Sixty-third General Assembly

Second Committee

7^th & 8^th Meetings (AM & PM)

AILING GLOBAL FINANCE SYSTEM NEEDS ‘REGULATORY OVERHAUL’,

 

ROBUST SURVEILLANCE, SAY SECOND COMMITTEE DELEGATES

 

Taking Up Macroeconomic Policy Questions, Committee Also

Weighs Options to Help Developing Countries Overcome Heavy Debt Burdens

A regulatory overhaul and stronger surveillance of international financial institutions, measures to prevent commodity market fluctuations and increased development aid were urgently needed to restore global economic health and help developing nations overcome debt obstacles to achieving the Millennium Development Goals, several speakers told the Second Committee (Economic and Financial) today, as it began its consideration of macroeconomic policy questions.

Indonesia’s representative, speaking on behalf of the Association of Southeast Asian Nations (ASEAN), said the depth and systematic nature of the current financial crisis required a collective, global response, rather than the type of “go-it-alone” protectionist trade strategies that worsened conditions during the Great Depression of the 1930s.  ASEAN’s economic fundamentals were sound, partly due to significant reforms adopted following the region’s 1997 financial crisis.

A similar two-pronged approach -- involving prudent fiscal and monetary policies -- was needed to address the current financial malaise.  The Group of Seven’s recent commitment to unity and togetherness and the Group of 20 finance leaders’ pledge this past weekend to work together to improve regulation, supervision and overall functioning of the world’s financial markets were steps in the right direction.  But more must be done, including empowering developed countries to regulate capital flows to protect themselves against volatile financial flows, he said.

Bangladesh’s representative, speaking on behalf of the Group of Least Developed Countries, said the current crisis threatened to reverse developing countries’ development gains.  Paradoxically, developing countries had little resources, but were making net outward capital transfers to developed countries.

That global imbalance must be urgently addressed, and the activities of the International Monetary Fund (IMF) must be scrutinized more closely, with an emphasis on stabilizing the entire system in order to ensure that the impact of macroeconomic and financial policies of larger economies did not spill over onto other countries.  The Bretton Woods institutions should ensure easy access to their resources without any conditions, particularly for least developed countries.  At the same time, they and creditor nations must take exchange rate risks more seriously and develop a mechanism for loans in domestic currencies.

She also warned that commodity markets should not become a source of global macroeconomic instability and social and political upheaval.  Primary commodity exports were the main source of Government revenue in many developing countries, and were critical to employment and income generation.  It was important to tackle the factors that caused large commodity price fluctuations, which often negatively impacted macroeconomic stability, fiscal balance, and balance of payment sustainability.  Strict regulatory measures that helped contain commodity market speculation could be an important step, as could product diversification and the participation of the least developed countries in the global value chain.

Kenya’s representative, speaking on behalf of the African Group, said Africa’s ability to achieve the Millennium Development targets by 2015 depended on a healthy global socio-economic environment.  But inconsistencies in aid delivery were thwarting those efforts.  He urged development partners to seriously consider the Secretary-General’s proposal that external financing for development in Africa reach $72 billion annually to support achievement of the millennium targets, and called on Members States to support a coordinated approach to aid effectiveness and management in Africa.

Africa’s total official debt dropped to $144.5 billion in 2007 from $205.7 billion in 1999, but private debt increased over the same period, to $110.2 billion from $92.4 billion.  He called for extending debt relief to heavily-indebted and low-income African countries not currently under the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative.  He also called for an international financial system overhaul to allow adequate African voice participation in decision-making.

In a similar vein, France’s representative, speaking on behalf of the European Union, called for greater efforts to face the challenge of debt sustainability, deepen dialogue with emerging donors, and address procedural credit.  A global partnership for agriculture and food must open a space for dialogue, coordination and mobilization by all stakeholders.  He reaffirmed the European Union’s commitment to official development assistance and the quality of that aid, and stressed that the results obtained in Accra must move forward in order to improve official development assistance’s effectiveness.  The pilot phase of innovative financing had yielded positive results.  Now, it was time for a change of scale in that area and new partnerships to mobilize more resources for development.

Presenting the reports before the Committee were Manuel Montes, Chief of the Policy Analysis and Development Branch in the Financing for Development Office of the Department of Economic and Social Affairs, who introduced the Secretary-General’s report on the international financial system and development; Yuefen Li, Chief of the  Debt and Development Branch in the Division on Globalization and Development Strategies of the United Nations Conference on Trade and Development (UNCTAD), who introduced the Secretary-General’s report on progress towards a durable solution to the debt problems of developing countries; and Khalil Rahman, Officer-in-Charge in UNCTAD’s Division of Technology and Logistics, who introduced the report on world commodity trends and prospects.

