Global Economic Deterioration Dispelled ‘Cautious Optimism’ Over External Debt Sustainability, Senior Official Tells Second Committee
Global Economic Deterioration Dispelled ‘Cautious Optimism’ Over External Debt Sustainability, Senior Official Tells Second Committee
|Department of Public Information • News and Media Division • New York|
Sixty-sixth General Assembly
7th & 8th Meetings (AM & PM)
Global Economic Deterioration Dispelled ‘Cautious Optimism’ Over External Debt
Sustainability, Senior Official Tells Second Committee
Members Also Consider ‘International Financial System And Development’
Although cautious optimism had prevailed at the time of drafting the Secretary-General’s report on external debt sustainability, it had since dissipated in the face of the global economic deterioration, a senior official of the United Nations Conference on Trade and Development (UNCTAD) told the Second Committee (Economic and Financial) today, as it began its consideration of macroeconomic policy questions.
Presenting the report, “external debt sustainability and development”, the Head of the Debt and Development Finance Branch in UNCTAD’s Division on Globalization and Development Strategies said that before the crisis, many countries had successfully reduced their external debt and changed their debt composition, due in part to strong growth in gross domestic product (GDP) and easy credit availability. However, not only had the favourable externalities that had helped in that regard disappeared, but there was now a crisis, she said, adding that keeping the same debt figures “would be a challenge and a test of economic stamina of developing countries”.
Many representatives of least developed countries spoke of the problems they were facing with regard to debt sustainability in the wake of the financial crisis. Senegal’s representative said the Heavily Indebted Poor Countries (HIPC) Debt Initiative should have reduced the debt burden but it was not a lasting solution. Debt remained a major handicap and a holistic approach was required to find effective solutions, he emphasized. India’s delegate, meanwhile, noted that despite significant debt relief under HIPC and the Multilateral Debt Relief Initiative (MDRI), the total debt-service burden of least developed countries in 2008 had reached $7.5 billion. Debt-sustainability analysis frameworks remained limited and subjective, and the international community must work towards a debt structure that was linked to a country’s ability to pay.
Ecuador’s representative pointed to legal gaps in the Paris Club initiatives, and called for reaffirmation of the role of the United Nations in helping to achieve debt sustainability and institutional reform. He said his country had called for a new mechanism to discuss debt, and had made concrete proposals, including the establishment of a working group to study options for new mechanisms to help resolve debt issues and allow developing countries to achieve the Millennium Development Goals. However, developed countries had refused to take part, he said, noting that it was that lack of political will that had prevented comprehensive debate from taking place, even on the need merely to identify legal gaps and solutions.
Several other representatives echoed those thoughts, with many focusing on the added complications to the situation faced by least developed countries. Those challenges extended far beyond debt sustainability and touched on areas covered in the Secretary-General’s report on the international financial system and development, also presented to the Committee today by the Director of the Financing for Development Office in the Department of Economic and Social Affairs. That report highlighted the challenges arising from the crisis and its aftermath in the key areas of financial regulation and supervision, including multilateral surveillance, macroeconomic policy coordination, and governance reform within the Bretton Woods institutions.
Guyana’s representative, speaking for the Caribbean Community (CARICOM) said official development assistance (ODA) was crucial to fostering development in the region and he called on donors to make good on their aid commitments. Several CARICOM countries ranked among the most highly indebted in the world, he continued, noting that many heavily-indebted countries had resorted to commercial borrowing to mitigate the economic crisis. Now was the time to discuss, in the United Nations and other multilateral forums, the feasibility of new sovereign debt-restructuring and debt-resolution mechanisms that would take the role of debt sustainability into account in the pursuit of the Millennium Goals.
Nepal’s representative, speaking for the Group of Least Developed Countries, echoed the call for full and timely fulfilment of all ODA pledges, and for consideration of the structural constraints of least developed countries. “The economic and financial crisis should not be used as a pretext to slow down the delivery of agreed commitments,” he stressed. He also emphasized the need for greater involvement by least developed countries in the decision-making and norm-setting processes of the Bretton Woods institutions, adding that the latter’s recognition of least developed countries as a special category based on the United Nations vulnerability index would “go a long way” towards ensuring the efficacy of measures to support them.
Bangladesh’s representative called for immediate, vigorous and comprehensive reform of the international financial architecture, including in the governance of the Bretton Woods institutions. It was “painful to mention” that least developed countries were not even recognized as a category by the “Bretton Woods twins”, he said, calling for immediate recognition by the World Bank and the IMF.
That proposal also featured among those suggested by Pakistan’s representative, who also recommended that the international financial system focus on support for developing countries as part of an effort to increase its legitimacy and effectiveness. He added that global financial regulation and even-handed surveillance were required, both in the banking and non-banking sectors, and looked to the United Nations to play a central role in international economic governance, including in the reforms and functioning of the international financial and economic system. While there was a consensus that responsibility for the current global economic problems lay with the international financial markets, there political will to pursue reform was lacking, he said.
Argentina’s representative, speaking for the “Group of 77” developing countries and China, established a theme that many other speakers touched upon when he said developing countries should not be financially burdened by the crisis, for which they were not responsible. It was necessary to find measures that would bring about a more rapid solution to the crisis that had hit the developing world, he said, pointing out that three years after the outbreak of the global economic and financial crisis, the recovery was today more fragile, uneven and uncertain, requiring urgent support measures.
Indonesia’s representative, speaking for the Association of South-East Asian Nations (ASEAN) called for a balanced conclusion to the Doha Round of World Trade Organization negotiations and urged all Member States to shoulder their responsibilities to the multinational trading system. The representative of the United Republic of Tanzania was one of a number of delegates who echoed that view, stating that the Doha Round would be a failure unless it spurred development in the poorest countries. It should be negotiated in the spirit of give and take, he added.
As the discussion continued, the theme of multilateralism came to the fore as Lichtenstein’s representative led many speakers in calling for the United Nations to be the seat of the global response and suggesting the establishment of an expert panel. He cautioned, however, that discussions of the international financial system and related issues at the United Nations were often led from an exclusively foreign-policy perspective, and called for “more independent financial and economic expertise, in particular with regard to systemic risks affecting the global financial architecture”.
Also speaking today were representatives of the Russian Federation, Sudan, Singapore, Nicaragua, Brazil, Kazakhstan, Costa Rica, China, United States, Bolivia, Ethiopia, Malaysia, Cameroon, Nigeria, Tunisia, Uganda, Venezuela, France and Thailand.
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, 12 October, to begin its consideration of operational activities for development.
