Resolving economic crisis

The global financial crisis has opened the eyes of the world economic power houses to the importance of applying solutions across the spectrum to encompass Third World countries.

No longer can these Western economies operate in isolation given the increasing interdependence between economies in a globalised structure.

It is also gratifying to note that the powerful economic blocs such as the G20 are veering away from its hegemony and are acting considerately towards the poorer countries.

The new generosity displayed by the IMF to Third World countries it now transpires, has its genesis in a plea made by President Mahinda Rajapaksa during the SAARC Summit in April. This was a time the global economic meltdown was having a crippling effect on the major economies and was threatening to strangle the Third World nations.

Addressing the SAARC Foreign Ministers Conference in Colombo, President Rajapaksa called for a global solution encompassing both rich and poor countries given the increasing inter-dependence and sophisticated linkages between the developed countries and third world economies.

On that occasion, the President advocated new modalities and innovative approaches to deal with the crisis both regionally and internationally. This was due to the fact that the global stimulus packages unveiled were directed at helping only the economies of the developed countries.

The President told the SAARC Foreign Ministers "let our collective voices be heard at international financial fora seeking positive responses from multilateral agencies and international financial institutions to support our efforts through special proactive initiatives".

In effect, the President was calling for strong South- South amalgam to force the developed nations to adopt an inclusive approach in dealing with the crisis.

It is now evident that the President's forceful advocacy that a solution should be all encompassing has found resonance where it matters.

As reported in our main story yesterday, it was decided at the April G20 Summit to make recommendations to the IMF to boost its funding to all countries by US dollars 250 billion as a multi-prong strategy to contain the global crisis. This decision was implemented in August and there are already signs of economic recovery in the form of increased commodity prices and industrial output.

This may perhaps be a trend that we would be witnessing in the future where the world economic powers would target their policies to benefit a collective rather than members of a select club. The globalized format of emerging structures would leave no other choice but to force the western economies to come out of their cocoons and address the crises on a collective basis.

If there is one thing that the global financial crisis has taught the world economic power houses, it is that they can no longer afford to act in isolation in their decision making.

Their decisions will have to consider the lesser economies whose interests are interlinked with theirs, however remote. It goes without saying that a break in this link or any weak spot down the line is bound to trigger a collapse of the entire edifice under the present order. Therefore the economic health of a third world countries today is paramount for the stability of the rich nations.

Hence it is vital that these Western economies extend all assistance to uplift the third world economies which are intrinsically linked with their own.No extraneous issues such as human rights should be brought into the equation.

Sri Lanka is hoping for the renewal of her GSP Plus facility which would boost her exports and stabilize the economy. The EU should not waver on this and follow the example of the G20 in giving a breather for poor economies to recover.

For, the Third World countries have now come to be major players in the new world order and a key factor in the stability of global financial markets. They can be ignored only to the cost of the economic superpowers.