing their debt obligations, regardless of past good practices.
As of March 2009, the debt levels of almost 30 countries had exceeded 60 per cent of gross domestic product (GDP), he noted, stressing that a reduction in debt-service payments was not sufficient on its own to avoid the risk of debt distress. The situation of a number of completion-point HIPCs remained highly vulnerable to external shocks, while middle- and low-income countries that were not considered HIPCs faced long-standing problems that must be addressed. “Without international support, developing countries may face another debt crisis in the years to come,” he warned.
The developing world, including low- and middle-income countries facing foreign-exchange shortages due to the crisis, should not be denied their right to resort to debt standstills in mitigating adverse effects, he said, adding that it was clear that sovereign defaults were bound to occur in the absence of a more coherent international financial system. The international community must, therefore, explore the possibility of establishing a debt-resolution mechanism to guarantee a speedy and fair resolution of the sovereign debt crisis, he said, noting that the Secretary-General’s report emphasized the need for international discussion on the design of such a mechanism. Moreover, the mandate to do so was reaffirmed in General Assembly resolution 64/191, he added.
CHRISTOPHE DE BASSOMPIERRE (Belgium), speaking on behalf of the European Union, said the impacts of the multiple global crises of food and energy insecurity, climate change and biodiversity loss had been strongly felt worldwide. The European Union fully supported global initiatives and actions to deal with them, and had played its part in taking timely, targeted and coordinated actions to support developing countries. Persisting crises had revealed the need for better coordination and greater policy coherence for development at the global, regional and national levels. In that respect, the recent high-level meeting on the Millennium Development Goals had demonstrated the “vital role of a strong and efficient United Nations in building consensus on global issues”, he said.
There had been broad consensus on the characterization of a modest global recovery, with some pockets of strength, especially in Asian countries, but a number of remaining uncertainties required sustained attention, he said. The European Union had a consistent and comprehensive economic policy strategy in place, and had taken determined action to safeguard financial stability in the eurozone. The financial crisis had also demonstrated the need to improve global economic governance and the functioning of the international financial system, he said, noting that the United Nations and international financial institutions had complementary mandates, and encouraging them to coordinate more effectively.
Welcoming the role of the G-20 in implementing the global development agenda, including the Millennium Goals, he said the European Union anticipated that it would bring significant added value to global development efforts. The G‑20 Framework for Growth Initiative, aimed at fostering strong, sustainable and balanced world growth, was favourable to developing countries, many of which were dependent on global demand, he said, emphasizing also the importance of strengthening cooperation between the G-20 and the United Nations.
Turning to debt sustainability, he said the European Union would continue supporting existing debt-relief initiatives, particularly the HIPC Debt Initiative and the Multilateral Debt Relief Initiative. Macroeconomic policy buffers built before the crisis had helped to shield middle- and low-income countries from short-term impacts, but it was essential that developing countries strengthen their buffers at a pace consistent with supporting the current economic recovery. The international community’s focus should now be on rebalancing global growth — a necessary condition for creating fiscal policy space in both developed and developing countries. “This must be a global effort,” he stressed.
DEWI SAVITRI WAHAB ( Indonesia), speaking on behalf of the Association of Southeast Asian Nations (ASEAN), while associating herself with the Group of 77 and China, said that amid the delicate recovery from the financial crisis, ASEAN needed to focus on development targets. The Second Committee’s work should help ensure action following the recent reaffirmation by world leaders of the Millennium Goals. The Committee must set the conditions for promoting development through opening markets, improving governance and boosting public spending in pursuit of the Goals. There must also be closer monitoring of implementation commitments, she said.
ASEAN remained committed to the Goals, particularly in areas of sustainable development, technology transfer, education and collaboration with United Nations agencies, she said. However, the Organization needed to work more with other institutions, such as the G-20, to foster better global economic governance by strengthening financial regulation and macroeconomic policy, and improving the global financial safety net and reserve system. To achieve strong and sustained global recovery and attain the Millennium Goals, it was urgent to conclude the Doha Round of World Trade Organization trade negotiations and grant developing countries greater access to markets. In that regard, she supported early accession to the World Trade Organization for the Lao People’s Democratic Republic.
She said ASEAN was expected to achieve 5 per cent growth in real GDP, which could be attributed partly to stimulus packages in the wake of the financial crisis, but was due mainly to regional trade and investment as well as strong growth led by China and India. The regional body was pushing towards a single market and production base, and also aimed to integrate its capital markets by 2015. With free trade agreements around Asia, ASEAN would remain open to global markets, she said, pointing out that too many people in South-East Asia lived in poverty and required international assistance. Regional integration was, at its heart, a project to support all countries in the region at their various development stages.