As the Second Committee (Economic and Financial) met this morning to take up its agenda item on macroeconomic questions, members had before them two reports of the Secretary-General relating to the sub-items “international financial system and development” and “external debt sustainability and development”, respectively.
The report on the international financial system and development (document A/66/167) reviews recent trends in the international official and private capital flows of developing countries, and current efforts to reform the international monetary and financial system and architecture. It highlights urgent challenges arising from the world financial and economic crisis and its aftermath, particularly those relating to financial regulation and supervision, multilateral surveillance, macroeconomic policy coordination, sovereign debt, a global financial safety net, the international reserve system, and governance reform in the Bretton Woods institutions.
According to the report, greater global coherence and coordination among national economic policymakers to improve financial stability and sustainable global growth should become a central objective of the International Monetary Fund (IMF). It calls for international frameworks to assess the management of cross-border capital-flow policies and sovereign-debt restructuring, and for the creation of a multilateral mechanism for financing in times of systemic crisis. The report also calls for a more balanced and stable global reserve system.
Also before the Committee was the report of the Secretary General on external debt sustainability and development (document A/66/164), which reviews the external debt of developing countries, particularly policies aimed at avoiding debt crises and the role of credit rating agencies. It states that developing countries, suffering heavily from the effects of the global recession, could be forced into a counter-productive fiscal contraction in the face of high food and oil prices, as well as continued global economic uncertainties. It recommends that the international community put a system in place to limit unproductive large capital flows while increasing efforts to ensure that official development assistance (ODA) commitments are fulfilled.
It goes on to request the extension of debt relief to countries that have not benefited under the Heavily Indebted Poor Countries (HIPC) initiative and the Multilateral Debt Relief Initiative (MDRI). While noting the importance of credit rating agencies in the sovereign debt market and the desire of developing countries to be rated, it also recommends that the latter remain mindful of the system’s shortcomings, and proposes ways to reduce their vulnerability to debt crises. They would include such measures as regulating domestic and international capital flows, creating an effective international lender of last resort, and international assistance in improving and strengthening debt management.
The report also suggests further discussion and the building of consensus around the May 2011 United Nations Conference on Trade and Development (UNCTAD) Principles on Responsible Sovereign Lending and Borrowing.
Also before the Committee was a letter dated 3 October 2011 from the Permanent Representative of Singapore (document A/C.2/66/3) transmitting to the Secretary-General, a document entitled “Global Governance Group (3G) inputs to the G-20 on global governance”.
Introduction of Reports
ALEXANDER TREPELKOV, Director, Financing for Development Office, Department of Economic and Social Affairs, introduced the report of the Secretary-General on International system and development(document A/66/167) stressed that the financial and economic crisis highlighted the need to strengthen multilateral surveillance. The report, submitted in response to General Assembly resolution 65/143, reviewed recent trends in the international private and official capital flows of developing countries, as well as current efforts to reform the international monetary and financial system and architecture.
He said the report highlighted the challenges arising from the crisis and its aftermath in the key areas of financial regulation and supervision, multilateral surveillance, macroeconomic policy coordination, sovereign debt, a global financial safety net, an international reserve system and governance reform within the Bretton Woods institutions. The global recession had led to a narrowing in global economic imbalances, with current-account deficits and surpluses declining in major advanced and emerging economies, he said.
However, there were signs that global economic imbalances were beginning to widen again alongside the global recovery, he continued. Further developments in that regard would be influenced by a number of factors, including trends in growth rates, levels of domestic demand in the major economies, sovereign-debt problems, and exchange-rate movements. The introduction of the Basel III framework for regulating bank capital and liquidity was a major step in the process of reforming financial regulation was, he said, adding that the IMF had taken steps to improve the methods and coverage of its surveillance activities.
Noting that total net ODA from member countries of the OECD’s Development Assistance Committee (DAC) had reached $129 billion in 2010, or 0.32 per cent of DAC members’ combined gross national income (GNI), he said it was the highest level ever. However, the projected spending plans of developed countries showed that ODA was wavering. Innovative sources of financing were expected to provide additional resources to supplement traditional sources of development financing, he said. The upcoming report of the Secretary-General on “innovative mechanisms of financing for development” (document A/66/334) would be discussed by the Committee next Thursday, he said.
YUEFEN LI, Head, Debt and Development Finance Branch, United Nations Conference on Trade and Development (UNCTAD), presented the report on external debt sustainability and development (document A/66/164) and said that despite cautious optimism at the time of its drafting, the global economic situation had since deteriorated. Policymakers had been raising the issue of protecting “the innocent bystanders” of the crisis, who were impacted by lower commodity prices and an unresponsive credit market. Before the crisis, many countries had successfully reduced their external debt and changed their debt composition, due in part to strong gross domestic product (GDP) growth and easy credit availability.
However, not only had the favourable externalities that had helped in that regard disappeared, but there was now a crisis, she said. Keeping the same debt figures “would be a challenge and a test of economic stamina of developing countries”. Counter-cyclical fiscal policy at the beginning of the crisis, together with the slow recovery, had resulted in wider fiscal deficits or weaker fiscal positions across the board, reducing developing countries’ fiscal space. Furthermore, their total external debt stocks had increased in 2010, though that had been due largely to United States currency fluctuations.
The same was true of external reserves, she continued, noting that “aggregates and averages” masked large cross-country differences. Small countries on the continent were particularly lacking in reserve coverage, with ten African States overall possessing coverage at levels well below the threshold of three months worth of imports. Caribbean and Southern Asian countries had also failed to improve their debt ratios in 2010, with some already in a situation of high public and external debt. While progress had been made in implementing HIPC and MDRI, some post-completion HIPC beneficiaries continued to show signs of debt distress. Eight of the thirty-two that had reached completion were deemed to be at high risk of debt distress, with eleven others at moderate risk.
She said official development assistance (ODA) was reported to have increased by 6.5 per cent over 2009 figures. While removing inflation and currency depreciation factors would make the figures look less impressive, they would remain encouraging. Many donors had reduced their assistance in 2010, making the fulfilment of ODA obligations more remote. The crisis was a major setback to realization of the Millennium Development Goals, she said, citing the World Bank’s estimation that few of the 40 low-income countries were on track to meet their targets.
Emphasizing that maintaining debt sustainability and preventing a debt crisis should be a top concern of policymakers, she advised countries to remain highly vigilant and avoid complacency. Rebuilding fiscal and reserve buffers was vital. It was essential to consider responsible and prudent lending and borrowing a key line of defence against the emergence of debt problems. UNCTAD had released a set of draft principles outlining the responsibilities of lenders and borrowers in sovereign financing, she said, stressing that consensus on the principles would contribute to preventing future debt crises.
