The UN discusses implications of the financial crisis for development and the international financial system

Eurodad, January 22, 2009

There is no doubt that the financial crisis will have vast implications for developing countries. The world’s poor are going to be seriously affected by a crisis they have not contributed to create, and they run the risk of being left out from key global discussions to fix the flawed international monetary and financial system. Even though the G20 is broader than the G8 any reform which excludes most of the world’s nations is doom to fail: it will lack the necessary legitimacy to set the scene for a new era of fairer economic and financial relations worldwide. Two UN processes offer hope for a more inclusive process, including an opportunity for civil society groups to input.

UN conference on the financial and economic crisis and its impact on development

NGOs have been calling on world leaders to set up an inclusive and participatory process leading to the much-needed reforms in the international economic and financial system. At the UN conference on Financing for Development that took place at the end of November in Doha, developing countries and CSOs around the world succeeded in their demand to fully engage the United Nations in the discussions on reforming the financial system and making it work for developing countries. After long and tense negotiations, governments agreed in the  Doha Outcome Document last October to convene a UN conference “at the highest level on the world financial and economic crisis and its impact on development”.

It is crucial that governments live up to their commitments and put the necessary political will and resources to make this conference a success. European development ministers are meeting for the first time after Doha on 29 and 30 January in Prague to discuss the implications of the financial crisis on development and to follow-up on the commitments made in Doha. European CSOs are calling upon their ministers to “provide the political leadership and necessary resources to make this conference a milestone in the process towards a fairer and democratic international financial architecture which works for the world’s poor.”

In the meantime the UN General Assembly is working to decide the modalities and timeline for the conference, which should be agreed by April 2009. Rumours recently indicated June as a possible date for the conference.

Commission of experts   on reforms of the international monetary and financial system

The President of the United Nations General Assembly last year also decided to establish a Commission of Experts to reflect on the causes of the financial crisis, assess impacts on all countries and suggest adequate responses to avoid its recurrence and restore economic stability.

The commission met for the first time at the beginning of January in New York and agreed a first set of recommendations for immediate action. These include, among others:

  • Additional assistance to developing countries to offset effects of fiscal stimulus in developed economies;
  • Take into account that bail-outs of financial and non-financial institutions in developed countries can generate substantive disadvantages for institutions in poorer countries. Developing countries should be provided with funds to enable them to undertake comparable policies;
  • New facilities to provide credit from countries with ample sources of liquid funds should be created. They should be governed by democratic principles and appropriate representation of developing countries;
  • IFIs should provide more funds, and they should do this without the usual conditionalities – especially those that force these countries to pursue pro-cyclical policies or to adopt the kinds of monetary and regulatory policies which contributed to the current crisis;
  • Regional efforts, such as the extension of liquidity support under the Chiang Mai initiative without an IMF programme requirement, should be given immediate consideration;
  • Developing countries should have expanded scope for establishing policies and institutions appropriate for their conditions, including frameworks that help insulate themselves from regulatory and macro-economic failures in systemically significant countries;
  • Lack of transparency has contributed to the problems in the financial market and continues to be insufficient in the actions taken by all parties in responding to the crisis.

The work of this Commission may be a key input to provide alternative views on those generated by other process and institutions, such as the IMF or the G20. To make this process fully participatory and democratic, it is crucial to include CSO views, particularly those from Southern groups. CSOs have recently been in contact with the UN to ensure that there is an appropriate consultation process in place. The UN is planning to call for written submissions and organise face to face consultations. 

  • The Commission is asking for written submissions up to 1,000 words, with principles and specific proposals under the four themes of the Commission’s work (financial regulation; macroeconomic issues; multilaterals; reforming the international financial architecture). The deadline will be 6th February. The UN Non-governmental Liaison Service (UNGLS) will compile submissions into a single document to submit to the Commission on 18th February;
  • Submissions will be via the website, to start Monday 26thJanuary;
  • UNGLS is considering to organise a meeting with CSOs around the Commission’s next meeting, which will be in March in Geneva.

A website should be up in the next few days with more details.

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