Thursday, 30 April 2009

UNCTAD: Debt moratorium and stimulus for poor countries needed

UNCTAD's Secretary-General called for temporary debt relief for countries hard-hit by the economic crisis, telling a UN meeting that world attention to the crisis must not wane, regardless of signs of recovery in wealthier nations. Debt-ridden developing countries already struggling with the economic crisis will be particularly hard hit if they do not receive some form of debt relief in the immediate future, Secretary-General Supachai Panitchpakdi said at the annual dialogue at ECOSOC among the World Bank, IMF, World Trade Organization, and UNCTAD on 27 April. A temporary moratorium on their official debt servicing would give them some breathing space. “In the current global crisis situation, both debtor and creditor countries would probably be better served if scarcer foreign exchange earnings in the debtor economies were used for the purchase of imports rather than for debt servicing," he told the meeting.

The developing world, beset by declining export earnings, diminished foreign direct investment (FDI), and reduced remittances from citizens working overseas, as well as by rising social and financial difficulties, will also take much longer to recover from the crisis than will developed countries, Supachai said. And if better-off nations indeed begin their recovery this year and next – as some are predicting – the current sense of urgency may fade away, along with laudable measures now under way to assist less-wealthy countries. Any monitoring mechanism designed to predict or avert future crises should therefore consider trends throughout the world economy, including in developing countries, and not just in the advanced economies, he urged.

Supachai also recommended that supplementary International Monetary Fund (IMF) cash should be used to stimulate and expand developing-country economies, as the US and other developed countries are doing for their domestic economies. The IMF should not compel governments to curb public spending or tighten monetary policy, which would have exactly the opposite effect, he said. UNCTAD is predicting a US$2tr financial shortfall for developing countries, along with a 30% drop in exports in some sectors. A decline in food production is also likely, as is a recurrence of food crises in some parts of the developing world.

Friday, 24 April 2009

Trade unions call on IFIs to act quickly on G20 goals

The international trade union movement has called on the World Bank and IMF to use the opportunity of their spring meetings in Washington to accelerate efforts to stem the global collapse in employment and economic prospects. In a statement released by the ITUC and its Global Unions partners, trade unions warn that global unemployment could increase by 50 million people in 2009 unless the IFIs and governments take immediate action to implement the commitments made at the G20 London Summit.

The statement notes that among the groups most affected by the financial meltdown are workers close to retirement in countries that adopted mandatory privatized pension funds as advocated by the World Bank. Global Unions suggests that the Bank participate in providing compensation for the loss of retirement incomes suffered by these workers. The trade union statement emphasizes that job creation and public investment must be an essential part of all economic recovery strategies, and further proposes the reform of global governance systems to ensure that the world economy remains sustainable after the crisis. Noting that longstanding demands for governance reform of the IFIs remain unfulfilled, the statement urges both the World Bank and IMF to quickly and substantially increase the representation of developing countries in their decision-making structures. It also suggests that the IMF should monitor recovery programmes and advocate for stronger fiscal stimulus measures if current expansion plans prove insufficient.

In addition to outlining the international trade union movement's proposals for new financial sector regulation, including the nationalization of insolvent banks, the statement encourages the IFIs to promote active labour market policies, extend social safety nets, and invest in "green" projects to shift the world economy onto a low-carbon growth path. It calls on the IFIs to work with the International Labour Organization to find employment-driven solutions to the crisis, to support the proposed Global Jobs Pact at the upcoming International Labour Conference, and to cooperate in establishing a global Charter for international governance that would include all the major international labour, financial, trade and development instruments.

Wednesday, 22 April 2009

IMF lending still requires harmful and inappropriate economic conditions

The Center for Economic and Policy Research (CEPR) released a new paper that finds that the International Monetary Fund (IMF) is still prescribing inappropriate policies that could unnecessarily worsen economic downturns in a number of countries. The paper, Empowering the IMF: Should Reform be a Requirement for Increasing the Fund's Resources?, examines conditions tied to the IMF's new lending to El Salvador, Pakistan, Ukraine and other countries and finds the IMF is requiring macroeconomic conditions that can unnecessarily exacerbate the effects of the global economic recession on these countries.