However, debt crises were bound to happen, even with the best policies, she cautioned, pointing out the international financial architecture’s lack of a mechanism to facilitate the resolution of sovereign insolvency and to impede litigation” by providing legally binding resolutions to debt distress. Views on the subject remained divergent and there was a need for further efforts in that direction, involving all stakeholders, she said.
MARCELO SUAREZ SALVIA (Argentina), speaking on behalf of the “Group of 77” developing countries and China, said that three years after the outbreak of the global economic and financial crisis, the recovery was today more fragile, uneven and uncertain, and required urgent measures of support. A majority of developing countries were still confronted by common problems and great challenges such as extreme poverty, global food crisis, continuing food insecurity, high level of unemployment, external debt burdens, lack of financial aid and the negative effects of climate change. He underlined the concern that the worsening crisis would have even longer-lasting negative effects on development, depressing potential output for years to come, raising the cost of capital and tightening the availability of credit, affecting international trade as well as impairing the economic and financial stability of many developing countries, least developed countries in particular.
Stronger and more sustainable growth was critical to helping those countries meet the internationally agreed development targets, including the Millennium Development Goals, he said, stressing the need for appropriate and necessary measures to bring about a more rapid solution to the crisis that had hit the developing world. Developing countries should not be financially burdened by the crisis, for which they were not responsible, he said. Any successful strategy to ensure food security must involve a comprehensive approach that would enhance market access for agricultural produce from developing countries and direct support towards advancing their agricultural sector. In addition, the heads and senior leadership of international financial institutions, in particular the Bretton Woods institutions, should be appointed through open, transparent and merit-based selection processes, with due regard to gender equality and geographical and regional representation, he emphasized.
CHANDRA ACHARYA (Nepal), speaking on behalf of the Group of Least Developed Countries and associating himself with the Group of 77 and China, said least developed countries were seeing a decline in trade, tourism, remittances and foreign investment. Lower earnings, together with unmet ODA commitments had significantly widened the external financing gap. As such, the Group of Least Developed Countries called for the full and timely fulfilment of all such pledges, as well as consideration their structural constraints.
“The economic and financial crisis should not be used as a pretext to slow down the delivery of agreed commitments,” he stressed. Further, least developed countries must participate in the decision-making and norm-setting of the Bretton Woods institutions, he said, adding that the latter’s recognition of least developed countries as a special category based on the United Nations vulnerability index would “go a long way” towards ensuring the efficacy of measures to support them.
He went on to stress the need to ensure greater coordination among the policy areas of the international development architecture, including trade, foreign direct investment (FDI) and debt. As for the United Nations, he called on the Open-ended Working Group to follow up on the issues contained in the outcome of the 2009 Conference on the World Financial and Economic Crisis and its Impact on Development. Turning to debt sustainability, he urged effective measures to alleviate the high debt burden of many least developed countries, notably debt cancellation and renewal of the HIPC extension. For countries not covered by such initiatives, he urged the creation of a better incentive mechanism to lighten their burden.
YUSRA KHAN (Indonesia), speaking on behalf of the Association of South-East Asian Nations (ASEAN) and associating himself with the Group of 77 and China, underlined the importance of coordinating efforts to encourage sustained, inclusive and equitable economic growth. With global imbalances appearing to widen, it was important to strengthen macroeconomic dialogue and coordination as well as financial cooperation at the regional and global levels. The crisis had highlighted the need for multilateral economic surveillance, he said, suggesting that it focus on financial sectors, policy spillovers and cross-border linkages.
Underlining the need for stronger regional coordination, he pointed to ASEAN’s Plus Three Macro Economic Regional Surveillance Office. Fiscal soundness and sustainability were key, and the ASEAN countries continued to follow structural reform policies to stimulate demand, while promoting trade and investment. He called for a balanced conclusion to the Doha Round of World Trade Organization negotiations and urged all Member States to shoulder their responsibility to the multinational trading system, adding that ASEAN supported the accession of the Lao People’s Democratic Republic to the global trade body.
He went on to stress that increasing regional cooperation through groups like ASEAN reinforced the work of the United Nations. Key to stronger global governance was the strengthening and reform of the Bretton Woods institutions, and greater involvement of the least developed countries. He expressed hope that the Second Committee would help promote that through the opening of markets and improving governance. There was a need to address the volatility of food commodity prices, which could negatively affect attainment of the Millennium Development Goals. ASEAN’s work to achieve greater integration included the hope of realizing a single market and liberalizing the financial service sector by 2015, he said, saying that was an example of South-South cooperation to support all countries and ensure that ASEAN would achieve enough growth to meet Millennium Development Goals.
VLADIMIR SERGEEV ( Russian Federation) said his country was implementing a project to transform Moscow into an international finance centre. In addition to housing the Russian financial system, the capital would serve as a “catalyst for the development of financial markets throughout the post-Soviet space as well as Central and Eastern Europe”, he said. Stressing that a stable and efficient international financial system was one of the key factors of sustained economic development and timely implementation of the priorities of the global socio-economic agenda, he said the General Assembly could make an important contribution to multilateral efforts to improve the international financial system with a view to mitigating the impact of the financial and economic crisis.
Undoubtedly, the Russian Federation took into account the negotiating process within the G-20 framework, which remained a key multilateral format for elaborating collective approaches to addressing relevant world economic and financial issues, he said, going on to call for further reform of international financial regulatory mechanisms, and the strengthening of coordination and supervision in that area, in the interest of promoting the sound development of global financial markets and banking systems. The Russian Federation supported efforts to improve the international monetary system, and called for extending the range of international reserve currencies, he said, adding that his country attached particular importance to ongoing expert-level discussions on the role of IMF special drawing rights in the global reserve system.
DAFFA-ALLA ELHAG ALI OSMAN(Sudan), associating himself with the Group of 77 and the Group of Least Developed Countries, pointed out that external-debt levels within the latter grouping had risen by 32 per cent of its collective gross domestic product. At least three of its Member States faced insolvency, he said, noting that low-income countries were paying a high price for a crisis caused by the policies of developed countries.
A response called for bold and decisive measures to put an end to the problems resulting from the crisis, he said. Sudan had engaged heavily in reform but external debt remained a heavy burden limiting its ability to halve poverty by 2015, noting that his country had not benefited from debt-exemption initiatives, he called for an end to discriminatory policies since Sudan had met all necessary standards and prerequisites, including a full commitment to implementing a programme to fight poverty. He called for more creative mechanisms to help post-conflict countries and further enhance flexibility in debt assistance in order to help rebuild the socio-economic architecture.