SHANKER DAS BAIRAGI (Nepal), speaking on behalf of the Group of Least Developed Countries, said that their declining income from trade, tourism, remittances and foreign investment, as a result of the economic and financial crisis and coupled with unmet ODA commitments, had significantly widened the developing world’s external financing gap to $350 billion in 2009, and the gap was even greater in least developed countries. Allocating 0.15 per cent to 0.2 per cent of GDP to foreign aid would not be enough to address those countries’ high vulnerability, structural constraints and growing numbers of poor people. The spectre of a debt crisis loomed large due to increased borrowing to cover the financing gap, he said, citing a recent World Bank publication which stated that developing countries’ external debt surpassed $3.7 trillion.
UNCTAD estimated that in the third quarter of 2009, the average external debt of least developed countries had reached 52 per cent of GDP, he said. The World Bank estimated that the number of people living in poverty and suffering from hunger in least developed countries — presently 400 million, almost half the total population — would increase by a further 64 million because of the crisis. It was time to address the entrenched global imbalances and ensure short-term liquidity to overcome the severe socio-economic costs of the crisis, while also enhancing external resources for long-term development financing.
He called for greater involvement by developing countries, including least developed countries, in financial regulation and the supervision of international bodies responsible for setting norms and standards, including the Financial Stability Board and the Basel Committee on Banking Supervision. Financial institutions must implement and supervise stringent regulation to ensure maximum stability in exchange-rate systems, limit excessive short-term capital flows and curb illicit financial transactions. All relevant multilateral development banks must have substantial capital to finance regular development activities in normal situations, while providing liquidity in times of crisis, he said.
Globalization must benefit everyone, and least developed and other vulnerable countries must not be marginalized, he emphasized, pointing out that the average debt ratio of least developed countries was 50 per cent higher than the overall average for developing countries. Least developed countries with balance-of-payment problems must have the right to resort to debt standstills, he said, calling for the full cancellation of the multilateral and bilateral debt owed by least developed countries to private and public creditors. He urged the Bretton Woods institutions to extend the HIPC Debt Initiative in order to address their debt. The Group of Least Developed Countries also called for the creation of an independent debt arbitration system, he added.
MIKE MWANYULA (Malawi), speaking on behalf of the African Group and associating himself with the Group of 77 and China, said the international financial system, external debt sustainability and international trade were of great importance to developing countries, and the African continent in particular, given their impact on livelihoods. Sustainable external debt and fair equitable trade could easily reverse the negative impact of the world financial crisis on developing countries, he said, noting that it had particularly affected developing countries with limited production capacity and narrow export bases, frustrating their efforts to achieve development initiatives, including the Millennium Goals.
Most countries required international assistance to stop their currencies from falling because their own reserves were to narrow, he said. Vigorous steps were needed on ODA and on enhancing debt sustainability, trade and participation by developing countries in global economic decision-making processes. It was worrying to note that, out of the $25 billion increase in ODA pledged in 2005, only $11 billion had been delivered, he said, calling for the attachment of such commitments by developed countries to clear time lines and targets. The African Group also called for the establishment of an intergovernmental mechanism to follow up on development commitments.
Significant portions of development assistance had been provided in the form of debt relief, implying that the level of real resources available to developing countries was not as significant as total figures might indicate, he said. For that reason, African countries preferred that debt relief and assistance to address climate change be classified as additional commitments. However, it was imperative to enhance debt-relief initiatives for all low-income countries. The role of trade was also indispensable for development, he said, urging developed countries to show the political will to conclude the stalled Doha Round. The financial crisis and efforts to address it should not lead to Africa’s further marginalization, he said.
RAYMOND WOLFE (Jamaica), speaking on behalf of CARICOM, underscored the need to move towards a transparent, inclusive, well-coordinated global economic governance system that would reflect global changes since the creation of the Bretton Woods institutions. The prevailing global economic situation had reversed development gains in several developing countries and put others at risk of failing to realize the Millennium Development Goals. Despite some signs of recovery, progress to date had been fragile and uneven. Small developing Caribbean countries still needed support to guard against the potentially long-lasting negative effects of the crisis on their production, economic stability and development. Since small CARICOM countries had borne the brunt of the fallout from the global crisis, they deserved a voice in global economic decision-making, he stressed.
Hailing the G-20’s efforts to address the crisis through regulatory reform and more resources, he noted, however, that its perspective was limited, and urged the Group to engage with a wider cross-section of developing countries, including CARICOM members, by ensuring they had appropriate representation at G-20 summits. Long vulnerable to external shocks due to their open economies, CARICOM members had been severely affected by the crisis, he said, pointing out that significant declines in tourism earnings and remittances, coupled with the steep decline in commodity prices and the subsequent rise in unemployment, had exacerbated the fragility of their economies. He underscored the importance of urgently renewing commitments to financing for development.
