Secretary-General Ban Ki-moon today called for more action over the global financial crisis following the “laudable” steps taken by major economies and international financial institutions over the weekend, voicing deep concern over the impact of the crisis on the developing world, particularly the poorest of the poor.
“More coordinated approaches, including direct intervention by governments of the major economies, are necessary to recapitalize the banking system and guarantee the savings of ordinary people,” he said in a statement.
“The initiatives by the World Bank and the IMF [the International Monetary Fund] to provide new emergency liquidity provisioning to poor countries could help them counteract some of the consequences of this crisis. But more needs to be done,” he added, calling for urgent reform of the global financial system.
“The ad hoc manner in which governments have had to respond to the management of this crisis is reflective of serious lacunae in the current world financial system. To ensure continued stability and protect the economic gains of both developed and developing countries, we need to consider deep and systemic reforms based on an inclusive multilateralism for a global financial system that can better meet the challenges of the 21st century.”
Mr. Ban’s appeal followed similar calls for reform over the weekend from UN Under-Secretary-General for Economic and Social Affairs Sha Zukang, who told several economic summits in Washington that the crisis was clear proof of the urgent need to reform the international monetary and financial system set up during three weeks of talks in Bretton Woods in New Hampshire, United States, in July 1944.
“The current crisis throws a spotlight on the international community’s failure to adequately address systemic issues,” he said, calling for more effective regulatory frameworks, particularly in financial markets.
Other areas that “require critical attention” include improved risk monitoring and crisis avoidance as well as management better suited to the realities of contemporary global financial integration and more universal and equitable distribution of voice and representation in global decision-making bodies.
There also must be follow through, in an accountable manner, on all international commitments made in the areas of aid, trade, debt reduction, and access to technology and affordable medicines in support of developing country efforts to achieve the Millennium Development Goals (MDGs), Mr. Sha said, referring to the ambitious UN programme to reduce a host of social ills such as hunger, poverty and lack of access to medical care and education, all by 2015.
“Progress on the question of how existing mechanisms can provide financing on the scale and in the form required to address climate change is urgently needed,” he added, stressing the limitations of relying solely on voluntary mechanisms and on the amount of financial resources identified for climate change to date.
“It is critical that the international community reach agreement on financing targets and mechanisms to which all parties can be held accountable in the negotiations under the United Nations Framework Convention on Climate Change (UNFCCC),” he declared. “Deficiencies in global governance, already much in evidence in the financial crisis, will therefore have to be overcome in order to adequately and effectively address climate change.”
Mr. Ban and Mr. Sha said a Financing for Development Conference next month in Doha, Qatar, provided an important opportunity to ensure that current financial difficulties do not undermine commitments already made to provide more aid and other financial resources for the achievement of the internationally agreed development goals.
The UN expects world gross product (WGP) growth to decline to a recessionary pace below 2 per cent for 2008, down from the 3.8 per cent of 2007, implying zero growth in world per-capita income and likely falls in income for a large proportion of the population, particularly the poor. The outlook for 2009 will be even worse, with the growth of WGP expected to drop to about 1 per cent, he noted.
Growth in developing countries and economies in transition is expected to decelerate on average by about 2 per cent in 2008, from the previous year, and by another 1 per cent or so in 2009.
“The root cause of the global financial crisis is deeply embedded in policy deficiencies in the international financial system and in the unsustainable fundamentals of the world economy,” Mr. Sha declared. “The prospect of a systemic world financial breakdown –and, consequently, a long lasting economic slowdown – is real.”