LIU FENG-YUAN ( Singapore), associating himself with the Group of 77 and ASEAN, said his country was attempting to balance openness to capital, talent, trade and markets with judicious regulation that protected the interests of businesses and citizens. Being in a unique position as a small nation and State, Singapore had had no alternative but to confront the international financial markets and openness to trade early on in its development. Its economy was now integrated into the world economy, enjoying trade volumes three-and-a-half times the size of its GDP, he said. However, Singapore had been one of the first countries in the world to lurch into recession, although it had enjoyed double-digit growth rates in 2010, he added. International financial flows and investment had helped the economy in part, through the development of ports, factories, telecommunications, and human capital.
He went on to note that they had added to recent growth, and Singapore had tried to balance its openness with a social safety net focusing on sound basic education, skills training and “workfare” — a policy grounded in the underlying philosophy of supporting a decent job and wage for all citizens, especially low-wage workers. Convergence was urgently needed in global governance and harmonization in the supervision of financial institutions, he said, noting that many financial institutions were global and cross-jurisdictional in reach, while in contrast, supervisory frameworks remained predominantly national in approach. The international community needed to ensure a level playing field and to prevent a situation whereby countries complete through “regulatory arbitrage” — by resisting necessary legislation to enhance the relative competitiveness of their own domestic institutions, he said, stressing that the United Nations, with its “universal representation and legitimacy”, should continue to play a central role in that process.
DANILO ROSALES DIAZ ( Nicaragua), associating himself with the Group of 77 and China, said that without political commitment to facing the challenges, it would be impossible to respond to the economic collapse or the issue of climate change. It was essential to shift from an international order based on an exploitative trade and economics system, he said, recommending policies aimed at freeing millions from the yoke of misery under which soulless capitalism and inherently expansionist policies had placed them.
Warning that the economic system was the primary threat to global peace, he recalled that Governments around the world had promised an end to irresponsible indebtedness and promised structural change, but that had been “just a lie”, as Nicaragua had warned at the time. Three years later, the economic system was on the verge of collapse with no lessons learned. Capitalists’ greed was so great that they preferred to risk collapse rather than institute changes to a system that was not working and which cemented the pauperization of the vast majority of the world’s peoples.
Pointing to his own country’s attempts to deal with the role of rating agencies, he said the Northern countries had opposed the idea, wondering “blindly and arrogantly what planet we came from”. What must they be thinking now? he asked. The current model was not salvageable and needed changing from head to toe, he emphasized, recommending full and immediate restructuring of the international financial architecture. The United Nations should play a central role in redefining economic policies that would strive for a truly fair and solidarity-based economic order. “The economy must be at the service of the human being rather than human beings at the service of the economy,” he asserted.
JOAO LUCAS QUENTAL NOVAES DE ALMEIDA (Brazil) said developing countries would likely remain the main engine of growth in the world economy in the short and medium terms, warning, however, that many developing countries were now facing an “extraordinarily challenging transition” as they adjusted their monetary and fiscal policies to mitigate the negative spillover effects of the renewed crisis in the developed world. In a matter of only a few weeks, concerns over inflation and overheating were being supplanted by questions about the impact of the ongoing world crisis, he noted.
In order to avoid another recession in the developed countries and mitigate its effects in the developing world, it was crucial to promote stronger policy coordination and enhanced coherence, he emphasized. The G-20 offered an important platform to safeguard and strengthen the recovery, and lay the foundations for strong, sustainable and balanced growth, including with regard to reform of the international financial system, he said.
At the same time, Brazil remained conscious that the G-20 was an “informal group whose agenda necessarily reflects the priorities of its membership”, he said. Reform of the IMF and World Bank governance regimes was crucial for the legitimacy and effectiveness of the international economic system. While supporting the 2008 and 2010 agreements on reforming IMF governance, Brazil called urgently for additional measures, considering the present quota formula “deeply flawed” as it did not reflect the relative economic weights of member countries, and for the comprehensive review of the IMF quota formula, to be completed by January 2013.
ABDOU SALAM DIALLO ( Senegal), associating himself with the Group of 77 and the Group of Least Developed Countries, said there was a clear need to reform the global economic architecture, particularly the Bretton Woods institutions, which were unrepresentative. International supervision systems for the financial markets were also essential to ensuring lasting solutions in the face of global imbalances. Instability in the financial markets required supervision, a regulatory system based on control of financial players and a system for controlling exchange movements. He called on the IMF to improve its monitoring mechanisms on financial flows and involve the private sector in resolving the crisis, while also considering the establishment of lines of credit for short-term debt relief and allocating more resources for developing countries.
Beyond that, he welcomed the efforts of the G-20, which had reasserted its willingness to cooperate and integrate the least developed countries. Despite increases in ODA, he urged respect for the Paris Declaration and the Accra Commitments to improve aid efficiency, saying he looked forward to the Fourth High-level Forum in Busan. External debt was a major concern for least developed countries and the paths so far followed in terms of debt rescheduling had not allowed them to emerge from their economic problems, he said. The HIPC initiative should have reduced the debt burden but it was not a lasting solution, he pointed out, emphasizing that debt remained a major handicap and that other measures were needed to deal with it. Recovery would not be achieved without significant external support, he said, urging the international community to take the necessary holistic approach that would lead to effective solutions.
TLEUZHAN SEKSENBAY ( Kazakhstan) said the growing globalization of economic processes called for a paradigm shift in the economic dimension of United Nations programmes and activities. The world needed an early-warning system that could identify the stresses and systemic problems besetting world financial markets well in advance, and address them speedily and appropriately. Kazakhstan recognized that financial and economic crises had highlighted the need to strengthen multilateral surveillance with a view to enhancing fairness and effectiveness, he said, adding that emerging and developing economies therefore should have a greater voice and representation in international financial institutions.
The architectural plan should be governed by the key principles of efficiency, transparency, and accountability, he stressed. To realize long-term international commitments, he said, it was important to improve cooperation between Governments, international organizations, the private sector and non-governmental organizations so as to overcome important weaknesses in international cooperation and coordination. The United Nations system, and the Economic and Social Council, in particular, should play a central role not only in monitoring processes, but also in their coordination and implementation. Lastly, he stressed that world leaders should demonstrate strong political will and committed efforts to seek effective solutions to the global financial and economic problems from the development perspective.
