|
| 'Help for countries not responsible for the crisis is justified' | | Manmohan Singh's remarks at G-20 meet |
| Manmohan Singh / New Delhi Sep 27, 2009, 00:05 IST |
|
We have discussed the complex challenges posed by the need to revive the global economy. I would like to focus on what this implies for the developing countries. An estimated 90 million people in the developing world are likely to be pushed below the poverty line. Lower revenues will also lead to lower levels of expenditure. This will not only hurt future growth, but also delay achievement of the Millennium Development Goals. Social and political tensions could increase.
The prospects of convergence, which seemed bright before the crisis, have receded. We must take steps to counter these developments and restore the momentum of growth in the developing world.
First, the problem must be tackled at its root by ensuring the quickest possible return to normalcy in the global economy. This requires a commitment that we will not undertake any premature withdrawal of stimulus. We must certainly plan for an orderly 'exit' when the time is right, but that time is not now. The global economy may be bottoming out, but it is not expected to reach 3 per cent growth until the end of 2010.
The depressed state of the global economy translates into a considerable loss of export demand for the developing countries. Exports of non-oil developing countries are expected to decline by about $900 billion in 2009, compared with the previous year. They will remain well below the trajectory earlier projected for several years. This is bound to reduce production, incomes and employment in the developing countries.
The measures taken by the G-20 (nations) to increase the flow of assistance will help, and they certainly represent an important achievement in international co-operation. However, the scale of the transfers we have planned will only help the developing countries to manage their balance of payments at depressed levels of economic activity. They cannot counter the effect of the loss of exports. To resuscitate growth in the developing countries, we have to replace lost export demand by expanding other components of domestic demand. The best option is to expand investment. The World Bank and the other regional development banks can play a major role by financing such investment. They should expand lending for infrastructure development to emerging market countries which have relied on capital markets in more normal times, but will need support in the medium run, till capital markets recover. The poorer, low-income countries had very little access to capital markets. For them, financing on suitable terms may have to be made available for an even longer period.
A strategy of expanding investment demand in developing countries to replace lost export demand will not only help growth in developing countries, it will also contribute to a broader global revival.
The World Bank has announced that the volume of IBRD (International Bank for Reconstruction and Development) lending would be increased to $100 billion over the next three years. This is commendable. However, if the capital base of the IBRD is not expanded, they will have to compress lending at the end of the three-year period to less than the pre-crisis level. This is surely not acceptable. There is, therefore, an overwhelming case for doubling the capital of the IBRD. Similar increases in capital are needed for the other regional development banks also. I realise there may be hesitation in committing additional public resources for recapitalisation. However, we must keep in mind that what is needed for these institutions is small compared with the massive scale of public money used to stabilise the private financial system in industrialised countries. Some additional effort is surely justified to help the developing countries cope with the spill-over effects of a crisis for which they were not responsible.
Finally, a word on trade. The collapse in export markets makes it all the more important that the market access of developing countries is not constrained by protectionism. I recognise that when growth is low, and unemployment is high, it is inevitable that protectionist pressures will arise. It will be a test of the collective political leadership of this Group, whether we are able to resist these pressures in our countries.
(Excerpts from Prime Minister Manmohan Singh's remarks to the G-20 countries at the plenary session of the Pittsburgh meet in the United States, on September 25, 2009)
|
|
|
|
|
|
|
|
|
|
 Read Business news in |  |
|
|
|
|
|
|
Advertisements |
|
|
|
|
|
|
|
|
|
|
Content Guide
