Info Service on Finance and Development (Apr12/13)
27 April 2012
Third World Network
concerned with global finance and development, calls on IMF and World
Washington, D.C. (Bhumika Muchhala) – The Group of 24 (G24) developing
countries called on developed countries to curb negative spillovers
from volatile capital flows and commodity prices, and to restore fiscal
and debt stability to their economies without depressing domestic demand.
The G24 held its 87th session at the spring meetings of the International
Monetary Fund (IMF) and the World Bank, in Washington, D.C. on 19-22
G24 concerns about recession in the EU and US
communiqué expressed concern of the persisting high risks to emerging
market and developing countries from possible renewed tensions in the
Euro area, and from high and volatile oil prices driven by both geopolitical
and financial forces.
G24 countries are adversely impacted by the slowdown in Euro area and
US economies in myriad ways, such as a clamp down on export demand and
a credit crunch on access to foreign capital.
In the context of the export-oriented economic model that predominates
the industrialization trajectory of most developing countries, and in
the context that many developing countries are heavily dependent on
foreign capital to finance their current account deficits, the unabated
economic recession in developed countries is a serious concern.
Developed countries are also called upon by the G24 to undertake “vigorous
structural reforms,” which in part implies boosting job-creation and
domestic demand in the Euro area and the US.
The G24 also repeatedly highlights “conducive macroeconomic policies
to boost global growth” in the Euro area and the US, inferring to the
heavy influence the developed countries macro-policies have in spurring
or stagnating the momentum of global growth.
In the above context, hasty deleveraging by Euro area banks is cautioned
against due to the negative impacts on access to trade and infrastructure
finance for developing countries.
Still resisting the IMF’s approach on capital controls
repeated their previous strong assertion on the ability of developing
countries to adopt capital controls and other policies in “flexible
and discrete” ways to “mitigate risks associated with large and volatile
This G24 stance has remained unchanged from the G24’s two communiqués
in 2011. The G24 has persistently rejected the IMF’s proposed framework
for capital controls, to be used as staff advice and surveillance reports
to member countries on managing capital flows.
The Fund’s proposed framework had included macroeconomic pre-conditions
countries are to have in place before being able to use capital account
In reaction, the G24 had stressed that the IMF must adopt an “open-minded
and even-handed approach to the management of capital flows and take
into account policies in capital-originating countries,” in particular
the financial centers in the US and the Eurozone.
This year, the G24 again expressed “strong reservations on the
integrated approach proposed by IMF staff and insist that it should
not result directly or indirectly in new obligations on members.”
The point that capital account management measures should be seen as
an integral part of the policy toolkit was reaffirmed.
Policy areas identified as priorities
addition not mentioned by the G24 in last year’s communiqués is the
need for further study of sovereign debt restructuring mechanisms,
which the G24 state has been highlighted by the ongoing European debt
The G24 underscored addressing the excessive volatility of commodity,
food and energy prices through action that includes “better regulation
of commodity derivative markets” and “concerted steps to enhance
food and energy security, especially in low-income countries.”
Two areas of priority identified by the G24 are job creation and
social safety nets that protect the poor and vulnerable, which the
member states underscored their commitment to in order to achieve strong,
inclusive, sustainable and equitable growth.
On official development assistance, or ODA, the G24 communiqué
reiterates past emphasis on timely and full delivery of aid commitments
already made by developed countries.
IMF surveillance, and the need for it to be conducted by staff
in a more fair and balanced manner, is again highlighted by the G24.
The communiqué referred to the range of existing proposals to “enhance,
better integrate and balance the IMF’s bilateral and multilateral surveillance
The recommendations of the Independent Evaluation Organization (IEO),
which highlighted the IMF’s bias in carefully monitoring developing
country macroeconomic fragilities but overlooking those of developed
countries, was also pointed to by the G24.
The G24 called on the IMF to complete the 2009 financing package
for low-income countries, through 2014, as an “immediate priority.”