SAUL WEISLEDER (Costa Rica), associating himself with the Rio Group and the Group of 77, called on the United Nations to address macroeconomic policy issues through the Second Committee (Economic and Financial) in a calm, pragmatic way. The starting point should be recognition of shared but differentiated responsibilities, and solutions should result from objective and level-headed analysis. The crisis had its origins in the developed countries, with their imprudent conduct in the financial sector and lack of regulation. Robust and coordinated measures, were needed to avoid a future relapse, he said, adding that to understand what measures were needed now, a proper understanding of the problems that had affected the global economy before 2008 was also required. Problems must be tackled in a technical way, but backed by political support and decisions.
That called for close coordination on the part of the stakeholders, he said, stressing that developing and middle-income countries had a legitimate interest in calling upon developed countries to set aside their narrow, short-term interests and “think big”. Counter-cyclical measures were the current mark of good macro- and microeconomic policies, with employment an instrumental variable, not an outcome itself, he said, underlining that it had never been clearer that “no one size fits all for all countries and all situations”. Regulation of the global financial structure was essential, and reform was an opportunity to build regulations that would raise confidence but prevent recurrence. “All that glitters is not gold,” he warned, pointing out that the financial innovations of past years had not contributed to improving well-being. Taking up the question of food security, he linked it to commodity-price and exchange-rate volatility, recommending an agricultural policy that exploited comparative and absolute advantages, while emphasizing that food security would not be achieved through the pursuit of self-sufficiency.
MD TAUHEDUL ISLAM (Bangladesh), associating himself with the Group of 77 and the Group of Least Developed Countries, called for a rapid solution to the economic and financial crisis that would address the issues of developing countries, especially least developed countries who “are not responsible for the crisis but are suffering the most”. The ongoing crisis had demonstrated the weakness of the international system, he said, calling for immediate, vigorous, and comprehensive reform, including in the governance of the Bretton Woods institutions. It was “painful to mention” that least developed countries were not even recognized as a category by the “Bretton Woods twins”, he said, calling for immediate recognition by the World Bank and the IMF. The world’s poorest people should aptly and justly be represented in their governance, decision-making and policy dictation, he stressed. He went on to call for the immediate conclusion of the Doha Round as a necessary step to moving forward, and urged developed countries to cease all protectionist measures, including agricultural subsidies and non-tariff barriers to trade.
DONG ZHIHUA (China), associating himself with the Group of 77,said that despite the complex international financial and economic situation, countries should continue to help each other, and developed countries should maintain economic recovery and financial stability while creating an enabling external environment for the strong, sustained and balanced economic development of developing countries. Accelerating the fulfilment of commitments on development assistance, trade financing and concessional loans were particularly important in that regard.
He called for an improved international economic and financial governance structure, increasing the voice and representation of developing countries, as well as improvements to the global financial regulatory system to step up the monitoring and regulation of cross-border capital flows, and reform sovereign-credit rating mechanisms. Reform of the international monetary system would boost mechanisms for regulation and control over the issuance of reserve currencies, maintain the relative stability of exchange rates of major reserve currencies, and strengthen the poverty-reduction functions of the international financial institutions.
China had taken steps to implement a programme for increasing domestic demand, promoting steady and rapid economic development, he said, adding that its successes in that regard had contributed to the global economic recovery. Nonetheless, as a developing country, China took the debt problem very seriously, he said, pointing out that external debt had become more unsustainable with the financial crisis. The international community should do more to create the conditions for debt relief and honour their debt-relief commitments. China had assisted other developing countries and paid attention to debt sustainability, negotiating rescheduling or cancellation to help reduce their burden as much as possible. By the end of 2010, China had cancelled 388 debts owed by 50 HIPC and least developed countries, he said, adding that his country would increase its foreign assistance and help in lightening debt burdens while promoting development.
GEORG SPARBER ( Liechtenstein) said the economic situation was fragile and recovery from the financial crisis had slowed down significantly. The international financial system had shown a degree of instability and inherent risks that hopefully would be addressed more stringently through political decisions. In the wake of the crisis, the G-20 had proven its ability to avert the most negative impacts of the crisis, and had set up an agenda to sustain growth in developing countries. “We welcomed these efforts on many occasions,” he said, adding that, “there is no alternative to the United Nations as the only genuinely global governance framework, where decisions of global impact belong and should be implemented”.
He said that, as a member of the Global Governance Group (3G), his country believed those claims to be fully compatible. The G-20 was an informal group of diverse composition, representing a large portion of the world’s population and economic strength. Decisive inputs and initiatives could therefore come out of the G-20 in areas where economic policy coordination and cooperation were needed. The G-20 also had an ambitious agenda with respect to development policy. “The time has now come to focus on implementation,” he said.
The negative impacts of the financial crisis on hard-earned development gains should motivate improvement of the current global economic and financial architecture, he said, noting two political obstacles: first, the political stalemate among major political groups on macroeconomic questions. While differences were expected, they should not be allowed to stand in the way of improvements, he stressed.
Second, discussion at the United Nations of the international financial system and related issues were often led from an exclusively foreign-policy perspective, he continued. “We need more independent financial and economic expertise, in particular with regard to systemic risks affecting the global financial architecture,” he emphasized. The idea of establishing an expert panel seemed appealing, he said, sharing the concern of many States, however, that such a panel could fall victim to politicization. The establishment of a panel must go hand-in-hand with the serious streamlining of other mandates dealing with global financial issues.
WALTER SCHULDT ( Ecuador), associating himself with the Group of 77 and China, said the current instability indicated the need for urgent reform of the economic system. The systemic failure showed the need for better monitoring and a system for global protection. A key area for reform in international institutions was to focus on the lack of debt sustainability, he said, adding that there was also a need for more resources and mechanisms to address the crisis, which was threatening to impact achievement of the Millennium Development Goals.
He went on to point to legal gaps in the Paris Club initiatives and called for reaffirmation of the role of the United Nations in assisting in achieving debt sustainability and institutional reform. Ecuador had called for a new mechanism to discuss debt, he said, adding that it had made concrete proposals, including the establishment of a working group to study options for new mechanisms to help resolve debt issues and allow developing countries to achieve the Millennium Development Goals. However, developed countries had refused to take part, he said, noting that it was that lack of political will that had prevented comprehensive debate from taking place, even on the need merely to identify legal gaps and solutions.
