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Developing countries cannot be sole engines for recovery - G24

Developing countries cannot be sole engines for recovery - G24
By Mutale Kapekele in Washington DC
Mon 11 Oct. 2010, 14:40 CAT

THE Intergovernmental Group of Twenty-Four (G24) has observed that emerging markets and developing countries cannot be sole engines of global recovery from the current economic crisis.

In its recent publication titled 'The day after Tomorrow', the World Bank observed that developing countries were the new engine of global growth that could lift the world from the crisis.

In a communiqué on international monetary affairs and development that was read by South Africa’s Minister of Finance Pravin Gordhan following a G24 meeting that he chaired on Thursday, the ministers observed that emerging markets and developing countries' increased economic growth was not enough to permanently defeat the crisis.

According to the World Bank, growth in developing countries is estimated to reach 6.1 percent in 2010, 5.9 per cent in 2011, and 6.1 per cent in 2012, while corresponding figures are 2.3 per cent, 2.4 per cent, and 2.6 per cent for high-income countries.

“While emerging markets and developing countries (EMDCs) will continue to provide a major impetus to the global economy, they cannot be the sole engines for the global recovery,” the ministers observed.

The G24 ministers expressed concern about the impact of the growing divergence in monetary policy between advanced and developing countries.

The ministers were particularly concerned about the prospects of sustained low interest rates in the advanced countries which they said had contributed to a surge in capital flows to some emerging markets, putting upward pressures on exchange rates, creating overheating pressures, and carrying risks of increased vulnerabilities and
reversals.

In view of the risks posed by surges in capital flows, the G24 called on the IMF to strengthen the monitoring of such flows and to consider options for mitigating risks.

They also welcomed the G20 mutual assessment framework and process as a means for proactive and cooperative actions by major economies, and asked that the framework take into account the needs of all developing
countries.

The ministers also called for appropriate calibration and adaptation of the new rules to the circumstances and needs of developing countries including the smooth functioning and deepening of credit markets and the cost of credit.

The G24 stressed the need for continued commitments to avoid protectionist pressures in trade, finance, investment and labour services as well as the importance of resuscitating and reaching an early conclusion of the Doha Development Round.

They also stressed that the IMF’s legitimacy, relevance, and effectiveness in implementing its mandate depended critically on addressing the imbalance in voice and representation.

The ministers reiterated that the goal for the Fourteenth General Review of Quotas to be completed by January 2011 must be to bring about a shift of at least 5 percentage points from advanced economies
to EMDCs.

The ministers believed that the current size of the IMF Executive Board was appropriate given the increase in the number of member countries.

They called for a rebalancing of Board composition through increasing the number of chairs held by EMDCs, including by considering a third chair for sub-Saharan Africa.

The ministers noted that the ongoing review of the IMF’s mandate must go hand in hand with ambitious steps to improve the Fund’s governance and legitimacy.

On development priorities, the ministers stressed the need for a more cooperative multilateral development agenda in support of national development goals and priorities.

They noted that although the crisis has been a major setback to the development progress achieved over the past decade, developing countries had shown greater resilience than in previous downturns. - Post Online Zambia

Labels: G24, World Bank

posted by MrK @ 4:12 PM