Several CARICOM countries were among the world’s most highly indebted countries, he continued, noting that most of the region’s members were categorized as middle-income countries, which limited their access to concessionary financing and debt relief. Middle-income CARICOM members continued to struggle with high debt-to-GDP ratios, averaging more than 100 per cent, in addition to socio-economic inequalities, persistently high poverty and dependence on commodity exports. A more systematic approach was needed to give them greater access to concessionary financing, and for international financial institutions to adjust their approach to heavily indebted middle-income countries by providing them with debt relief as well as grants and loans on concessionary terms not generally available to them. He called for recognition of those countries’ special needs as a group of small, vulnerable, highly indebted middle-income countries.
DONG ZHIHUA ( China), associating herself with the Group of 77, said the basis for global economic recovery was not solid, and the process was uneven and beset by uncertainties. Strengthening the global economy would require the creation of a new international financial order that was fair, equitable and inclusive. Outlining areas that would help stimulate reform, she said IMF should fulfil its commitment made at the 2009 Pittsburgh Summit of the G-20 to shift at least 5 per cent of quotas from developed countries to emerging markets, while protecting the voting power of its poor members.
She said the Fund should also enhance its ability to keep a close watch over macroeconomic policies and enhance the monitoring of financial markets and cross-border capital flows. She also called for reform of the World Bank, including voting parity, and expressed support for the increased voting power of developing countries in both the International Finance Corporation and the International Development Association. China also supported increasing the resources of the World Bank and multilateral development banks, from which developing countries should be the first to benefit, she said.
Regarding the global debt crisis, she noted that the total volume of developing-country external debt had increased by 8 per cent to reach 3.7 trillion in 2009. To reduce the debt burden of the least developed countries, the developed world should fulfil its ODA commitments and reduce tariffs to facilitate exports from developing countries. In addition, financial institutions should increase technical assistance to the developing world countries. For its part, the Chinese Government had cancelled debt amounting to ¥25.6 billion owed by 50 heavily indebted poor countries and least developed countries, and would also cancel debts associated with outstanding governmental interest-free loans, which would mature in 2010. Furthermore, China would strengthen and improve its foreign assistance, work to promote the economic development and improvement of people’s lives in developing countries, and contribute to the realization of the Millennium Goals by 2015.
JOÃO LUCAS QUENTAL NOVAES DE ALMEIDA ( Brazil), associating himself with the Group of 77 and the Rio Group, said continued fiscal weakness in several developing countries was a major area of concern for the world economy. In some cases, it would be necessary to promote short-term fiscal consolidation to avoid market instability. As a result of the expansionary monetary policy adopted by developed countries, many developing countries were now faced with a surge in capital flows, which had caused excessive growth in credit and demand, in addition to currency appreciation and current account imbalances. There was need for stricter prudential measures, and the international community must examine measures to avoid short-term capital volatility and its effects on developing countries.
An estimated financing gap of $315 billion for developing countries in 2010 would most likely remain large for the next few years, he said, adding that many of those countries could face difficulties in rescheduling their external debt commitments. Developing countries should not be penalized for a situation for which they were not responsible, he stressed, calling for short-term liquidity and long-term development finance and grants to be made available as a priority. It was clear that a comprehensive and durable solution to the external debt crisis was needed, notably with regard to the establishment of a debt workout mechanism. Under the current economic circumstances, collective action was necessary to avoid “beggar-thy-neighbour policies and competitive devaluations”, he said.
MARCO GIUSEPPE ROSSI ( Switzerland) said that sustainable development, particularly in the areas of climate stability, biological diversity and soil fertility, were the fundamental conditions necessary for global security and the fight against poverty. Priority should be given to creating sustainable models of production and consumption that would enable progress from the economic, social and ecological perspectives, in addition to macroeconomic policies that would promote the shift to a green and equitable economy. Development required a transparent, efficient, participative and democratic global partnership on the part of both donors and partner countries, he said, stressing that each country should generate domestic revenues in order to attract investment while providing a framework for the promotion of financial stability and economic growth.
Improved coordination between the agendas of the G-20, the international financial institutions and the work of the United Nations was also necessary to ensure global financial stability, he said. To that end, Switzerland had participated in the Global Governance Group (3G) seeking to strengthen the world body’s role in global governance, and advocated for more systematic engagement between the G-20 and non-G-20 members. The private sector also played a key role in providing innovative funding. In closing, he said a rapid and ambitious conclusion to the Doha Round would significantly strengthen the multilateral, rule-based trading system of the World Trade Organization, on which developing countries relied for economic development.