JOHN SAMMIS ( United States), noting that poverty alleviation remained uneven, said sustained economic growth was vital to meaningful results on all levels of development. He stressed the role of women in pushing development, saying that financial resources were not the only important factor. Open markets were important in boosting trade and a major driver of sustainable development, he said, expressing hopes for an ambitious and balanced result in the Doha Round. Critical reforms and investments were needed, as were the diversification of exports and improvements in competitiveness, he said, adding that his country would continue to offer technical assistance to help realize those benefits.
He went on to say that the International Financial System for Development, the IMF and World Bank had enhanced the voice of developing countries, provided additional resources for low-income countries and instituted a more effective policy framework. Welcoming the work of the G-20 in promoting strong, balanced and sustainable growth, narrowing gaps in prosperity levels, further reducing poverty, promoting gender equality and contributing to job creation, he said his country had also had “significant success” in terms of its commitments on debt, notably through the HIPC and MDRI, as well as the joint World Bank-IMF debt sustainability framework.
The United States would continue to look to the Paris Club for coordinated and sustainable solutions to payment problems faced by debtor countries, he continued. Sustainable debt required national strategies for monitoring and managing external liabilities, as well as good governance and macroeconomic policies. He expressed support for exploring new ideas to support development and accelerate achievement of the Millennium Development Goals but stressed that innovative finance schemes must be voluntary and adopted on a case-by-case basis. He concluded by expressing hope that more donors would adhere to the principles of the Paris Declaration and Accra Action Agenda.
CARLA ESPOSITO GUEVARA ( Bolivia) associating herself with the Group of 77 and China, said that “sooner or later the world will encounter the worst financial crisis in its history”, noting that global unrest indicated the crisis was only getting worse. The situation was an “organized crisis” that had originated in the developed countries and the serious problem was that the “banks are drawing money from the real economies”, she said.
She recalled that since 2009, the economies of developing countries had been in dire condition and lacked the resources to deal with the crisis. Bolivia was concerned about moving the cost of the crisis from the private to the public sector. The crisis had long-range consequences, one of which was the widening gap between the rich and the poor. “We appeal for an urgent solution of this crisis, mainly looking towards a new international paradigm,” she said, describing the neoliberal model that looked to “privatizing everything” as a failure.
The Bretton Woods institutions did not meet the needs of the current environment, she said, warning that developing countries could find themselves in a spiral of debt. Developed countries should help alleviate the debt and the crisis, she said, calling upon the United Nations to find innovative approaches to resolving such global problems. There was a need for a more democratic and representative economic model that would represent people in developing countries, specifically least developed countries, she said, calling also for new regulation measures that would avoid placing financial burdens on developing countries. ODA must not be affected because developing countries were not responsible for the crisis, she added.
ATAKLTI HAGEGE HAILU ( Ethiopia), citing the highlighting in the Secretary-General’s report of the challenges facing developing countries in particular, said debt and debt-servicing had gained attention because of the financial crisis. In spite of the enormous need for State financing of public projects, the Ethiopian Government had remained committed to its international obligations, especially to its creditors. Debt relief was “alarmingly declining” with the level of relief received through the HIPC initiative 18.3 per cent lower. That would mean that a significant proportion of the assistance received would be devoted to servicing, he said, noting also that many donors were failing to meet their commitment to allocate 0.7 per cent of official aid to ODA. Aid flows should continue “without being hindered by red tape and prohibitive conditionality”, he said.
He said the crisis underlined the fact that the world prospered together and suffered together, demonstrating the “interconnectedness and interdependence of the global economy”. The need to give special attention to the least developed countries had been recognized in the 1970s, which showed that the “one-size-fits-all approach could not be a substitute for grounded and specific policy directions in developing countries. They needed a broader policy space, he said, citing the punishment his country had suffered for pursuing home-grown policies. That unorthodoxy had led to Ethiopia receiving half the development finance it was due, and despite robust economic growth and strides towards bringing people out of poverty, economic and social hardships remained. Sensible macroeconomic policies had brought Ethiopia forward, playing a key role in the country’s economic transformation, he said. To scale-up the country’s achievements, the Government had launched the five-year Growth and Transformation Plan, focusing on infrastructure, education, health and employment.
K RAHMAN KHAN (India) aligning himself with the Group of 77 and China, said it was ironic that those least responsible for the crisis must become its biggest victims as more than 100 million people in developing countries had slipped back into poverty in 2010, and their socio-economic situation continued to worsen. The international community should not allow the global economic slowdown to become a trigger for “building walls around ourselves through protectionism or creating barriers” to movement of people, services and capital. He called for the early implementation of a two-phrase package of World Bank reforms to enhance the voice and representation of developing countries. The decision to shift 6 per cent of IMF quota shares to developing countries must also be attended to, he said.
There was a need to deploy effective ways to promote the coordination of the macroeconomic policies of major economies, he said, emphasizing also the importance of pursuing reform of the governance systems of international financial institutions with speed and efficiency. Regulatory surveillance and monitoring frameworks must be tailored to meet the highest standards of accountability and financial controls. He noted that despite significant debt relief under the HIPC and MDRI programmes, the total debt-service burden of least developed countries in 2008 had reached $7.5 billion. Debt-sustainability analysis frameworks remained limited and subjective, and the international community must work towards a debt structure that was linked to a country’s ability to pay.
MOHSIN FADZLI HAJI SAMSURI (Malaysia), associating himself with the Group of 77 and ASEAN, said it was important to put early-warning systems and mechanisms in place to ensure proper coordination and sharing of information and to allow timely action to be taken in pre-empting a crisis before it was too late. As small economies were highly susceptible to global shocks, and their populations suffered most during the turbulent periods of global financial and economic downturns, that type of warning system would be very useful.
Concurring with findings reflected in the Secretary General’s report, he expressed hope that the measures and actions needed to strengthen the international financial system would be implemented without delay, focusing on ways to further enhance the economies of developing countries, least developed countries, in particular. Malaysia supported a comprehensive reform of the international financial architecture that should address the challenges posed by the current international financial architecture, while ensuring that the objectives of those institutions were achieved.
He reiterated the need for further measures by the IMF and the World Bank to address the historical imbalances that had led to the lack of representation for the developing world. Malaysia, as one of the leading nations in the use of Islamic financial instruments, had created a new international financial infrastructure through the establishment of the International Islamic Liquidity Managements Corporation last October. A collaboration between 12 central banks and two multilateral development institutions, it represented a major breakthrough in strengthening liquidity arrangements for the international Islamic financial system, he said.
