G-20 leaders commit to restoring global growth

The G-20 Leaders Summit on Financial Markets was held in Washington DC at the weekend to discuss the uncertainty of international markets and, among others, its effects on developing countries.

Laying foundation of reform

In a statement following the summit, leaders said the measures to support the global economy and stabilise financial markets must continue while the foundation for reform is laid to ensure that such a global crisis does not happen again.

“Our work will be guided by a shared belief that market principles, open trade and investment regimes, and effectively regulated financial markets foster the dynamism, innovation, and entrepreneurship that are essential for economic growth, employment, and poverty reduction,” said the leaders.

The summit, which included key developed and emerging market countries, agreed on a strengthened system of international financial governance, in which the International Monetary Fund (IMF) and World Bank play a central role.

SA inclusive governance structure

According to a statement released in South Africa by the Presidency, this would occur with a more inclusive governance structure for both institutions and other relevant institutions, so that developing countries are effectively represented.

This would also require far better representation for Africa countries in the international financial institutions than is currently the case and the banks would have to be accountable and transparent, said the Presidency in a statement.

The world leaders also agreed on a coordinated initiative to support interventions in domestic economies, through expansionary fiscal and monetary policy. This would be done within a sound and responsible economic framework.

Supporting financial institutions

International financial institutions must be properly funded so they can support investment to maintain robust economic growth and poverty reduction of developing countries.

The international financial system should fall under proper surveillance, oversight and supervision, this would involve a considerable reform of the current situation, and would require all countries to subject themselves to agreed and transparent roles.

President Kgalema Motlanthe and Finance Minister Trevor Manuel were among the South African delegation at the summit.

The African perspective

South Africa, as the only G-20 member country from Africa, was asked to convey an African perspective by the African finance ministers, who recently met in Tunis to consider the impact of the crisis for our continent.

The G-20 Leaders Summit on Financial Markets also takes place when African economies were making significant progress, and are now threatened by the global financial crisis. As a result, the current crisis has the potential to exacerbate the impact of the recent volatility in food and commodity markets.

The effects of volatile food and fuel prices and the potential damage that might be done by the effects of the financial crisis on developing countries in Africa make it essential to ensure that Africa receives increased aid, according to the G-20 leaders.

Knock-on effect

President Motlanthe said that while the financial crisis originates in the rich countries, it perpetuated a sudden and sharp increase in the borrowing costs of developing countries and in many cases their currencies have fallen dramatically too.

He welcomed the steps already taken by the World Bank and the IMF and called on them to keep up the admirable promises to increase aid to Africa and ready themselves to provide appropriate support to avoid contagion.

Article published courtesy of BuaNews