ALEXANDER S. ALIMOV ( Russian Federation) said that among the key priorities for his country’s Government were improving the efficiency of global regulatory institutions, creating a diversified system of reserve currencies and financial centres, developing an effective risk-management system and providing incentives for rational market behaviour. Monetary policy must promote stable and sound economic growth, with an effort to fight inflation. Enhancing accessibility of bank loans for the real sector economy through lower interest rates and extended credit was also important, he noted, adding that a balance must be struck between efforts to reduce inflation, ensuring growth and countering systemic risks associated with excessive debt burdens. The creation of a deposit-insurance system was essential, as were efforts to rebuff the possible penetration of “dirty money” into the banking sector.
The Russian financial system had strengthened, he said, pointing to a total of $1 trillion in assets at the end of 2009, despite the global crisis. Moreover, the public financial market was developing in Moscow, ranking the Russian capital among the world’s top 10 markets for derivatives. By year-end, the Government would adopt legislation on consolidated financial reporting, regulation of affiliated entities and a national payments system, he said. Once complete, the Russian financial centre would help stabilize regional financial markets and strengthen the rouble’s potential as a global-reserve currency. An equitable solution must be found to the external debt problems of developing nations, which risked a sovereign debt crisis, he said, calling for discussion of measures to ensure debt sustainability, notably through better external corporate debt monitoring. The Russian Federation was ready to discuss innovative approaches on the basis of existing principles and mechanisms, he said.
WU YE-MIN ( Singapore) said that in order for the United Nations to fulfil its role in international finance, all Member States must commit to its processes. The Organization gave small- and medium-sized States a level playing field and a platform to participate in discussions that could affect them. Since large States had the option of playing in other fields, they must remember their status as Member States of the United Nations when participating in other forums, such as the G-20, she said, adding that decisions made in such forums should seek to strengthen the world body, not undermine it. Emphasizing the need to equip the United Nations and its development system with the necessary resources and capabilities, she said that without adequate funding and trained staff, the Organization would not be able to respond to global crises and other financial and economic situations in a timely, comprehensive manner.
Any delay in reaching agreement on a response to the global financial and economic crisis could result in billions of dollars lost, millions of people left in poverty and the further erosion of hard-won development gains, she said. The United Nations working methods affected the Organization’s ability to develop effective, timely responses to the crisis, she said, emphasizing that the Organization’s decisions must have some “bite”, with Member States seeking feasible and pragmatic solutions to the crisis in all resolutions and declarations. It was also important to reconsider the practice of basing agreement on the “lowest common denominator”, since such tepid agreements would not suffice in addressing major financial and economic issues. Singapore called for flexibility in negotiations in order to reach practical, substantive agreements. When discussing proposals, Member States should focus on how they could be implemented, by whom and how to ensure implementation.
JIRANUT PITAKANNOP (Thailand), associating herself with the Group of 77 and China, said the recent economic crises reminded the world that growth must be balanced, inclusive, innovative and green in order to be sustainable. Imbalances in the world economic system had led to the global economic downturn, and countries that were overdependent on certain commodity exports were vulnerable to fluctuations in global demand and competition. It was “depressingly clear” in that regard that developed countries must rethink their reliance on the international trading system, she said, emphasizing the importance of further developing regional export markets.
She went on to stress that fiscal measures must be efficiently designed to jumpstart private sector activity. In the medium and long term, Thailand agreed with the Secretary-General on the need for greater Government involvement in industrial development policies, including by providing infrastructure, investing in human capital, promoting small- and medium-sized enterprises and facilitating access to credit. To prevent further economic harm to the helpless, greater investment was needed in education and human resources development, among others. It was equally important for developed countries that had graduated from low value-added production and commodity exports to focus on fostering innovation and creativity so as to move up the value chain, she said.
MOHAMMAD HASSANI NEJAD PIRKOUHI ( Iran) said inconsistencies in the global economic, trade and financial systems continued to put developing countries at risk. It was crucial to build coherence in international trade, finance, aid and technology in order to support inclusive national development policies, otherwise developing countries would remain excessively vulnerable to external shocks and destabilizing forces that they had not created.
In recent decades, he recalled, developing countries had installed economic policies to develop human resources and economic output, but inconsistencies in the global governance architecture had made it impossible for them to create sufficient jobs and markets. A coherent, supportive external environment was essential in creating productive national capacity and employment, he said, emphasizing the need to reconsider the current practice of matching national policies with the priorities of ODA donors in ensuring the availability of international aid. At present, recipient countries and United Nations development agencies would get no funding unless they first matched their projects to donors’ priorities, regardless of how critical such projects were to national goals.
