Small states are the 'innocent victims' of world financial crisis

A major conference convened by the Commonwealth Secretariat on the impact of the global financial crisis on small states heard this week how smaller nations are bearing its “tremendous cost”.

Dr Jomo Sundaram, United Nations Assistant Secretary General for Economic Development, opened the ‘Sustaining Development in Small States in the Turbulent Global Economy’ conference with a warning that the international community must act faster to ensure a global recovery.

He said: “In many ways developing countries are innocent victims of this crisis for which they will have to bear a tremendous cost.”

Dr Sundaram warned of the threat of deflation, reduced social spending, and unrest amid declining aid flows as well as the “failure of the international community” to agree on a co-ordinated global economic stimulus.

“As long as you delay the recovery effort the slower the recovery will be,” he said. “If you have a co-ordinated global stimulus, you will actually have a stronger recovery.”

Policy responses for small states

Held between 6 and 7 July at Marlborough House, the headquarters of the Commonwealth Secretariat, the conference brought together envoys from Commonwealth countries, finance ministries, academics, central bankers, and international policy makers to map out ways in which small states can overcome the impact of the recession.

While most developing countries are expected to begin their recovery later this year, the impact on small vulnerable economies is likely to be much longer lasting.

Ransford Smith, Deputy Secretary-General of the Commonwealth Secretariat, warned the delegates of the “severe adverse impact” the crisis was having on the growth prospects of small states.

He said: “The smallest and most vulnerable states are experiencing large trade shocks, declining aid, reduced access to external financing, loss of employment, and increasing difficulty in maintaining the existing progress towards their immediate objectives, much less making further advances.”

A crisis foretold

During the conference, delegates shared experiences on the responses that have been implemented to-date and on the effect of the crisis on the achievement of vital development objectives such as the Millennium Development Goals.

The attendees sought to develop appropriate policy responses in monetary and fiscal policy as well as green policy, social policy and international partnerships.

Dr Sundaram, who commended the Commonwealth Secretariat for its work in seeking out reforms to the global economic system, also hit out at the suggestion that the crisis came as a surprise.

“This was a crisis that was foretold. It is grossly erroneous to believe that this crisis was unpredictable and unpredicted. Rather we had a situation where very few international organisations actually stepped up to the mark,” he said.

Secretariat Links:

• Environmentally Sustainable Development