Other speakers today were the representatives ofAntigua and Barbuda (on behalf of the “Group of 77” developing countries and China), Guyana (on behalf of the Caribbean Community), the United States, China, Australia (on behalf of the CANZ Group), the Sudan, Colombia, the Russian Federation, Saudi Arabia, India, Malaysia, Algeria, Ghana, Pakistan, Ethiopia, Jordan, the Ukraine, Thailand, Brazil, the Philippines, Nigeria, Japan, Guatemala, Libya, the United Republic of Tanzania and Iraq.

A representative of the Common Fund for Commodities also made a statement.

The Committee will meet again at 10a.m. on Wednesday, 15 October, to begin its consideration of operational activities for development.

Background

The Second Committee (Economic and Financial) met this morning to consider macroeconomic policy questions, including the international financial system and development; external debt and development towards a durable solution to the debt problems of developing countries; and commodities.

The Committee had before it a report on the international financial system and development (document A/63/96), which reviews recent trends in international official and private capital flows to developing countries, and international policy changes arising from the financial crisis that are critical to expanding the flow and stability of development financing.

The report notes the paradox on the increasingly outward net transfers of financial resources from developing to developed countries, which rose from $735 billion in 2006 to $792 billion in 2007.  That trend contributed to the pattern of global imbalances, characterized by a large current account deficit in the United States and corresponding surpluses in Chile, China, other emerging market economies and oil-exporting nations, such as the Russian Federation and Saudi Arabia.  Developing countries had so far proven to be better prepared to address the financial turmoil than in previous crises, thanks to large currency reserves, improved macroeconomic fundamentals and strong economic growth that helped sustain high levels of private capital flows.  Shortfalls in commitments from donor countries to meet their official development assistance (ODA) pledges and targets remain.

The report discusses challenges to strengthening the international financial architecture, particularly in light of its weaknesses sparked by the turmoil in the United States subprime mortgage crisis.  In that regard, the report sheds light on the 2008 quota and voice reform package of the International Monetary Fund (IMF) and similar reform efforts begun at the World Bank; strengthening the foundations of multilateral surveillance in the international monetary system; financing in times of crisis and for crisis prevention; and financing gender equality.

Also before the Committee was the Secretary-General’s report entitled towards a durable solution to the debt problems of developing countries (document A/63/181), which reviews recent developments in the external debt of developing countries, as well as progress in debt relief initiatives and Paris Club rescheduling.  According to the report, the average debt ratios of developing countries continued to improve in 2007, but there were substantial differences between countries.  In 2007, the total external debt of developing and transition countries of $3.4 trillion was more than compensated for by the $3.7 trillion in international reserves.  By 2008, developing and transition economies had no net external debt, but held net external debt assets of about $350 billion.  Several low-income countries ran current account deficits and had deteriorating external situations.

The report also examines the interaction between external and domestic public debt sustainability, and reviews the progress in debt management capacity-building efforts in developing countries.  It concludes that, contrary to the standard view expressed in the Monterrey Consensus, access to external resources plays a positive role in economic development, but not all countries need it at all times, since some do not have a problem sustaining a higher level of debt.  It stresses the importance of identifying which countries would most benefit from external resources and of implementing debt management strategies that minimize the risk of a debt crisis.  It states that further revision of the Debt Sustainability Framework in Low-Income Countries should aim at identifying how to best address the financing needs of different groups of countries.

The Committee also had before it a note by the Secretary-General transmitting the report of the United Nations Conference on Trade and Development (UNCTAD) on world commodity trends and prospects (document A/63/267), which states that commodity prices increased sharply in the past 18 months in all major commodity groups, fuelled largely by strong global demand driven by brisk global economic growth, a slow supply response and low inventories for oil, minerals, metals and grains, as well as speculation.  The UNCTAD price index for non-fuel commodities reached its highest level in current dollars since 1960, rising 110 per cent between 2002 and 2007, and 71 per cent in the first six months of 2008, versus the same period a year earlier.  While such increases have improved commodity-producing countries’ growth and development prospects, soaring fuel and food prices have worrisome implications for global economic growth and poverty reduction, particularly in low-income countries.

The report discusses emerging issues that affect the extent to which stronger demand and higher prices for commodities will lead to sustainable development and poverty reduction, including the distribution of gains from higher prices between foreign investors and host countries in the extractive industries; the preservation of a competitive environment in commodity supply chains; energy security; and food security.

The report states that, despite progress in narrowing differences in the Doha Round of trade negotiations in the past 18 months, the World Trade Organization has failed to reach agreement on advancing the agricultural reform agenda, leaving agricultural market distortions in place that adversely impact the commodity-based development and diversification efforts of many developing countries.  Also, high agricultural prices have undercut the rationale for large farm subsidies and protection.  The report further summarizes developments contributing to implementation of General Assembly resolution 61/190 on commodities, as well as the Accra Accord -- the outcome of UNCTAD’s twelfth session in April 2008 -- which provides an effective framework for addressing commodity issues.