He called for true leadership and ownership by developing countries of their own development plans, in line with national development strategies and priorities, and for serious consideration of “untying” aid. Development effectiveness must be measured in respect of its ability to reduce poverty and inequalities in developing countries through the creation of productive capacities and employment. There was already a $22 billion shortfall in the commitments made at Gleneagles, which had seriously impacted efforts to realize the Millennium Development Goals in poor countries, he said, noting that aid was now subject to the economic well-being and cycles of donors rather than the needs of poor countries. Aid should be independent of the financial or political situations of donor countries, he stressed.
YOSEPH KASSAYE YOSEPH ( Ethiopia), associating himself with the Group of 77 and China, said that mobilizing more domestic and international resources to promote long-term development throughout the developing world must be a priority. Net ODA for 2010 was an estimated $108 billion in 2004 prices, which represented an expected shortfall of $18 million against the revised 2005 commitment and $22 billion below the original target. Given that shortfall, donors must increase the quantity of aid, he said, emphasizing that ODA was of the utmost importance and calling for a doubling of assistance and assurances that it would be predictable within the financing for development framework.
Turning to the management of external debt, he said most developing countries had to borrow from bilateral and multilateral lenders due to the persisting financing gap. External debt problems often constrained spending on social services and reduced investment on “pro-poor” projects, with dire consequences for economic growth and poverty reduction. Like many other HIPCs, Ethiopia had unresolved external-debt issues under the Enhanced HIPC Initiative with some non-Paris Club and commercial creditors, and since the non-participation of creditors and undelivered debt relief affected its long-term debt sustainability, any debt analysis by the World Bank and IMF should consider that issue. Moreover, debt relief to HIPC countries should be strictly additional to the net flows they were entitled to receive from international financial institutions.
GONZALO GUTIÉRREZ ( Peru) said that despite the debilitating global economic and financial crisis, his own and other developing countries had continued to post economic growth, thanks to serious and responsible economic management. Peru’s economy would growth an estimated 6 per cent this year, enabling it to meet the growing needs of its population. It had reduced poverty from 48 per cent to 34 per cent and was on track to reduce it further to 30 per cent in 2011.
It was important to recognize that middle-income countries were still recovering from the crisis, he said, adding that developing countries must have a greater say in global decision-making. With the G-20 emerging as a premier forum for international financial coordination and cooperation, it was necessary to consider its positive role in reforming the global financial system. Better regulation was needed to increase the speed of economic and financial management instruments, he said, commending the G-20’s efforts in that regard. However, its work would have greater legitimacy through more fluid communication with the Bretton Woods institutions and by involving other countries in the reform process.
Effective feedback from follow-up mechanisms created by the General Assembly and the Economic and Social Council in the wake of the financial crisis was essential, taking into account decisions of the G-8 and G-20, he said. To recover from the crisis and prevent a recurrence, multilateralism must be reactivated, with the United Nations playing a role. A lasting solution to the debt problems of developing countries must address the situation of least developed countries, including the treatment of their insolvency problems resulting from sovereign debt, he said, calling for structural solutions to prevent such problems from recurring and for the promotion of responsible loan-granting practices.
ABDUL RAHMAN DAHLAN (Malaysia) associated himself with the Group of 77 and ASEAN, recalling that over the past year, the world had witnessed the introduction of substantial fiscal stimulus packages, proposals for regulatory reform and various policy measures to stabilize and restore market confidence in the financial system. However, the question remained as to whether those measures would ensure economic sustainability in the future or were merely short term in nature, eventually leading to the next world economic crisis.
The Secretary-General’s report identified five elements for strengthening the financial architecture, but Malaysia believed national regulatory reforms should also be given adequate attention, he said. Member States, especially those from the developing world, should be given assistance in training and capacity-building to develop stable domestic financial structures.
He recalled that in 2009, his country had proposed greater integration of Islamic finance with the international finance system. Today, Malaysia believed strongly that Islamic finance promoted a coherent economic system, and called for elements of it to be considered in the reform of international financial regulations. In closing, he noted that his country’s sukuk, or bond market, had evolved into the world’s largest Islamic bond market, accounting for more than 50 per cent of global sukuk issuance in the first half of 2010.
MUHAMMED HAMDULLAH SAYEED ( India) said 60 million people had fallen into poverty in 2009, and the figure for 2010 was likely to be just as discouraging. Despite the global economic recession, however, India’s economy had expanded by 7.4 per cent in 2009 and 2010, and was expected to grow by 8.5 per cent in 2010 and 2011.
