UN meet highlights development crisis in wake of global downturn
(part 1)
Bhumika Muchhala
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The upcoming UN General Assembly on the global
financial and economic crisis ought to focus on the threats faced by
developing countries to their development in this present downturn.
(First of a two-part article)
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The critical impacts of the current financial and economic crisis on
developing countries threaten to undermine their development prospects
and require the attention of the highest level of participation in the
June conference of the UN General Assembly on the world financial
crisis.
This message was highlighted by delegates at the annual high-level
meeting of the UN Economic and Social Council (ECOSOC) in April in New
York. Participants included representatives from the Bretton Woods
Institution, the World Trade Organisation (WTO), UN organizations as
well as country delegates.
Workers in an export-oriented factory |
The meeting focused on the impact of the global financial and
economic crisis on development, the international financial and monetary
architecture and global governance structures. The intergovernmental
process to carry out the financing for development commitments agreed to
in Doha, in November 2008, was also discussed.
United Nations Secretary General, Ban Ki-moon, in his opening speech
stating that this year’s ECOSOC meeting is “more urgent than ever” due
to how the current global economic and financial crisis is exposing
dangerous weaknesses and flaws in the international economic system. A
shrinking global economy, falling average incomes, collapsing trade and
the threat of social violence are together conspiring against
development efforts, which will see “negative effects in nearly every
area covered by the Monterrey Consensus and the Doha Declaration on
Financing for Development.
While Ban Ki-moon acknowledged the steps taken by the Group of 20
(G20) at their London summit on April 2, he stressed that the United
Nations is in the process of establishing a system-wide mechanism for
monitoring vulnerability and sounding alerts, which will work toward
keeping the financial crisis and economic recession “from evolving into
a major humanitarian crisis and a breakdown in peace and security.” He
stated that as devastating as the ensuing crisis is, it is “also an
opportunity to move towards a Green New Deal.”
The flagship publication of the World Bank and International Monetary
Fund (IMF), “Global Monitoring Report 2009 - A Development Emergency,”
emphasized that the ongoing financial and economic crisis occurred on
the heels of the food and fuel price crises of 2008, and is in essence,
a development crisis. In presenting the report, Zia Qureshi, Senior
Adviser to the Chief Economist of the World Bank. Qureshi stated that it
does not appear that this financial and economic crisis will be
short-lived.
World output is to fall by 1.3% in 2009. Developing country growth
will fall to 1.6% in 2009 - only a quarter of the pre-crisis projection.
Growth in sub-Saharan Africa will be 1.7%. The global growth slowdown
will trap 55-90 million more people in poverty in 2009.
The absolute number of people in poverty will rise in more than half
of all developing countries, and in two-thirds of low-income countries
and three-quarters of African countries.
For low-income countries, even though food prices have come down from
their peak in 2008, prices still remain high. The food crisis is not
over. It will continue to trap up to 100 million people in poverty in
2009. It is thus critical that investments to boost agricultural output
should not decline.
Qureshi highlighted that growth collapses are costly for human
development outcomes.
The food crisis has resulted in the number of hungry people in
developing countries to rise from 850 million in 2007 to 960 million in
2008. The economic slowdown will raise this number to past 1 billion in
2009.
Infant deaths could be 200,000 to 400,000 higher per year on average.
School attendance outcomes are projected to fall, and the overall
outlook for the Millennium Development Goals (MDGs), already a cause for
serious concern, has become even more worrisome.
Most MDGs, in particular maternal health and mortality as well as
child mortality and primary education, are now unlikely to be met.
According to the assessments in the joint report, the first order of
business is to stabilize global financial markets and counter the
economic recession.
But strong and urgent actions are also needed to counter the impact
of the crisis on developing countries.
The report sets out six priority areas for action to confront the
development emergency in developing countries.
These are an adequate fiscal response, improvements in private
investment, a redoubling of efforts toward achieving the MDGs, scaling
up aid to the poor in vulnerable countries, maintaining an open trade
and financial system and ensuring that the multilateral system has the
mandate, resources and tools to respond to the current crisis.
The ECOSOC meeting raised a number of key priorities for developing
countries affected by the financial and economic crisis. Some of these
priorities are the ability for developing countries to undertake
countercyclical policies and to not be prohibited from doing so,
especially by conditionalities attached to loan and aid.
A high-access loan facility without conditionalities, much like the
new Flexible Credit Loan (FCL) of the IMF, to assist developing
countries was called for, as well as additional resources and increased
aid flows from donor countries. Several country delegates noted that
global recovery can only be achieved if key donors not only honour their
previous aid commitments but also go beyond their commitments and
augment aid resources.
A new debt crisis, especially in debt vulnerable countries, was
called attention to, as UNCTAD (UN Conference on Trade and Development)
Secretary-General Supachai Panitchpakdi called for a temporary
moratorium on official debt servicing for countries hard-hit by the
crisis in order to both avert a debt crisis and to increase the fiscal
space of developing countries.
Supachai also recommended that IMF loans to crisis-affected
developing countries should not advise governments to curb public
spending and tighten monetary policy, which have the opposite effect of
stimulating and expanding developing-country economies, as the US and
other developed countries have been doing.
Trade and financial protectionism, making progress in the Doha round
of Development in the WTO as well as the need for Least Developed
Countries (LDCs) to access developed countries markets in order to meet
their urgent need for their own ‘fiscal boost’ was mentioned.
Meaningful reforms in the voice and participation of developing
countries in the decision-making structures of the IMF and World Bank
was stressed as a critical requirement to address the crisis. The
central role of ECOSOC in the Financing for Development (FFD) process
was alerted to by many, and the meeting reinforced the important role
FFD plays in building bridges between key development actors and meeting
the development needs of developing countries.
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