Introduction of Reports

MANUEL MONTES, Chief of the Policy Analysis and Development Branch, Financing for Development Office in the Department of Economic and Social Affairs, introduced the Secretary-General’s report on the international financial system and development (document A/63/96).

He highlighted key chapters of the report, including net transfers of financial resources of developing and transition economies, and the strong net private capital flows to developing and transition economies.  He said the pattern of the increasing net outward transfers of financial transfers from developing to developed countries continued to increase, from $735 billion in 2006 to $792 billion in 2007.

On the section on strengthening the international financial architecture, he said the combination of strong global growth, relatively low interest rates and associated stepped-up demand for riskier assets with higher yield, as well as rapid financial innovation over the past several years, led to a significant relaxation of lending standards and global under-pricing of credit risk.  The turmoil in global financial markets demonstrated that increased use of newly invented risk transfer instruments in globalized markets carried a number of serious shortcomings, both in the markets themselves and in the regulatory and supervisory systems.

YUEFEN LI, Head of the Debt and Development Finance Branch, Division on Globalization and Development Strategies of UNCTAD, introduced the Secretary-General’s report on progress towards a durable solution to the debt problems of developing countries (document A/63/181).  She said developing countries’ external debt situation was facing significant downside risks due to the ongoing financial crisis in some major developed countries.  The current credit crunch would reduce investment worldwide, tourism and remittances.  The poorest would be hit the hardest.  UNCTAD would hold a special Executive Session of the Trade and Development Board on 13 November to discuss the current crisis’ implications for developing countries.

The Secretary-General’s report showed that developing countries’ average external debt ratio continued to improve in 2004, reaching 24 per cent of the gross national income (GNP), an impressive decline from 39 per cent in 2000, she said.  Thanks to the large accumulation of international reserves in some countries, developing countries as a group no longer had net external debt.  However, the net external debt varied widely among developing countries, with smaller, poorer countries recording higher levels.  There were underlying forces that improved debt ratios:  higher economic growth in the past few years; the changes in the structure and composition of debt, such as domestic public borrowing; and the use of international debt relief initiatives such as the Heavily Indebted Poor Countries (HIPC) Debt Initiative and the Multilateral Debt Relief Initiative (MDRI).  Those could disappear.  That trend, coupled with the drastically worsened global economic situation, made debt sustainability even more important.

The Secretary-General’s report also noted the substantial increase in official development assistance since the 2002 Monterrey Conference, although large shortfalls still existed, she said.  More aid was untied and grants were increasing.  That was progress.  However, according to the Organization for Economic Cooperation and Development (OECD), debt relief accounted for most of the increase in official development assistance.  The increase was driven by a few countries in special circumstances.  In fact, most donors were not on track to meet official development assistance commitments.  Only Denmark, Luxembourg, the Netherlands, Norway and Sweden reached or exceeded the United Nations target of 0.7 per cent of gross domestic product (GDP) for official development assistance in 2007.  There was still a considerable gap between actual official development assistance flows and the aid estimated to be necessary to meet the Millennium Development Goals.

KHALIL RAHMAN, Officer-in-charge, Division on Technology and Logistics, UNCTAD, introduced the report on world commodity trends and prospects (document A/63/267).

He said the report covered developments until the second quarter of 2008 in the commodities sector, and significant changes had taken place since then, especially given the current financial turmoil.  Commodities remained an important issue on the global development agenda, and concerns about commodities remained as valid as before.

The Secretary-General’s report dealt, in large part, with the recent price increases in the commodities sector, he continued.  Since 2002, there had been a broad-based increase in commodities prices, which was led by a boom in metal and mining, as well as mineral prices.  For example, lead and nickel prices in current-dollar trends increased about 400 per cent from 2002 to the second quarter of 2008.  Price increases in agricultural commodities had been varied, although most commodities in that portfolio saw increases.

Although the prices of commodities had increased, the story was slightly different in real terms, he added.  Those increases had also been accompanied by much higher price volatility than in the past.  The boom in commodity prices was caused by a strong demand for commodities, the role of speculation, and the depreciation of the United States dollar.  The key policy issue still remained the distribution of gains from commodities, he said.

Discussion

The representative of Antigua and Barbuda, speaking on behalf of the “Group of 77” developing countries and China, asked how countries could plan for the future in the light of the current external debt crisis.  What message was the official development assistance shortfall sending?  How should Member States proceed?  What lessons could be drawn for the future?

Mr. MONTES said the Secretary-General’s report listed six conclusions in his report on the debt crisis.  In today’s Financial Times, an article stated that Lehman Brothers investment bank failed because the United States’ and United Kingdom’s regulatory systems were not in sync.  The Secretary-General’s report called for a coordinated approach to regulatory reform, which would have been important in the Lehman Brothers case and in similar situations.  The Doha Review Conference could make a difference, if the Secretary-General’s recommendations were implemented.

