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UN meet highlights development crisis in wake of global downturn (part 1)

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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.

- Third World Network Features

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