A critical lesson from the global crisis was that unregulated capital flows were highly destabilizing, he said, noting that the withdrawal of huge amounts of money had left developing countries without adequate coping mechanisms and more financially unstable than before. Many of them were in no position to implement counter-cyclical measures. ODA, concessionary financing, debt relief, FDI and other international aid was urgently needed to help them gather momentum. Declining demand in developed countries had led directly to a fall in exports from developing countries, adversely impacting growth and employment. That loss must be offset by expanding investment, he stressed, adding that his country advocated increased investment in the infrastructure of developing countries.
The global economic and financial architecture, which was overwhelmingly loaded against the developing world, required urgent reform, he said, calling for early implementation of the two-phase reform package announced by the World Bank in 2008 to enhance the “voice” and participation of developing countries. Global banking regulators should tighten capital and liquidity rules to enable the financial system to withstand future downturns. Due to the financial crisis, the total external debt of developing countries had risen by 8 per cent and the debt-servicing burden by more than 11 per cent during the 2007-2009 period.
He said the least developed countries were the worst affected, with their debt-service burden reaching $6.03 billion in 2008. In 2009, debt service in relation to Government revenue had risen by more than 17 per cent in HIPCs, a burden that constrained developing countries’ national policy space and independence. Describing debt-sustainability analysis frameworks as “limited and subjective”, he called for a shift towards linking debt structure with a country’s ability to pay. The international community should work to design policies that would promote safe debt instruments, reduce destabilizing capital flows and limit solvency crises by promoting responsible sovereign borrowing, he said in conclusion.
ABDELGHANI MERABET (Algeria), associating himself with the Group of 77 and the African Group, said appeals to reform the international financial architecture had become more urgent, and structural imbalances were a clear legacy of the Bretton Woods system. While trade was a major tool for promoting economic growth and reducing poverty, there were wide gaps in competitiveness, especially within least developed countries. Despite the efforts made, progress remained weak and the question of debt remained a major burden for many countries suffering as a result of developed countries failing to respect their commitments. The international community must allocate more resources to help indebted countries reduce their indebtedness and allow them to meet the Millennium Goals, he stressed.
Turning to progress in his own country, he said the macroeconomic policies it had followed in recent decades had led to improvements in terms of positive and sustained growth. The Government had implemented several development plans and ambitious programmes, most of which were based on two main principles: the pursuit of infrastructure projects and the need to combat social exclusion by ensuring the participation of all. Despite a very difficult international context owing to the continuing crisis, Algeria had made remarkable progress in pursuing the Millennium Goals, he said, highlighting several achievements and calling for enhanced cooperation between development partners. Developed countries must respect efforts made by their developing partners and work to ensure that the Millennium Goals were met, particularly in Africa.
ABULKALAM ABDUL MOMEN ( Bangladesh) said the financial crisis had deeply affected the least developed countries, pushing more than 1 billion people into poverty and 31 million onto the unemployment line in 2009. That had forced those countries to divert resources to address the crisis, compromising their realization of the Millennium Goals. Those countries needed counter-cyclical measures, but lacked sufficient policy space. Development partners must come forward with stimulus packages to ensure immediate short-term liquidity as well as long-term development.
He called for the creation of a grant fund, under the aegis of the United Nations, to fuel developing countries’ crisis-ridden economies. That need was illustrated by the fact that the World Bank and IMF had lent only $12.8 billion and $70 billion, respectively, to developing countries in 2009, against the $350 billion financial gap. New mechanisms were required to manage trade, money and financial intermediation, as were new classifications for countries in the scale of development and economic maturity, he said. The traditional classifications of high-income, middle-income, low-income and least developed countries may not fit today’s crisis-ridden world.
In 2009, the debt levels of almost 30 countries had exceeded 60 per cent of their GDP. Least developed countries facing foreign exchange shortages owing to the crisis must have the right to resort to debt standstills, he said, calling for immediate implementation of the IMF-driven debt-resolution mechanism to address sovereign debt defaults. A debt moratorium would immediately benefit developing countries, he said, urging the creation of an independent international debt-arbitration system to give countries at risk of debt distress recourse to a debt standstill, a debt workout with burden-sharing procedures, or a continuing lending facility.
M.O. LAOSE ( Nigeria) said that although developing countries had witnessed a seemingly higher growth rate, it had not been matched by a corresponding increase in trade or the FDI volumes necessary to sustain the tempo. Nigeria was harmonizing its trade practices with those of other member States of the Economic Community of West African States (ECOWAS) and fostering the subregion’s integration with the rest of the world, she said, calling again for an early and final resolution of the Doha Round that would ensure better integration of developing countries into the growth of international trade.