AHMAD NASEEM WARRAICH (Pakistan), associating himself the Group of 77 and China, said that apart from current challenges, there was also exceptionally high uncertainty about the future. There was a consensus that responsibility for the current economic problems lay with the international financial markets and that reform was necessary, but the political will to pursue reform was lacking. There were a number of ways to make the international financial system more legitimate and effective, he said, recommending that it focus on supporting the development efforts of developing countries. Expressing hope for the timely implementation of reforms in the Bretton Woods institutions, he stressed, however, that they would be insufficient on their own. Developing countries needed a bigger voice in the Bretton Woods institutions and that required reform.
He added that financial regulation and even-handed surveillance were required, both in the banking and non-banking sectors, and the United Nations should play a central role in international economic governance, including in the reform and functioning of the international financial and economic system. Developing countries had seen further deepening of their debt problems and some advanced countries had also suffered, he pointed out, emphasizing that the need for lasting solutions had never been more pronounced. The HIPC and MDRI programmes had helped provide relief but there was a need to assess why they had not managed to maintain debt sustainability, which was central to the debt-relief debate. It should be linked to a country’s capacity to achieve its national development goals, he said, adding that grants and concessionary loans should be used as the preferred modalities of international support to help improve debt sustainability. Innovative thinking across the board was needed, he added.
GEORGE TALBOT (Guyana), speaking on behalf of the Caribbean Community (CARICOM), expressed worry about the prospect of a second wave of economic recession and the subsequent negative impacts and challenges. CARICOM members had virtually no capacity to apply counter-cyclical measures in response to crises due to their high levels of indebtedness. For that reason, ODA was crucial to fostering development, including attainment of the Millennium Development Goals, and donors must make good on their aid commitments. The international community must do more to provide relief and help restructure the debt of small middle-income countries, he said, calling for greater policy measures to facilitate FDI tailored to their needs.
Concerned about the lack of progress in creating a more conducive international environment for growth and development, he said that given the situation, there was a need more and better multilateralism, as well as an accelerated roadmap for reforming the Bretton Woods institutions to give developing countries greater voting power and voice. More even-handed, active surveillance of all major financial centres was also needed.
Several CARICOM countries ranked among the most highly indebted in the world, he said, noting that many heavily indebted countries had resorted to commercial borrowing to mitigate the economic crisis. Now was the time to discuss in the United Nations and other multilateral forums the feasibility of new sovereign debt-restructuring and debt-resolution mechanisms that would take the role of debt sustainability into account in the pursuit of the Millennium Goals, he said. During the 2011 session of the Economic and Social Council, CARICOM had tabled a draft resolution calling for the Committee of Experts on International Cooperation on Tax Matters to be upgraded to an intergovernmental body of the council, he recalled, urging Member States to consider upgrading it to an inclusive, participatory mechanism that could discuss and agree on international tax matters.
JOSEPH MARIE FOUDA NDI ( Cameroon) said low growth and high debt were causing concern across the world, particularly among developing countries, which were still trying to recover from the previous financial crisis. They lacked the necessary resources to develop robust plans to deal with the situation, he said, noting that proper recovery would only come about through partnerships and solidarity. ODA was not enough on its own. He emphasised the particular importance of the United Nations, urging the world body to assert itself in a similar way as it had done on collective security. The Organization must not be marginalised, he added.
He said he recognised, however, that responsibility for recovery and sustainable development also lay with individual States, and pointed to the fact that his country had resolutely been implementing a 10-year strategy aimed at broadening its economy. He expressed hope that Cameroon would be an emerging economy by 2035 and listed a number of infrastructure projects the Government had taken with the aim of improving the economy. They had created many jobs and helped to reduce youth unemployment, he said, adding that, despite the global stagnation, he said Cameroon was resolved to go beyond counter-cyclical policies alone.
MODEST J. MERO (United Republic of Tanzania), associating himself with the Group of 77 and the Group of Least Developed Countries, noted the importance of the Istanbul Programme of Action for the social and economic development of least developed countries. For developing countries, current global economic challenges translated into serious commodity volatility, costly international transactions due to volatile exchange rates and terms of trade, increasing debt challenges, reduced export opportunities and unpredictable ODA, all of which led to inflation and reduced prospects for economic growth.
He said that in his country the annual growth of reserve monies had slowed to 16.8 per cent in April 2011, from 21.6 per cent in the corresponding 2010 period. Inflationary pressures from such factors as increased food and oil prices posed a challenge to the pursuit of the targeted 5.0 per cent inflation rate. The Doha Round would be a failure if it did not spur development in the poorest countries, he warned, adding that it should be negotiated in the spirit of give and take. He called on the international community to regulate speculation and trading in commodity futures to protect the poorest countries from price volatility. He also called for new initiatives to address debt and development.
MAGDIEL GENO SUPO SAMAKI ( Nigeria), associating himself with the Group of 77 and China, said that building a global financial system that would restore investor confidence required vigilant regulatory oversight. “As global economic imbalances widen in the face of an increasingly interdependent global economy, international cooperation and adequate regulation are inevitable in the effort to stabilize financial flows between countries.” Nigeria’s economic-reform efforts, aided by revenues from high oil prices, had led to significantly improved macroeconomic outcomes, lower inflation rates and strong GDP growth, he said. Addressing infrastructure shortcomings was crucial for long-term, stable growth, he said, adding that Nigeria’s fiscal policy was focused on increasing the quality and efficiency of spending, and that the tax system had been reformed to improve revenue collection.
The rules outlined in the Basel III framework for bank capital and liquidity regulation would bolster financial stability and development, he continued. Fallout from the economic crisis underscored the need for measures that would reduce the likelihood of problems emerging at systemically important financial institutions. National development efforts must be complemented by global policies that expanded development opportunities for developing countries, he said, calling for more debt relief and for restoring steady, income-generating development assistance. Further, as 3 billion people around the world were excluded from formal financial services, such as savings accounts and credit, “financial inclusion” was important to promoting economic growth and reducing poverty, he said, urging donors to meet their ODA commitments and calling for greater cooperation among African banks.
ELYES LAKHAL(Tunisia), associating himself with the Group of 77 and China, said that in the face of the complex threats the world was facing, it was the central responsibility of the United Nations to foster a spirit of cooperation in supporting countries as they sought successful and sustainable development. Tunisia had always respected its commitments to international donors as a matter of principle, and it was essential that, following the Arab Spring, the country’s economy was able to reassert itself. That commitment was a burden on the public finances, he said.
