Global financial crisis:

President proposes innovative solutions

President Mahinda Rajapaksa, the current Chairman of SAARC was one of the first leaders in the world who proposed the introduction of new modalities to deal with the global financial crisis, that started in the Western economies.

In the face of the deteriorating global financial conditions, President Mahinda Rajapaksa on a number of occasions, has raised the importance of adopting innovative approaches both regionally and internationally.

In this regard, the Sri Lankan President has pointed out that many of the global stimulus packages were essentially focused on helping the economies of developed economies only.

Hence, he suggested that new initiatives should be taken by multi-lateral institutions to address the needs of the developing countries, since the effective recovery from the global financial crisis cannot be attained without doing so, given the sophisticated linkages and interdependence between the various economies of the world.

On one such occasion, addressing the SAARC Foreign Ministers Conference held in Colombo on February 27, 2009, President Mahinda Rajapaksa said: “We should look for global solutions as well.

And for this purpose, let our collective voice be heard at international financial fora, seeking positive responses from multi-lateral agencies and international financial institutions to support our efforts through special proactive initiatives, such as stand still arrangements for at least one year.

Such arrangements could also be flexible enough so that at the end of one year, these could be reviewed and extended if the global financial crisis would still exist.”

As a result of President Mahinda Rajapaksa call, the Council of Ministers of SAARC adopted a Ministerial Statement calling for specific action on this proposal by South Asian nations and the international community. Such Ministerial Statement was sent to all important groups, including the G-20, and other multi-lateral institution.

It is now known that the Group of Twenty Nations (G-20), at its London Summit in April 2009, had decided to make recommendations to the International Monetary Fund (IMF) to boost its funding to all countries by US Dollars 250 billion as part of a multi-pronged strategy to contain the global crisis. Such an initiative is the first time that the IMF has adopted a course of action of this nature and magnitude and this new scheme appears to be well in line with the proposal made by President Mahinda Rajapaksa at the SAARC Ministerial Conference.

On August 13, 2009, the IMF approved a new allocation of US Dollars 250 billion of Special Drawing Rights (SDRs) to inject fresh liquidity into the global financial system, and this decision was implemented by the IMF on August 28, 2009.

By the third quarter of 2009, many economies had already begun to show the first signs of economic recovery in the form of increasing commodity prices and industrial output. On that basis, with the new economic stimulus that has been unfolded by the IMF, countries that have been enduring the global economic crisis could benefit immensely and accelerate their recovery processes in the near term.

In this regard, economic experts and analysts say that although the world should welcome this current initiative of the IMF, that it should also be noted that, had this response been implemented sooner at the time it was first proposed by President Mahinda Rajapaksa, the economic hardships endured by many countries and countless number of individuals globally, could have been significantly minimised or avoided.