The representative of Nigeria asked how developing countries, particularly least developed countries, heavily indebted poor countries and commodity producers, could and should respond to the depreciating United States dollar.  How could the debt of developing countries, particularly very poor nations, be managed?  He warned that Doha should not be just a chat fest; rather, it should produce real results to alleviate the problems of very poor nations.

Mr. MONTES said developing countries as a group -- because they were now net creditors -- had an interest in, and must be part of, the global debt restructuring process.  But that process was currently controlled by the Paris Club.  The Doha outcome document called for taking a more global view and not just confining solutions to the debt problem to Bretton Woods institutions and the Paris Club.

Ms. LI said she didn’t have big policy recommendations.  It was up to delegates to make those.  Large debtors that were middle-income countries, or large commodity exporters, had been able to retire their debt earlier, because of low interest rates in the last few years.  But, poorer countries had a tougher go of it, due to their greater vulnerability to increased external shocks.  For them, future debt management was a major challenge.  Some of them had resorted to domestic borrowing, which was easier to pursue during a time of sufficient liquidity.  But, investors were now asking for their money back, and tremendous panic was occurring worldwide.  The official development assistance flow was not terribly sensitive to a short-term crisis.  It was sensitive, however, to the global economic growth rate.  Thus, it would probably drop, in the light of the current economic slowdown.   During difficult times, donor countries tended to look inward.  Delegates here and at Monterrey must warn against that tendency and implore donors to make good on their official development assistance commitments.

Mr. RAHMAN said energy importing countries had to import fertilizers to produce food.  Fertilizer, and other energy price increases, had made that difficult and costly.  Those nations must be able to depend on official development assistance.  It was reasonable to ask donors -- including the United States, which had just committed $700 billion on a financial bailout package -- for $70 billion to implement the Millennium Development Goals in a timely way.

The representative of Benin asked the presenters to elaborate on the future of the market economy.  What was the objective of integrating least developed countries into the global economy, when the global economy was collapsing?  How could official development assistance be maintained?

Mr. RAHMAN said the market economy was, in fact, needed.  Markets did not work perfectly, which was why Government was needed to regulate them.

Statements

BYRON BLAKE (Antigua and Barbuda), speaking on behalf of the Group of 77 developing countries and China, said the global economy was facing a significant economic downturn, and the looming global recession highlighted very significant policy, institutional and regulatory failures.  It had come on the heels of a long period of severely uneven economic growth among countries, and economic and social inequality within countries.  One result had been the increasing marginalization of countries, particularly the least developed countries, landlocked developing countries, small island developing States, African countries, and countries emerging from conflict.  The present situation served as the most recent illustration of the lack of capacity and legitimacy of international institutions to intervene, promote, advocate and facilitate coordinated responses.  That had long been a major shortcoming.

For many years, developing countries –- through different organs of the United Nations –- had been highlighting the fact that the international development agenda had been undermined by uncoordinated and incoherent policies and policy actions.  That had posed a particular and persistent challenge to the achievement of the internationally agreed development goals, including the Millennium Development Goals, and to efforts to eradicate poverty and raise standards of living.  Those longstanding challenges, compounded by the current situation of multiple global crises, significantly increased the relevance of the Committee’s work in macroeconomic policy formulation, promotion of development cooperation, and implementation of commitments in the areas of international trade and development; the international financial system and development; external debt and development; and commodities.

The Committee had been adopting resolutions on those issues, but increasingly with less urgency, he said.  The current situation required even greater cooperation, so that Member States could take strong action to fundamentally address the major macroeconomic challenges.  The Committee should ensure that the food crisis was addressed in a coherent and coordinated way, but the discourse must not be imbalanced.  Strong signals were also needed to boost confidence, so developing countries’ products would not be driven from the commodities markets, both at home and abroad.  In addition, as the Committee entered into a heightened stage of preparation for the review conference, it must remain seized of the major macroeconomic policy questions and provide the requisite intergovernmental policy guidance.

PHILIPPE DELACROIX (France), speaking on behalf of the European Union, reaffirmed the Union’s commitment to implementing the Monterrey Consensus, which must remain the reference text and not be renegotiated or rewritten.  The document to be adopted at Doha would be the achievement of review sessions this year by the Economic and Social Council (ECOSOC), the Bretton Woods institutions, the World Trade Organization and UNCTAD, including forums on development cooperation, aid effectiveness, Africa’s special needs and the Millennium Development Goals, as well as future meetings.   The need to profoundly change the global regulatory system, in light of rapid globalization in recent years, must also be taken into account.  The Union would make an ambitious and constructive contribution to the Doha conference.