In order to restore investor confidence, provisions must be made for strong and vigilant regulatory oversight institutions, she said. While a shift in quota shares should take cognizance of “dynamic” developing countries, a shift in favour of hitherto underrepresented countries could never be overemphasized. The debt burdens of developing countries continued to be plagued by adverse exchange-rate movements and volatile remittances in development assistance. There was a need to make concessionary loans and grants in areas that would increase primary balances for least developed and African countries, thus leaving enough revenue for debt servicing and economic growth, she said, calling for more debt relief, including outright cancellation for HIPCs.
DIANA AL-HADID (Jordan) said that in order to reduce the risk of future crises, a more sustainable and balanced global economy was needed in which the pattern of current-account deficits and surpluses would be more clearly determined by the efficient allocation of capital across borders. The ongoing financial crisis had raised concerns about a future wave of sovereign defaults among developing countries. There was therefore a need for additional debt relief in poor indebted countries and among States that might become unsustainably indebted. Also, many developing countries had been affected by a significant and deepening fall in remittances, exports, capital and ODA flows, she noted. Their financial and economic imbalances could lead to a dangerous fiscal disparity, as tax revenues plunged and social insurance and bailout expenditures rose.
Given the negative effects of the global recession, many efforts had been undertaken to promote a more resilient global financial system, she said, noting, however, that more remained to be done in preventing a recurrence of the conditions that had given rise to the crisis. As an emerging market economy, Jordan had seen some impact from the global recession, following a decade of strong growth, but economic activity was expected to rise modestly in 2010. Jordan had enhanced its banking regulations, monitoring and banking early-warning systems, she said, adding that the situation had also improved by gradually reducing reserve requirements and interest rates, in addition to issuing a full guarantee of bank deposits until end-2010.
AHMAD NASEEM WARRAICH ( Pakistan), associating himself with the Group of 77 and China, noted that, given political will and commitment, requisite actions could be taken at very short notice. The world was currently facing a fragile economic recovery, and the international community should not encourage complacency. “We must maintain the momentum towards addressing the weaknesses of the international financial system,” he said, underscoring the need to review both IMF and the World Bank, and to enhance the voice and participation of developing countries within those institutions. The United Nations and the Second Committee could help in taking that process forward, he added.
The redesign of the global economic and financial governance architecture must be based on the principles of inclusiveness and equity, he said, adding that his country was opposed to exclusive decision-making, especially when those decisions had global implications. Moreover, the new compact for development, growth and prosperity should be premised on a people-centric approach and founded on a carefully crafted balance among the roles of Governments, markets and civil society. Present levels of current-account deficits in developing countries demanded bolder and more encompassing initiatives to solve external debt problems. Serious consideration should be given to a debt moratorium, as well as debt-relief mechanisms, including debt restructuring and debt-for-development swaps, he said.
ALMAT IGENBAYEV ( Kazakhstan) said forthcoming reforms of the international financial system should be focused on acknowledged realities of the modern economy, which would bring the global architecture into accordance with the principles of democracy, justice, transparency, legitimacy, equity and accountability to the international community. It was critically important to ensure that the creation of a post-crisis model of development produced a qualitative restructuring of the entire system of international economic relations, he emphasized.
Pointing out that the world’s economic problems had been caused by the inefficiency of the existing global monetary system, he said the President of Kazakhstan had proposed the development of a completely new financial architecture with a global regulatory system to oversee financial markets. Improved cooperation among Governments, international organizations, the private sector and non-governmental organizations was needed to ensure the realization of long-term international commitments, he said. In light of the current crisis, the financially integrated international community must find a mechanism for continuous oversight of progress on coordination and cooperation.
FEDERICO ALBERTO CUELLO CAMILO (Dominican Republic), noting that the Secretary-General’s report showed that developing countries were still net exporters of capital, said that in 2009, they had exported $513 billion, which was still an exaggerated amount, despite the fact that it was 38 per cent lower than that of the previous year. Such resources could be spent on reducing the social gaps that annually impeded children from finishing basic education and caused the deaths of so many people. Such capital flows from developing countries reflected policies that must be corrected. There was a lasting global imbalance in the current accounts of major world economies, some of which were still developing, while there were fiscal deficits in other countries, he said. There was need to pay attention to the lack of confidence, on the part of national investors, in their own economies.
He asked whether the international community would stand by as the deadlocks that had existed since the 2001 launch of the Doha Round continued. Many countries had been forced to increase their debt to confront the crisis, which would reduce growth margins in the future. Things would get worse if people in favour of belt tightening got their way, he warned, asking whether it was consistent to jeopardize global economic recovery merely to protect speculative margins. Global financial organizations were once again imposing conditions that would do little to attract investment and address unemployment. The best way to address external debt was through sustained economic growth and job creation, he said. There must be basic social protection to cover basic needs, particularly of people living in extreme poverty.