He went on to urge the international community to help the country access the funds held by the previous leadership, saying that without them, the Tunisian taxpayer was deprived of rightly held assets. Returning them was a matter of justice, ethics and morality, he emphasized, saying that the recovery of missing money was essential to building the economy during the democratic transition. Among other measures partners could take to ensure the success of the transition, he recommended financial arrangements that would ensure that money used for debt servicing could be redirected into wealth- and employment-creation projects.
The crisis had led to some countries seeing their budgetary margin of action significantly reduced by the various impacts of the crisis, he said. IMF surveillance of capital flows was highly important and the IMF should encourage coordination between national economic policies aimed at achieving stability and growth. Reform governance of the Bretton Woods institutions should eliminate the voting imbalance on the board of directors. A comprehensive and fair solution on the issue of the external debt of least developed countries could prevent them from facing a problem in sovereign debt and resolving that financing problem should be a priority, he said.
BENEDICT LUKWIYA (Uganda), associating himself with the Group of 77 and the Group of Least Developed Countries, underscored the importance of timely and thorough implementation of the agreed reforms, noting that in many developing countries, external debt remained a major obstacle to poverty eradication because debt-servicing continued to divert much-needed resources away from investments needed to improve the people’s quality of life. That challenge was even greater for least developed countries that generally had high external debt levels due to the inherent structural weaknesses in their economies.
He said the current crisis had worsened the debt sustainability of most developing countries by limiting their fiscal policy space as counter-cyclical Government spending continued to increase public debt, reduced international reserves and widened current-account deficits, leading to a large increase in the total external debt. Uganda thus welcomed the Secretary-General’s recommendation to explore solutions to the persistent debt problems of developing countries as the HIPC initiative wound down to a close.
Further stressing the need to intensify efforts to prevent debt crises by enhancing international financial mechanisms for preventing and resolving crises, as agreed by Member States, he said the success of developing countries in realizing the Millennium Development Goals hinged on adequate and predictable financing. Debt relief and other forms of assistance provided important sources of that essential financing, he added. He went on to note that developing countries remained vulnerable to exogenous shocks and a number of them, especially least developed countries, would continue to face precarious growth prospects. In that regard, the whole issue of modalities for the integration of developing countries into the world economy needed to be re-examined, he said.
VÍCTOR LAUTARO OVALLES-SANTOS ( Venezuela), associating himself with the Group of 77 and the Rio Group, said he was concerned about the worsening global economic crisis, particularly public debt. In 2011, the world had seen a worsening stock exchange in almost every country and a drop in social expenditure, he recalled. In addition, the capital used in the face of the crisis had worsened the situation instead of making it better. “We have seen an accumulation of capital without creating goods, services and jobs for people.”
He said more than 100 representatives and ministers of the global South had met recently to deal with the “tsunami” of the economic crisis, and if they united, a fairer economic model could be possible. The Second Committee should continue its work on the global economic crisis, he said, while stressing the need for fairness. The global crisis had occurred on account of models created by developed countries and institutions, including the United States, IMF and World Bank, which had been used as “mechanisms of domination”. Venezuela had chosen an alternative path from neoliberalism, he said, urging the international community to “change the system and establish new rules that promote the real economy”, with membership for all States. He also called for an early-warning system that would give pre-emptive notice to developing countries of an imminent economic crisis.
CHARLOTTE MONTEL ( France) said that as President of the G-20, her country was aware of its responsibility and was seeking to deal with the global economic crisis. However, since France had been worst affected by the economic crisis as had Europe — it was being particularly vigilant in its actions. In response to calls by developing countries for reform of international financial institutions, specifically the IMF, it had adopted some changes, including the 6 per cent transfer of quota shares from over-represented to emerging and under-represented countries while switching from a reserved-seat to an elected-seat model. The Fund has also adopted a policy that would allow it to intervene on behalf of least developed countries, a policy that mainly affected African countries. The G-20 was determined to include the United Nations in any relevant talks and meetings, she said, adding that the Group’s French presidency had demonstrated its awareness of the importance of working with all the world body’s entities.
THEERAPHAT TRANGKATHUMKUL (Thailand), associating himself with the Group of 77 and ASEAN, said that in addition to the fragile economic landscape, severe natural disasters had hit several parts of the world, adding further strain. Thailand faced one of the worst floods it had seen in several decades, which had severely affected 30 out of its 77 provinces, involving about 3.4 million people, and acres of farm land were under water. The flooding had claimed 250 lives thus far, and more than 700,000 homes had been destroyed or damaged.
Although situated in the Asia-Pacific region, which had become an engine of growth, Thailand faced challenges of social and economic development similar to those of other developing countries, he said. It was apparent that the negative impacts of a fragile financial system were not limited to financial traders, but cascaded directly into the real economy. Reform of the international financial system was therefore essential for sustained and inclusive economic growth, he stressed, adding that regional monetary and financial cooperation should be supported.
He went on to note that international trade was one of the best ways to transmit the benefits of globalization directly to the people. Thailand therefore strongly supported a transparent, rules-based and equitable international trade regime. At the same time, the country advocated open and inclusive regional economic integration as a driver of international trade and investment. In spite of the progress made in debt reduction, the long-term prospects of developing countries in debt distress were a source of concern, he said. “Let us turn the current challenges into an opportunity to strengthen our international solidarity and emerge stronger than before.”
AMBER BARTH, International Labour Organization (ILO) said structural change and increased investment were needed to address long-standing labour-market deficiencies that had led to the debt-financed crisis while improving both the quantity and quality of jobs. The ILO had been advocating through various multilateral processes — including at the United Nations, the IMF and the G-20 — a revamped financial system that must support a convergence of macroeconomic, employment and labour-market policies to rebalance the global economy and so ensure strong, equitable, job-rich and sustainable growth.
Instability, lack of confidence in the financial markets and speculative fluctuations continued to damage growth prospects for the real economy, she said. Labour markets remained fragile in most countries, causing income inequalities to widen. That was weakening aggregate demand and the financing of growth, while also leading countries to an over-reliance on export-led development, thereby further widening internal imbalances. The way forward required a much closer correlation between sound fiscal and the monetary targets of macroeconomic policy together with employment, social and environment policies, she said.
To counter the downward pressure on the world economy and consolidate recovery towards strong, sustainable and balanced growth, policies and reform efforts must give priority to the real economy, she emphasized. It was equally vital to put measures in place that would stimulate investment in the real economy through by promoting productive enterprises that generated decent work, absorbed informality and significantly reduced the space for unproductive financial operations. Employment and social protection were indispensable pillars of balanced growth and fundamental to creating the shift from a debt-driven model to an income-led model of development, she said.
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