In order to mobilize and monitor development financing, he called for direct foreign investment to complement public investment and the creation of a transparent, stable and predictable investment climate.  Public investment in basic infrastructure, human capital development and institutional capacity were essential to sustain inclusive economic growth.  Regional cooperation was also important.  The Union was committed to reaching a successful, ambitious, balanced and comprehensive development-oriented multilateral trading system.  He also stressed the importance of increasing Aid for Trade and supporting regional trade, including through South-South Cooperation, with special emphasis on the needs of least developed countries.

He reaffirmed the Union’s commitment to official development assistance and the quality of that aid.  The results obtained in Accra must move forward, in order to improve official development assistance’s effectiveness.  The pilot phase of innovative financing had yielded positive results.  He called for a change of scale in that area and new partnerships to mobilize more resources for development.  Efforts must be consolidated to face the challenge of debt sustainability, deepen dialogue with emerging donors and address procedural credit.  A global partnership for agriculture and food must open a space for dialogue, coordination and mobilization by all stakeholders.

GEORGE TALBOT (Guyana), speaking on behalf of the Caribbean Community (CARICOM), said global developments over the last year had made the task of achieving CARICOM’s goals in the macroeconomic realm a more difficult undertaking.  Among the foremost of its challenges were achieving faster growth with social equity; transitioning to the precipitous loss in effective prices and access advantage in preferential markets for major exports; reducing the level of indebtedness; and building resilience to the impact of natural disasters.  The attainment of the development goals of the small economies of CARICOM depended significantly on a coherent, facilitative and supportive international macroeconomic framework.  CARICOM was disheartened at the lack of significant progress in creating a more conducive international environment for growth and development, particularly in relation to the international financial system, debt, official development assistance and international trade.

The challenge of debt sustainability continued to provide a significant macroeconomic hurdle for CARICOM countries, he said.  Increased demands for developing funding -- whether investing in the social sectors, in physical and productive infrastructure or responding to natural disasters -- had constrained many already heavily indebted countries to resort to commercial-type borrowing, especially in light of failing levels of official development assistance.  The situation had created a vicious cycle of negative impacts on:  economic growth prospects; domestic and foreign investment; inflation; and debt servicing that negated the achievement of basic development goals.  It was imperative that the international community placed greater focus on examining the severe debt situation of small, vulnerable States characterized as middle-income or lower-middle-income countries.

Regrettably, the level of official development assistance flows to the CARICOM region, in real terms, had continued to decline.  Given the present categorization of CARICOM Member States as middle-income countries, they found it increasingly difficult to source adequate and assured levels of financing on the concessionary terms necessary to assure future sustainable growth and development.  Along with new commitments, innovative sources of financing could play an important role, but such sources should be complementary to -– and not substitutes for –- official development assistance.  The Monterrey Review process provided the opportunity to address and make good on what must now be the compelling wisdom of greater collaboration in a globalized environment for the benefit of all countries and peoples.

MARTY NATALEGAWA (Indonesia), speaking on behalf of the Association of Southeast Asian Nations (ASEAN), said the depth and systematic nature of the current financial crisis made a collective, global response imperative.  The type of “go-it-alone” protectionist trade strategies that worsened conditions during the Great Depression of the 1930s must be avoided.  He welcomed the Group of Seven’s recent commitment to show unity and togetherness to deal with the crisis, as well as the Group of Twenty finance officials’ pledge this past weekend to work together to overcome the financial turmoil and to step up cooperation to improve regulation, supervision and overall functioning of the world’s financial markets.  The United Nations must assume its role and use it to make a difference.  Its effectiveness would depend on national efforts.  Macroeconomic fundamentals must be properly managed.  That would require international good governance.  The international financial system should be finely tuned, enough to anticipate and avoid a financial crisis, whenever possible.  He welcomed the holding of a special session on the financial crisis.

A two-pronged approach -- involving prudent fiscal and monetary policies -- must address the financial crisis, he said.  He stressed the importance of enhancing financial and regulatory frameworks.  ASEAN’s economic fundamentals were sound, partly due to significant reforms since the 1997 financial crisis.  ASEAN had also effectively responded to rising inflation with suitable macroeconomic policies.  The strong capitalization of regional banking and financial institutions, relatively low loan-to-asset ratios in mortgage financing and their limited direct exposure to the deterioration in credit markets in the United States and elsewhere were marked strengths for ASEAN.

ASEAN was pressing ahead to implement the Chiang Mai Initiative multilateralization facility in the first half of 2009, he said.  Building on existing bilateral swap arrangements, the facility would provide short-term liquidity support through a self-managed reserve pooling arrangement.  ASEAN was also working on other regional integration and cooperation initiatives.  The current financial crisis revealed the urgent need to reform the international financial architecture.  Developing countries should be empowered to regulate capital flows to protect themselves against volatile financial flows.  Delays should not be allowed in finalizing an outcome at Doha that would open new markets, especially for developing countries.  Now was the time for resolve and leadership.  He strongly supported the accession to the World Trade Organization earlier this year of the Lao People’s Democratic Republic.

