And with this, the industrialised countries have taken the changed global economic power structure into account. The financial crisis further accelerated this development. The G put itself on the throne, rendering the legitimacy of decisions with global impact questionable. Like the Netherlands and Spain, it does not even have observer status. Previously the meetings had involved the individual ministers of finance and the heads of the issuing banks. In particular, the direct interests of the poor countries were, for the most part, not taken into consideration, although the final declaration did mention the necessity of supporting the threshold and developing countries.
They would have to obtain access to sufficient financial resources. The declaration called on the IMF to be flexible in applying its credit instruments. The World Bank and multilateral development banks should use all their resources, and if necessary increase them, to support the poor countries. There were no concrete courses of action in favour of the developing countries; the phraseology remained vague.
Central bank cooperation during the great recession
The major threshold countries integrated in the G proved to be ineffective pioneers for the poorer developing countries. However, the latter hope to be able to benefit indirectly from the incipient technical reform process, e. The World Bank and multilateral development banks would increase their loans to low-income countries by USD billion. The capital basis would be broadened proportionately. A further USD billion should be made available to finance trade. IMF and World Bank institutional reforms that have already been initiated should be speeded up and extended.
In contrast, various comments on the results with respect to the development aspects were cautiously optimistic. The aid organisation added critically that, however, this would be for the most part in the form of loans and not gifts. Oxfam called for expeditious implementation. The voting reform and other governance questions remained mired in generalities. There was no call for a new IMF and World Bank policy; the strict conditionality of loans was only mildly modified see below. At the same time the summit emphasised that reforms of the IMF and World Bank mandate, mission and governance should be continued.
The conference also presented two extensive representations in table form of progress made, both with a fundamentally positive appraisal of what had been achieved G Woods did acknowledge IMF efforts for increased inflows of funds. However, it criticised the fact that the G had not yet provided the funds pledged. Aid resources for the developing countries are linked to disadvantageous conditions. Regulation of raw materials speculation and progress with tax havens, inter alia , are slow and insufficient.
This network of 75 civil society organisations is examining, on the basis of 13 G aims, whether the G is indeed on the right road and whether the needs of the developing countries have been met. Only in the event of a surveillance mechanism, to be created by the UN, monitoring the effects of the crisis on the poorest, does Jubilee come to a positive response on both counts.
At the same time the G resolutions also added impetus. Vice versa, the heads of these organisations were not loath to call urgently on the G heads of State for speedier and more intensive action. They were able to attend the summits as observers. To this end, all the multilateral financing institutions had to significantly expand their own resources. This process had not been completed by autumn At the same time the financial crisis had entailed increased pressure on the reform of governance. However, the resistance of a few industrialised countries remained high; nevertheless, the reforms should be completed in The more the crisis spread, the more active the IMF became.
In October several countries had to apply to the IMF for aid.
At the same time this about-turn in calls on the IMF challenged it to accelerate and complete the ongoing revision of its credit instruments. This also involved an examination of the frequently criticised economic policy conditions for granting loans. As the IMF recommended massive stimulation programmes to the industrialised countries impacted by the crisis, the developing countries accused the IMF of double standards in view of their previous experience with its stringent conditions.
And finally, the developing countries emphatically urged the IMF to at last step up the reforms on voting rights and other governance questions. In March the IMF published an important and comprehensive survey of how the poorest countries have been hit by the crisis and the measures that had to be taken IMF a.
The IMF created the flexible credit line as a precautionary measure for countries whose policies are considered good and which post sound macro-economic data. The credit conditions were simplified and the credit lines raised. Switzerland also pledged to provide the IMF with an exceptional, set-period contribution to the stocking up in the amount of CHF On the other hand, the consultative commission adjourned the decision-making until it could examine the report announced by the Federal Council regarding the increase of official development assistance ODA to 0.
IMF aid granted to the 15 countries which applied for credit in the past few months was successful IMF c. The conditionalities have been simplified and limited IMF d. Some three international networks reproach the IMF for changing its policy only insignificantly. Rather, fiscally restrictive IMF conditions in three countries examined 38 would impair the essential social protection Solidar, Global Network, and Eurodad Chowla also sees a restricted development potential in IMF resources.
