Wednesday, 1 April 2009

Debt warning to G20

In order to prevent emerging economies facing a potential liquidity crisis, it seems probable that the IMF will have its funds built up tomorrow- probably by China in the main. That is postive action right?

Well, it is important not to forget that many of the world's poorest nations still have an enormous debt overhang so what is necessary in the short term may create problems down the road. According to the Jubilee Debt Campaign, of the 43 nations who are most at risk from this crisis, 38 had prior unsustainable debts.

Sarah Edwards of JDC is absolutely clear when it comes to the IMF, World Bank, and the export credit agencies:
"These organisations have a poor track record when it comes to lending to poor countries, where they have financed projects that have caused social and environmental damage; gone into the hands of corrupt officials, or supported oppressive regimes."

"Emergency finance given via these bodies must go hand in hand with radical reforms in the governance, policies, and practices of these institutions. In particular, the IMF, World Bank, and export credit agencies such as the UK's ECGD, must be made fully transparent and accountable, and respect international standards on human rights, the environment and labour."

So while we may rejoice a beefed up IMF tomorrow that can not be the end of the discussion. While more advanced emerging economies such as Mexico will face a lighter tough approach from the IMF as was agreed yesterday, it's not clear how less developed nations will fare. So tomorrow's announcement is only the start of the story. Crippling debts remain and when added to new debts will become more burdensome and that can't be forgotten either tomorrow or further down the road.

No comments:

Post a Comment