GEORGE OWUOR (Kenya), speaking on behalf of the African Group, said macroeconomic policy issues were at the centre of the development fortunes of Africa, and the continent’s ability to achieve the Millennium Development Goals by the 2015 target date depended on a healthy and complementary global socio-economic environment.  Africa had made considerable progress in promoting good governance, and the New Partnership for Africa’s Development (NEPAD) strategic developmental framework had been established.  But, he was concerned that reforms were now being challenged by an imminent global economic depression, exacerbated by the adverse impacts of climate change, unpredictability of capital inflows and the absence of supportive infrastructure.

The African Group remained confident and encouraged by the international community’s commitment to continuing to help address the continent’s development needs, and commended the United Nations for providing the necessary leadership.  But, he renewed a call on Africa’s development partners to speedily actualize their commitments.  He also reinforced calls made for the early resumption and completion of the Doha Round, and that negotiations should include Africa’s quest for a reduction in agricultural subsidies by developed countries and improved market access for African exports.  To improve Africa’s share of international trade, he called on development partners to provide adequate resources, including foreign direct investment, towards improving the infrastructure base in Africa to connect the continent’s markets to the rest of the world.

Inconsistencies in aid delivery was equally important, he said, urging development partners to seriously consider the full implementation of the Secretary-General’s proposal that external financing for development in Africa reach $72 billion annually to support the achievement of the Millennium Development Goals.  He also asked all United Nations Members States to support efforts that would ensure a coordinated approach to aid effectiveness and management in Africa.  While debt reductions had led to Africa’s total official debt dropping to $144.5 billion in 2007 from $205.7 billion in 1999, he said private debt had increased over the same period, to $110.2 billion from $92.4 billion.  He, therefore, called for an enlargement and extension of debt relief to heavily-indebted and low-income African countries not currently under the HIPC Initiative and the Middle-Income Debt Reduction Initiative.

In recent times, volatile commodities, adverse climate change effects and the increasing use of agricultural products as sources of renewable energy had compounded development challenges in Africa.  He said a resumed World Trade Organization negotiation must consider ensuring a mutually supportive trade regime.  He also reiterated the call for a comprehensive overhaul of the international financial system to allow adequate African voice participation in decision-making.  He urged all stakeholders to take the best advantage of the unique opportunity the Doha Round offered to address all macroeconomic issues in a balanced, comprehensive manner.

ISMAT JAHAN (Bangladesh), speaking on behalf of the Group of Least Developed Countries, said the current subprime, financial and credit crises posed significant risks, and could create a vicious downward spiral leading to recession.  That could reverse the development achievements of developing countries.  While encountering a serious lack of resources, developing countries continued to make net outward transfers of capital to developed countries.  The paradoxical net flow of financial resources from poorer to richer countries had contributed to a pattern of global imbalance that should be addressed with urgency.  It was also necessary to further strengthen the surveillance activities of the IMF, with a focus on the stability of the system as a whole, particularly on the spillover impact of the macroeconomic and financial policies of the larger economies on other countries.

During the last few years, the flow of resources from the Bretton Woods institutions had been negative, and those institutions were currently running a deficit.  That jeopardized their ability to play a credible role in the international financial system, she said.  The recent build-up in international reserves by developing countries, ostensibly for reasons of “self-insurance”, indicated the diminished reliance of the developing countries on those institutions.  The institutions should ensure easy access to its resources without any conditions, particularly for least developed countries.  It was also imperative that creditor nations and the international financial institutions took the exchange rate risks more seriously, and developed a new mechanism for loans in domestic currencies.

Primary commodities constituted a significant part of gross domestic product in developing countries, she said.  That was also critical to employment and income generation, and a major source of Government revenues.  Many developing countries depended on primary commodity exports, and volatile commodity prices often had a direct negative impact on macroeconomic stability, fiscal balance, and balance of payment sustainability.  Commodity markets should not become a source of global macroeconomic instability and social and political upheaval.  It was important to tackle the factors that caused large commodity price fluctuations.  Strict regulatory measures that helped contain speculation on commodity markets could be one important step.  Product diversification and participation of the least developed countries in the global value chain was also important.

WILLIAM HEIDT ( United States) said the United States was committed to a constructive dialogue on the best way forward to reach the world’s shared development goals.  The current situation in financial markets would not change that commitment.  The United States and the international community were taking action on the current crisis.  In response to worsening market conditions and severe credit constraints, the Group of Seven countries had pledged to work collectively and individually in a cooperative manner to take decisive measures to maintain the world’s financial health.  They announced an important action plan last Friday.  Financial regulators were working collaboratively through the Financial Stability Forum to address the regulatory, accounting and credit rating problems that had arisen, in order to prevent their future occurrence.