Among the harmful conditions cited in the paper are agreements that unnecessarily tighten fiscal and monetary policy in countries facing declining output and negative external economic shocks. The IMF has at the same time advocated the passage of economic stimulus packages and expansionary monetary policy in developed economies such as the U.S., Europe, and Japan. "The main purpose of the IMF's lending and the increased resources for the Fund right now is supposed to be to help low-and middle-income countries do what the high-income countries are doing - stimulate their economies," said Mark Weisbrot, Co-Director of CEPR. "It defeats the purpose to require them to do the opposite."

The authors also find that Fund-supported policies may have contributed to the vulnerability of countries in the current crisis, as it did in the run-up to the Asian crisis a decade ago. The paper concludes that governments allocating new resources to the IMF should first ensure that there is sufficient reform of IMF governance and past IMF practices, and that accountability mechanisms are put in place at the Fund.

Tuesday, 21 April 2009

G8 Agriculture Ministers admit failure on hunger

Agriculture Ministers have admitted that they will probably fail to deliver on promises to halve world hunger by 2015. The final communiqué from the G8 Agriculture Ministers meeting in Northern Italy says the world is “very far from reaching” the United Nations goal of halving the number of people facing chronic hunger by 2015. This is the closest Ministers have come to admitting they will not deliver on the Millennium Development Goal – one of the eight international development goals that 192 United Nations member states agreed to achieve by the year 2015. "G8 Ministers have made an extraordinary admission of collective failure. This would be a sack-able offence in any other arena," said Chris Leather, Oxfam International’s Senior Food Advisor. “The G8 has failed the world’s one billion hungry people.”

An extra 150 million people have become chronically hungry in the last year as a consequence of high food prices, making the world total near to one billion people. Without urgent action the number will increase rapidly due to the global economic crisis and in the face of climate change. The United Nations Food and Agriculture agency (FAO) has called on world leaders to take action in order to eradicate world hunger by 2025. However setting a new goal will achieve little if rich countries fail to deliver on their promises.

It now falls to G8 Development Ministers, who are meeting at the end of April, to come up with concrete proposals to tackle the food crisis. These proposals must be agreed by Heads of State when they meet in July. “When leaders of the world’s richest countries meet in July they must put an end to the grandstanding and take concrete action to end hunger," said Leather. Oxfam is calling for G8 leaders to commit to a legally binding international convention that aims to eradicate hunger. There is currently no way of holding governments to account for their failure to deliver on promises to tackle hunger. A legally binding commitment would enable civil society to hold governments to account for their failure to prevent people dying from hunger in a world where we have the means to prevent it.

The meeting of the G8 and G5 agriculture ministers in Cison di Valmarino, near Treviso in the Veneto region of northeast Italy, was the first of its kind. The ministers were asked to come up with concrete proposals to address food security in a declaration by the G8 Summit in Japan in 2008. But the meeting has not produced a single concrete proposal to fight hunger, not to speak about new financial commitments.

Saturday, 4 April 2009

G20 results: Better done than the G8, but a long way to go

According to the European network on debt and development (Eurodad), political leaders did not agree ground-breaking measures to combat inequality or unsustainability or to transform global economic governance as had been suggested at the start of the enhanced G20 process last year. Yet the amount of money being pledged for developing countries is more than expected, if less than required. And on tax havens there are some useful steps forward, even if the model of information exchange will prevent many developing countries taking advantage of it.

The G20 has done better than many G8 and similar meetings in the past. But they have not sufficiently tackled the symptoms, let alone the causes of the crisis. The summit has certainly failed to “refound the financial system” as was promised before the G20 first met last November. However Eurodad wants to build on several elements in the statement, and plans active follow-up advocacy in the coming months.

Excerpts from a Eurodad statement: The communiqué states that $1.1 trillion extra money will be made available for the International Financial Institutions. Of this it states that $50 billion will be provided to “safeguard development in low-income countries”, but does not specify the time period for spending this.

The money comprises:
• $250bn in IMF Special Drawing Rights. Some $19bn of this will reach low-income countries.
• $500bn new contributions by governments to the IMF of which some $25bn over two years may be for low-income countries.
• $250bn in trade finance from export credit agencies, private companies and regional development banks, but unclear how much for low-income countries.
• $100bn extra via multilateral development banks, to be funded via bond issuances, but none for low-income countries.
• Around $6bn or so for low-income countries to be funded by IMF gold sales.