AMAR A. I. DAOUD (Sudan), associating himself with the Group of 77 and China, said the crisis had hit middle- and low-income countries hard, and external debt was of particular importance against that backdrop. Emerging crises had challenged the ability of developing countries to attain sustainable development, and they were “paying an exaggerated price for mistakes made by developed countries”. Brave and decisive measures were therefore needed to curtail the effects of the crisis and move towards realizing development targets.
He said his country had adopted comprehensive reform measures, with free trade as a fundamental element. Sudan had made efforts to increase expenditure on development and to promote transparency and accountability in the macroeconomic context. The country hoped to benefit from development aid on an equal footing with other receipt countries and wished to put an end to discrimination. In order to improve Sudan’s situation, the international community’s continuing encouragement was needed, and any reduction in assistance would restrict progress. On the issue of external debt as a result of conflict, he said there should be more flexibility in helping countries emerging from crisis to rebuild.
TARIQ AL-FAYEZ ( Saudi Arabia) stressed the importance of international trade and joint international and regional efforts to help developing countries grow their economies to the best of their respective abilities. There was need to create a system to open markets to the goods and products of developing countries. The world had experienced economic changes and crises, and seen the failure of the financial sector and its institutions, as well as the weakness of the trading system.
He said his country had focused on how to resolve the economic crisis during G-20 meetings, including the Toronto Summit in June. Saudi Arabia had given $400 million in public expenditures to ensure monetary liquidity for countries to support loans, lower interest rates and better investment climates. There was a need to create early-warning systems and overcome the consequences of the economic crisis, he said, adding that the only way to avoid future crises was to focus on economic transparency.
Underlining the importance of a proper investment climate to attract capital, he said his country was among the world’s top countries in terms of investment competition, and among the top 10 carrying out economic reforms since 2007. Saudi Arabia had boosted economic development through investment projects, a development fund for industry and land and agricultural development funds. It had created economic stimuli to attract investment and had given $129 million in study grants to finance 21 projects in 18 developing countries. It participated in IMF-sponsored projects in developing countries, helping them reschedule their debt. It had also issued loans to countries suffering from the economic downturn, as well as $5 million to the OPEC fund for investment and finance programmes.
MOHAMED F. F. ELKREKSHI (Libya), associating himself with the Group of 77 and the African Group, called for a redoubling of national efforts to realize the Millennium Goals and for a mobilization of resources. Taxation alone was not enough to fund development unless national efforts were flanked by real investment flows from donors honouring their commitments. Given a near $300 billion deficit in funding, developing countries would be forced to borrow more from international financial institutions and the World Bank, which would lead to heavier external debt burdens. Hopefully, donors would understand that effect and lift some of the conditions placed on lending to developing countries, he said.
With regard to the Millennium Goals, he agreed with Sudan’s representative that preferential treatment should be given to countries emerging from conflict. It had been agreed, through international consensus, that the global financial and economic crisis was the fault of developed countries which had not been transparent and which had poorly managed the financial markets. The crisis had contributed to a lack of understanding of the financial security of major banks on the part of regulatory authorities. The international community had stressed the need to reform international institutions, he said. “We have to tackle the ongoing crisis in order to avert new crises.”
JANE STEWART, Special Representative and Director, International Labour Organization (ILO) Office for the United Nations in New York, said the weaknesses and imbalances exposed during the financial crisis must be rectified for the sake of long-term global economic stability. The old model had left 210 million people without work, which would require the creation of more than 8 million jobs to return to pre-crisis levels. Therefore, addressing the jobs crisis within the macroeconomic policy debate would require, at the outset, a closer relationship between developments in the labour market and macroeconomic policy.
In labour markets, that would entail determining a balance between productivity, employment and wages, she said. In addition, balanced and sustainable growth policies must shift to ensure that the world economy was based on an income-led growth pattern, which would leave behind debt-driven consumption and investment models while boosting domestic demand. Wages should grow more or less with productivity, while, at the same time, wage increases should be consistent with stable and low inflation, she said.
She said that, in addition to well-designed wage policies, there was a growing consciousness of the benefits that sound social protection systems could play in thwarting the crisis. They protected people from poverty, empowered them to seize market opportunities and contributed to aggregate demand. ILO had warned that any premature fiscal cutbacks could damage growth and lead to even larger deficits. It estimated that stimuli in G-20 countries had created or saved 21 million jobs as a result of both discretionary policy measures and automatic stabilizers. Therefore, adopting financial policies and regulations that encouraged resource flows and allocation was the key to ensuring a more coherent and stable international macroeconomic and financial environment. Furthermore, the Global Jobs Pact, which placed employment at the heart of recovery, could help reduce the time between output growth and employment creation.
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