They would continue to act quickly, decisively and collaboratively to restore stability and confidence to financial markets, and through such existing channels as the Group of Seven, the Group of 22, the International Monetary Fund and the Financial Stability Forum to identify ways to address ongoing challenges in the global economy and international markets, he said.  There was still more to be done and difficult times were ahead.  But, the United States would see them through and work with all its partners to insure the least possible impact to the global financial system.  The events in Washington over the weekend demonstrated that the multilateral system was responding with urgency and commitment to the financial crisis and other current development challenges.

BAI YONGJIE (China) said the increasingly severe financial turmoil that spared neither developed nor developing countries showed that the existing international financial system had deep-rooted problems and required in-depth reform.  Such reform should focus on constructing an inclusive and orderly international financial system that fully reflected the changing world economic patterns and increasing the representation of developing countries in international financial institutions.  She hoped that the IMF and the World Bank would increase the voice of developing countries, that the IMF would play a greater role in maintaining the stability of the international financial markets, and that the World Bank would mobilize more development resources.

She said an appropriate solution to the debt problems was an important prerequisite for the eradication of poverty and the realization of the Millennium Development Goals.  The developed countries should actively fulfil their commitments by expanding assistance and debt relief, so as to increase the net capital in-flow to developing countries.  International and regional financial institutions should adhere to the principle of non-politization, increase financial support and technical assistance, and help with capacity-building.  The international community should play close attention to the current international financial market turmoil, in order to avoid any severe impact on the development of the developing countries.

Many developing countries were heavily dependent on the export of commodities, she said.  The international commodity price fluctuations remained violent and the surge of oil and food prices had posed formidable challenges to developing countries.  The international community should strive to reduce trade-distorting agricultural subsidies, push to the early resumption of the Doha Round negotiations, and promote the establishment of a fair and reasonable order for international commodity trade.

JOHANNA HART (Australia), speaking on behalf of Canada, Australia and New Zealand (CANZ Group), said she was encouraged that policymakers worldwide were adopting multilateral policy initiatives to address the impact of the recent sharp decline and volatility in many commodity prices, market developments in the United States and global financial markets, and the global food crisis.  She was also encouraged that many national authorities were actively moving to pursue policies to stabilize domestic financial conditions and that various commodity actions were underway, including the comprehensive framework for action of the High-Level Task Force on the Global Food Security Crisis and actions envisaged within the Accra Accord of UNCTAD.  Such measures were the most pragmatic approach to addressing specific commodity-related problems in a sustainable way.  The General Assembly’s monitoring of them would better ensure that they met short-term and long-term goals.

While welcoming progress on global debt indicators, which improved overall in 2007, that were outlined in the Secretary-General’s July report on external debt and development, she said debt sustainability was a crucial problem for many low-income countries.  The CANZ Group was committed to working to review the progress of existing debt relief and rescheduling initiatives.  The cooperation of all stakeholders was needed to fully benefit from the existing framework, including the HIPC Initiative, the Multilateral Debt Relief Initiative and the Evian approach.  She supported international efforts to make the international financial institutions more effective and accountable.  Those reforms would allow more voices to be heard within those institutions.  The current global financial situation reinforced the need for strong, effective and accountable institutions.

The Committee must take into account the successful reforms of the IMF and other institutions, she said.  Such change would only be effective if changes to shares and votes were matched with internal governance reforms.  The CANZ Group would be proactive in negotiations for the Follow-up International Conference on Financing for Development.  He encouraged delegates to work towards ensuring the most efficient, practical use of collective resources and efforts.

NADIA OSMAN (Sudan), aligning her statement with those made on behalf of the Group of 77 and China, the African Group and the least developed countries, said that urgent global action was needed to safeguard the development trajectory of developing countries in the context of the current world crises.  While the Secretary-General’s report noted the lessening of the debt situation of developing countries as a whole, some countries,  such as least developed countries that were not included in the HIPC Initiative, continued to face unsustainable debt burdens.

The Sudan, she said, was struggling with a total external debt of $31.9 billion as of the end of 2007.  Only 44 per cent of that was principle; the rest was made up of contractual and penalty interest.  The total was equal to roughly 65 per cent of the country’s gross domestic product and 468 per cent of exports.  It was, indeed, an unsustainable situation that severely hampered development, as well as the Government’s ability to meet its obligations under peace agreements.  The international community should recognize the Sudan’s accomplishments in those areas, and fully honour their commitments made to help the peace process.

In addition, she said that, despite all its economic, social and political reforms, the country had not benefited from any debt relief initiatives, which regrettably remained hostage to political conditionality.  She called for an end to such discrimination, considering that the country had met every technical requirement for those initiatives.  She also pointed to the need to explore more innovative mechanisms to address the debt of post-conflict countries that were embarking on reconstruction efforts.  Full debt cancellation and adequate access to concessional lending was needed.