More than expected of the announced package is new money and $50bn is clearly earmarked for low-income countries, higher than expected. But there are four issues of concern. The amount for use in 2009 is not detailed, although one section of the communiqué suggests it will be over 2-3 years. During this year low-income countries are expected to face a crisis shock of $216bn according to the IMF. Also the finance is mostly in the form of loans or guarantees, not grant transfers. On lending policies or instruments the IMF is praised for its recent conditionality reforms and its Flexible Credit Line (FCL) – which Mexico has just started using – is also mentioned. There is, however, no decisive break with the economic policy conditionality that has partly caused this crisis and which seriously aggravated the social impact of previous financial crises.

The communiqué recognises that the crisis has “a disproportionate impact on the vulnerable in the poorest countries”. To deal with this it also reaffirms previous commitments to the MDGs and to ODA, and mentions that:
• The UN is asked to “establish an effective mechanism to monitor the impact of the crisis on the poorest and most vulnerable.
• Some of the low-income country money will be channelled through the World Bank’s Vulnerability Fund, but the nature of this fund is unclear.

On regulation Gordon Brown told the G20 London summit press conference that the G20 has announced an “end to tax havens that do not transfer information on request”. The Global Forum based at the OECD will today publish a list of non-cooperating jurisdictions. The “international standard for exchange of tax information” mentioned in the communiqué is not clear. But it is likely to be based on compliance with measures proposed by the Financial Action Task Force, IMF’s Review of Standards and Codes and perhaps the UN treaty on information exchange. The measures announced are a start, but will not make a significant progress in the fight against tax avoidance industry.

Other measures on regulation that were briefly announced include:
• IMF surveillance will be enhanced.
• Regulation will be extended to “systemically important hedge funds”, though nothing is said on how regulatory arbitrage will be avoided.
• The Financial Stability Forum will be strengthened and renamed the Financial Stability Board, with new members including all G20 members, Spain and the European Commission.

The leaders agree that IFI “mandates and governance must be reformed to reflect changes in the world economy”, but have agreed little specific. The IMF quota reform already agreed last year is re-announced and a further one pledged “by 2011”. The World Bank should propose further ways to change its governance “by 2010”.

G20 summit results: Chance for a new globalization?

According to the International Trade Union Confederation (ITUC) and the OECD Trade Union Advisory Committee (TUAC), the statement adopted at the London G20 meeting gives the chance for a new globalisation, with jobs at the centre and an end to the failed policies of the last three decades. "The G20 has given us the chance to turn back decades of deregulation and restore the role of government in making sure that finance serves the real economy, which in turn must serve people. Massive challenges still lie ahead in restoring economic growth and employment, notably how the structures and policies of the international financial institutions will be reformed," said ITUC General Secretary Guy Ryder.

Central for the trade union’s view are the following decisions taken at the Summit:

* A major emphasis on saving and creating jobs, with a key role for the International Labour Organisation (ILO) in monitoring developments and setting future global economic policies;

* Regulation of financial markets and action on tax havens and executive pay;

* Further support for developing and emerging economies, reform of the international financial institutions and a reaffirmed commitment to the Millennium Development Goals;

* Policies to avoid "boom and bust" economic swings and support for counter-cyclical economic activity;

* A renewed commitment to tackling climate change with a pledge to reach agreement at the Copenhagen climate summit in December 2009; and,

* Work on a new charter for sustainable economic activity.

"The enhanced role for the ILO is particularly welcome, and will be essential to meeting the G20's commitment that the recovery plan has the needs and jobs of working people at its heart. The Global Jobs Pact is the key to this," Ryder said. John Evans, General Secretary of the OECD Trade Union Advisory Committee, welcomed the movement on banking and finance regulation, but insisted that "trade unions must have the opportunity to influence the structure and workings of the new Financial Stability Board, and ongoing access to its decision-making and work programme, which has to be fully transparent and accountable. We cannot allow the same people who got us into this mess to be given the job of getting us out of it".

Advocacy work by trade unions around the world, including meetings with G20 leaders in the days prior to the Summit and in London itself, was a major factor in ensuring that employment is included as a top priority in the reform and recovery plan, and that the G20 is calling on the ILO to "assess the actions taken and those required for the future". The need and scope for further fiscal stimulus also remains a pressing issue, given the scale and depth of the jobs crisis. Governments need to begin now to prepare further job-creation measures to be implemented over the months ahead.