The additional financing needs of low-income countries, particularly
in light of the impact of energy price increases, also needs to be addressed
by the IMF.
Increased efforts to mobilize donor support is called for, as well as
an “early discussion” within the IMF on meeting longer-term financing
gaps in low-income countries.
IMF governance reforms still unfulfilled
G24 called on all IMF member states to implement the 2010 quota and
governance reforms by the time of the annual meetings of the IMF and
World Bank in October 2012.
A timeline of January 2013 is slated for the review of the quota formula,
which determines member state decision-making power in the 24-member
Executive Board of the IMF. Completion of the Fifteenth General Review
of Quotas is marked for January 2014.
This G24 stated that the reformed quota formula “should lead
to an increase in the calculated and actual quota shares of dynamic
emerging market and developing countries in line with their relative
positions in the world economy.” The additional quota shares of more
powerful developing countries should not come at the expense of less
powerful developing countries.
The G24 said they “believe that the ultimate goal must be to better
reflect the growing role of emerging market and developing countries
as a whole in the global economy.” Meanwhile, the voice and representation
of the smaller states must also be protected.
With regard to the long discussed third chair for sub-Saharan African
countries, the G24 argued that this third chair “must be in place
of a chair held by an advanced country,” rather than an additional chair.
The G24 also stated that overall governance reforms should increase
the number of chairs held by developing countries on the Board.
The boosting of IMF lending capacity must not, the G24 warned, undermine
the character of the Fund as a quota-based institution. Rather, an enlarged
financing capacity must be anchored in a firm commitment to governance
The G24 also recognized that for the first time in the World Bank’s
history, it held an open leadership selection process that involved
a debate on the priorities and the future of the institution. It was
stressed that future selection processes must build on this last endeavor,
and be transparent and “truly merit-based.”
World Bank priorities and programs
supported the World Bank’s initiative to promote social protection
and safety nets, and underscored their necessity not only during
crises but also under normal situations, for the building of human capital
and productivity. To facilitate an expanded use of social protection
and safety nets, increased South-South learning and knowledge transfer
was called for.
The importance of both IMF and World Bank responses to the development
needs of the Middle East and North Africa region was reiterated
by G24 Ministers. A “scaling up” of resources, policy advice and technical
assistance was also called for in order to address high and persistent
unemployment, and myriad economic and development challenges.
The G24 welcomed the establishment of a working group of IMF Executive
Directors representing small states, which aims to give greater
visibility to the disproportionate vulnerability of their countries
to economic shocks and natural disasters. More appropriate policies
and adjustments in small state financing, to respond to their particular
circumstances and needs, was urged for by G24 ministers.
In light of the financing gap most developing countries face in the
context of shrinking credit available from rich country donors and international
banks, the International Finance Corporation (IFC) and the World Bank
are called upon by the G24 to provide a “steep increase in investment
in infrastructure over the next few decades.”
The possibility of a BRIC development bank was alluded to as
a source of financing for sustainable development and infrastructure
projects across developing countries. The G24 also pointed to the “growing
pool of savings” in many developing countries, in that enhanced South-South
cooperation can channel funds into “stable, predictable and scaled finance.”
The G24 urged that the World Bank draw upon the capacity of middle-income
countries more meaningfully to produce greater development benefits,
particularly for poverty eradication. South-South exchange offers one
way, that is so far under-utilized, to leverage resources and knowledge.
The final paragraph of the communiqué acknowledges the upcoming UN
Conference on Sustainable Development (Rio+20) as an “important
opportunity for the international community to renew its political commitment”
on sustainable development, “in accordance with the principles and provisions
of the Rio Declaration on Environment and Development, including the
principle of common but differentiated responsibilities, Agenda 21 and
the Johannesburg Plan of Implementation.”
The full text of the G24 communiqué can be found at: http://www.imf.org/external/np/cm/2012/041912.htm
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