It is a fact that the IMF is now bound to implement quota reform and with it the revision of voting rights by January The blocking minority of the US should also be done away with. At all events, in the IMF did undertake an extensive dialogue with civil society that led to the publication of a civil society report New Rules and to a joint event in Istanbul before the annual meeting. However, whenever there was a potential conflict of interests between the cautious financial gestures of the IMF and increased transfer of resources to the developing countries, Merz always upheld the former, e.
Governor Olli Rehn: Challenges of Monetary Policy – Past, Present, Future, 1 July
It was soon patent that the poorest countries, already depleted by the food and energy crisis, had few possibilities of providing the necessary responses from their own resources. One-third of this went to infrastructure projects in the hope of rapidly increasing employment and generally stimulating the economy. The World Bank expects a further rise in the coming years. Financing can no longer be covered by the present World Bank capital basis. On one hand, it raised the interest on loans; on the other, it took up significantly more funds on the international capital markets.
IDA accelerated its processes for the poorest countries to receive their funds more rapidly. They granted loans, participated in enterprises and put up guarantees. The latter is significant because local enterprises in developing countries had encountered increasing difficulties in obtaining trade credits or bank guarantees from the major international banks. At the time this would have raised some USD 15 billion. However, the World Bank estimated the financing shortfall of the developing countries much higher. According to this scenario, the World Bank considered the financial needs for to be between USD and billion Development Committee a.
The Past and Future of Central Bank Cooperation
Zoellick repeated the appeal in a call to the leaders of the G summit in Pittsburgh World Bank b. The World Bank also published numerous studies and reviews. However, effective payments tended to lag behind the approvals. Further, there are doubts whether the massive investments in infrastructure would really help protect the socially weakest. They further demanded that the aid measures should not be coupled with economic policy provisos.
The services should be rendered as concessionally as possible or even in the form of gifts. The slow and not far-reaching progress in the democratisation of the World Bank was deemed completely insufficient. In the development committee, the industrialised countries bridled at an immediate raise in capital, which the World Bank considered necessary, supported by the developing countries.
The World Bank is to make further clarifications before the next spring meeting. The ascendance of the G at the cost of the G-8 is irreversible. The larger threshold countries are demanding more influence. A renewed conflict is imminent. This also explains the adamant attitude of the larger threshold countries. Obviously they also see the IMF rather than the UN as the decisive power centre and forum for disputes on global economic issues.
And they take advantage of their access to the newly significant G They want to exercise their influence there for a new global financial order. Smaller and weaker States are rather committed to the UN, though without far-reaching success. The agenda of the global discussions still bears the stamp of the interests of the rich countries. This can be demonstrated by three examples: the debate on debt, the issue of global taxes and the question of international tax evasion and capital flight.
How to cope with this issue is a primary element of public economy and political debate. In , according to the IMF, the total burden of debt of all the developing countries mounted by a further USD billion to USD 4, billion 47 and will, according to predictions, continue to rise in the coming years. But they simultaneously warned that in a number of countries the debt vulnerability has risen sharply, namely in high-risk countries like Afghanistan, but also in Ethiopia, Malawi, Mali, Mauritania, Nicaragua and Sierra Leone. All HIPCs would be exposed to at least a moderate risk of being involved in any future debt crisis.
Half of the countries are still so severely burdened by old debts that their risk is very high or high. This menacing time bomb is allowed only an insignificant place in the ongoing discussion. In August the President of the British Financial Services Authority, Adair Turner, therefore proposed the introduction of a financial transaction tax, 49 and French and German government circles supported the idea. Before the Pittsburgh summit, non-governmental organisations wrote to the G that a tax of this kind should be introduced and the income used for development purposes.
The motion was not discussed seriously either in Pittsburgh or in Istanbul. However, the measures introduced to date largely bypass the needs of the developing countries. Any country which did not have at least 12 double taxation agreements DTAs or tax information exchange agreements TIEAs with other countries was blacklisted.
These agreements must, at least, meet the OECD minimum standards for mutual exchange of tax information on request.
go to site The lists were updated continually OECD a. OECD presents a review of its efforts in the struggle against tax evasion in an informative brochure published in October In the meantime, according to OECD, the offshore centres monitored have signed 90 new agreements for improved exchange of information since April and over 60 are currently being negotiated. New ones are being added continually.
OECD argued that the developing countries would also benefit from them. Many of them have not yet been brought into operation. Developing countries have also contracted far fewer bilateral DTAs than the industrialised countries.