A number of important aspects of the G20 plan have yet to be finalised in detail. According to the unions, particular emphasis should be placed on reform of the financial institutions and their policies, ensuring that the stimulus packages and trade and development financing translates into decent and sustainable jobs, keeping the governments to their commitments on development aid and climate change, and guaranteeing that the ILO is able to play its role alongside the global finance and trade agencies. The Summit's agreement on the "desirability of a new global consensus on the key values and principles that will promote sustainable economic activity", and to start discussion on a "charter for sustainable economic activity", is especially welcomed by the international trade union movement.

Thursday, 2 April 2009

G20 summit: We should look at specific numbers

Comment by Mary Robinson

I am worried about what the outcome of this G20 Summit will be for poor developing countries. I understand from experience how these kind of discussions are held and the pressures that are exerted. But I do get the strong sense today that the G20's focus is much closer to home - that this meeting is about reforms through stronger regulation and stimulus packages all designed to move the richer and more powerful countries out of financial crisis.

I have just returned from Liberia, the DRC, Rwanda and Kenya where I have been with poor people who are living on the very edge of survival. They are truly desperate. They are still suffering from the crippling effects of inflated food and energy prices, and from worsening climate change, and now they're being hit by a financial crisis that their governments played no part in causing. The financial crisis is hurting rich countries - but it is truly catastrophic for the poor.

Can I remind about Article 28 of the Universal Declaration of Human Rights. It's very short. "Everyone is entitled to a social and international order in which the rights and freedoms set forth in this Declaration can be fully realized." Today, I see our "social and international order" unraveling. There have been food riots. There will be others. The financial crisis is having a profound destablising effect. I believe that the security concern is an extremely strong one.

The developing world needs its own stimulus package to help ensure better global security and to meet finally the millennium development goals particularly to halve poverty and achieve people's rights to health and education. The amount of money needed to do this is minimal compared to the vast bail-outs of the banks; one of the biggest lessons we have learnt in the past 12 months is that huge resources can certainly be mobilized if there's a will to do so.

This afternoon we should look to the G20 for specific numbers to help poor and developing countries. We should be wary of rhetoric only. More money to the IMF and World Bank is welcome but alone will not be sufficient. The G20 must put poor countries at the centre of its agreement, not in the margins.

Mary Robinson is Honorary President of Oxfam.

Bank bailout could end poverty for 50 years

The $8.42 trillion promised by rich country governments to bailout banks would be enough to end global extreme poverty for 50 years and a massive step towards ending it forever, Oxfam said ahead of today’s meeting of G20 leaders in London. The $8.42 trillion – made up of capital injections, toxic asset purchases, subsidised loans and debt guarantees – is equivalent to more than $1,250 for every man woman and child on the planet. The annual cost of lifting the 1.4 billion people living on less than $1.25-a-day above this threshold is $173bn. G20 leaders could make a massive difference to the world’s poorest people by diverting a tiny fraction of the bailout money to provide an economic stimulus, social safety nets and health services for those affected by the economic crisis. Oxfam is calling for a $580bn-a-year rescue package for poor countries made up of an immediate fiscal stimulus for the poorest countries of at least $24bn, debt relief and fulfillment of existing pledges to increase development aid.

Urgent action is also needed to crackdown on tax havens, which deprive developing countries of hundreds of millions of pounds of tax revenue every year – much more than they receive in development aid. Barbara Stocking, Oxfam Chief Executive, said: “When you look at the amount of money that has been found for banks it seems inconceivable that G20 leaders will stand aside and allow the economic crisis to destroy poor people’ lives." An Oxfam report, published earlier this week, revealed women are hit hardest and are often the first to lose their jobs as countries slide into recession. For many, in developing countries the recession comes on top of high fuel and food prices that have already stretched communities to breaking point.

Oxfam is pressing for rich country governments to promote a ‘green new deal’ by ensuring their domestic rescue packages help tackle climate change by accelerating the transition to a low-carbon economy. Stocking said: “We cannot return to the situation where the greed of the richest was allowed to take precedence over the needs of millions. G20 leaders have a real opportunity to take a significant step towards a fairer, more sustainable world.”