Commonwealth developing nations risk becoming ‘collateral damage’ of global financial turmoil

Commonwealth Secretary-General Kamalesh Sharma, on 13 October 2008, expressed his deep concern at the potential impact of the financial crisis and the global economic slow-down on the development prospects of the world’s poorest and most vulnerable people.

“At the weekend, the IMF confirmed that the financial crisis and economic slow-down is global. So we must be global in our analysis and response,” said Mr Sharma.

“The shock waves now being experienced by the rich are felt many times over by those who have less, and who stand to lose what they have worked so hard to build.

“Many Commonwealth countries and their people are at high risk of being the unintended collateral damage of the financial crisis and economic slow-down in developed countries. I welcome the commitment to co-ordinated action in the developed world to deal with the financial crisis. But the global solutions now being debated and implemented need fully to take into account the needs of the world’s poorest and most vulnerable people. It is too easy to forget that the seismic shocks of the global financial earthquake are every bit as serious at the periphery as they are at the epicentre.”

Food, fuel – and now financial crisis

Mr Sharma stressed that the challenges were particularly great for developing countries and smaller states, which are already experiencing slower growth in 2008. This reversal is the result of the severe strains being placed on their balance of payments, by rapid rises in food and fuel prices (at stages, up by a quarter and two-thirds respectively in 2008), and by higher inflation (up by a third).

“Before this financial crisis took its global hold, many Commonwealth countries were already in the grip of food and fuel crises. Some of our economies are especially dependent on trade, and therefore especially vulnerable to changes in the global economy. With the World Bank estimating that a further 44 million people have been added to the number of the world’s undernourished this year, slower economic growth is a human tragedy as well as an economic disaster,” he said.

Impact on developing countries

The Secretary-General highlighted some of the ways in which poorer countries will be affected by the crisis. “Lower global growth does not just mean less trade. It means less investment in Commonwealth developing countries; growing pressure on governments’ budgets; fewer remittances from Commonwealth citizens abroad to their home countries; and fewer tourists to Commonwealth destinations.”

Mr Sharma further emphasised the overarching need for a response that is truly global. “Some people are already comparing the situation facing the world now with that of 1929. We must learn the lessons of that time and recommit ourselves to work collectively to tackle this crisis for the benefit of the world, constraining its worst effects. Decisive multilateralism is more important than ever,” he said.

Increased aid levels

The Secretary-General stressed that now was the time to maintain and increase development aid levels, and to commit to an early, development-oriented conclusion to the Doha Round of trade negotiations. “Less than three weeks ago, at an emergency summit in New York called in the face of serious slippage in progress towards meeting the Millennium Development Goals, UN Secretary-General Ban Ki-moon declared that there is a global development emergency. That emergency is now intensified by the developments in the financial markets.”

Reform of international institutions

Mr Sharma concluded that the current crises – and the difficulties faced in tackling their causes – reinforced the need to take forward the Commonwealth’s current work to bring about the reform of international financial institutions. These, he said, must shape global responses to crisis, and be representative of the entire global community, promising equal voice and equal benefit for all their members. “The first priority is to solve this crisis and bring stability to the global economy. That means a new commitment to transparency and regulation, coupled with the openness and liquidity which has brought such benefits in the last generation. But in the long run, maintaining global growth for the benefit of all the world’s citizens needs a multilateral system which prevents crises in the future. That is the vision of the international system which the Commonwealth is promoting and actively pursuing.”