G-24 outline for bringing poor into global system

By Sridhar Krishnaswami

WASHINGTON, APRIL 16. Although several emerging market economies have returned to a faster growth trajectory in the aftermath of the financial crisis, there are significant risks, vulnerabilities, constraints, high levels of poverty and debt in many parts of the developing world. In this context, the excessive hikes in short- term interest rates in major industrial nations may negatively affect global growth prospects and the cost of credit for the developing nations, say the Ministers of the Group of Twenty- Four.

In a joint communique at the end of the 63rd meeting here, the Ministers of the G-24 have also emphasised the need for a well- sequenced and balanced approach toward the further integration of developing countries, the poorest in particular, into the global trading system. The Ministers have taken the position that the World bank and the regional development banks have an important role to play in capacity building and infrastructure development ``to further and accelerate'' such an integration.

``The BWIs (Bretton Woods Institutions) must continue to provide effective support in the research on trade barriers and to assist developing countries to increase their capacity to identify and defend their interests,'' the G-24 said. The Ministers have also expressed support to ongoing efforts to develop ways to hedge against severe fluctuations in commodity prices.

At a time when there is a lot of attention on issues of debt and the plight of the poorest in the international system - both inside the World Bank and IMF buildings, and outside by way of the street protests - the G-24 has expressed serious concern over the insufficiency of bilateral contributions from donor countries to `Heavily Indebted Poor Countries Initiative Trust Fund' that would finance the share of debt relief from the World Bank and other multilaterals.

The G-24 has further cautioned that the debt service forgiveness granted by IDA to cover its own share of debt relief may compromise the future availability of IDA lending for the HIPC and Non-HIPC Initiative. ``More generally, slow legislative action on the part of the industrial countries for the funding of the components of the HIPC initiative is delaying their bilateral contributions, including for the transfer of the reminder of the investment income from gold transactions to finance the IMF's share,'' the communique says.

Mechanism of funding

One of the important issues that the G-24 has addressed is the mechanism of funding for the HIPC initiative, the argument being that the present arrangements shift a disproportionate burden of the cost of the initiative to other developing countries, including other HIPCs, and other poor countries. With the present arrangements also requiring a substantial contribution from multilateral organisations, these institutions were encountering difficulties in financing their share of the HIPC debt relief.

In order to secure the success of the HIPC initiative, the Ministers have suggested that a strategy be developed to address these problems that would include the provision of additional bilateral and multilateral grants to support contributions from developing nations and regional institutions. ``Particular attention should be given to providing financial support that would allow the participation of those developing countries whose claims on HIPCs represent a high proportion of their GDP and exports,'' the G-24 observed.

In welcoming the debate both within and outside the Bretton Wood Institutions on the reform of the international financial system, the Ministers of the G-24 expressed serious concern about proposals for the reform of the BWIs in ways that would deprive access to either the IMF or the World Bank Group's resources for any group of members, especially the poorest. The Ministers have also regarded the proposals for raising the cost of access to the BWIs facilities as shifting the burden of resource provision from one set of developing countries to another.

Call for transparency

At a time when there has been considerable criticism from the outside over the manner in which the Managing Director of the IMF and the President of the World Bank are chosen, the Ministers of the G-24 have called for a process that is ``transparent, involves the entire membership through the Executive Boards and allows the selection of the best candidate from any part of the world''.

On transparency, the G-24 argued that this concept is crucial for the demonstration of ownership, promotion of accountability and good governance, for attracting private capital flows to developing countries and for crisis prevention. The Ministers also stressed that transparency must be applied uniformly to all players in the international system - the developed and the developing world, and private, public and multilateral institutions alike.

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Section  : International
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