CLAUDIA BLUM ( Colombia) said her country shared the view of the Secretary-General’s report on the international financial system and development, particularly the need for advancements in regulation and structure to assure the flow and stability of financing for development.  Reform had become more urgent today, against a backdrop of the volatile global economy, which attested to the need to promote the implementation of oversight and regulation policies for the financial and banking systems.  The severity of the current situation, with impacts already affecting developing countries, meant commitment to the Monterrey Consensus must deepen.  She said the Doha International Follow-Up Conference was the occasion to project multilateral and coordinated actions.

Reform proposals should focus on developing countries’ financing needs, she said.  In situations of panic, such as the current reality, recovering confidence constituted an essential condition to ensure access to the capital markets, in a timely manner and at a reasonable cost.  At the same time, it was crucial that international financial authorities assumed a more dynamic leadership in establishing appropriate guidelines towards greater transparency in the markets.  The IMF and the World Bank had a relevant role in identifying actions and concrete remedies to face the effects of the actual crisis.  An adequate governance at all institutional levels was vital for the appropriate performance of the global economy and financial markets.

But, she continued, the current financial emergency should not lead to neglect in another critical crisis, reflected by the increase and instability of commodities prices, especially petroleum and food.  As indicated in the UNCTAD report, the situation had negative effects for economic growth and the global fight against poverty.  Multilateral efforts should be made to analyse the impact of price increases in petroleum in recent years, and about transport costs for basic inputs for food production.  Colombia’s Ministry of Agricultural and Rural Development had identified that, in the cost structure of agriculture production, the price of petroleum and fertilizers ranged between 30 and 40 per cent, including transportation costs.

The trade of commodities was vital for developing countries, and she stressed the importance of advancing towards a fair and free multilateral trade system, as well as a substantial reduction in subsidies to production, mostly applied by developed countries.  Colombia’s agricultural production, which totalled about 13 per cent of its gross domestic product in recent years, supported a simplification of tariffs and greater transparency in the trade of products within the sector.  She reiterated her country’s willingness to participate in discussions regarding cooperative actions at the global level to address the world economy.  “There is no single country that is equipped enough to face the reigning crisis by itself,” she said.  The legitimacy and efficacy of the response depended on collective and inclusive approaches that took into account the pressing needs of developing economies.

ALEXANDER S. ALIMOV ( Russian Federation) said the financial crisis made the creation of new, more adequate economic regulatory mechanisms an absolute priority, requiring political will and a responsible approach by the entire global community.  It should be stressed that there was no need for a total breakdown of the system that had developed over decades.  The matter at hand, rather, was to try to address the serious problems States were confronting by using certain elements of the international financial architecture.  The new system should be more flexible, and better adapted to modern day requirements, as well as better protected from risks.  The new system could not be oriented only to one country and currency.  It should be based on a balance of modern economies and their sustainable growth, as well as on the principle of multiple reserve currencies.

Ensuring debt sustainability was one of the priorities of international cooperation in the field of financing for development, and was a crucial element of the post-Monterrey agenda.  External debt relief was a multifaceted problem that required an integrated approach.  The elaboration of effective measures to prevent the recurring accumulation of external debt by the poorest countries was one of the principal components of such an integrated solution.  It was necessary to follow the principles of the joint World Bank/IMF framework for assessing debt sustainability.  Moreover, efforts to update that framework should be continued in order to prevent the rapid re-accumulation of external debt.

Considering external debt as a factor that hampered progressive economic development and the achievement of the Millennium Development Goals, the Russian Federation had written off, in the last two years, about $10 billion of the debt of African countries.  This year, an agreement on the settlement of the Iraqi debt to the Russian Federation, in the amount of $12.9 billion, had been signed between two governments, he said.  Russia actively advocated the creation of predictable and stable markets, and supported enhancing the export capacities of developing and least developed countries.

ALI MOHAMMED AL-ABBAD AL-HURABI ( Saudi Arabia) said his country occupied a unique place in the global economy, as it was the largest producer and exporter of oil in the world.  The Saudi economy followed the principle of freedom in global trade, and its international trade policy was characterized by liberalization, openness and transparency.  The Saudi Government had taken the appropriate measures to remove all of the hurdles that stood in the way of attracting foreign investments.  It had also instituted a five-year plan to implement its economic development activities.

Saudi Arabia had ranked among the top in the field of inter-Arab trade, and its share had reached to 29 per cent of the total value of that trade, or 315 billion riyals in 2005.  It also ranked among the top in terms of inter-Arab exports.  Exports to Arab countries had totalled 80.6 billion riyals in 2005, which represented 47.5 per cent of total inter-Arab exports.  In addition, it ranked among the top States receiving inter-Arab investments in 2006, and among Arab countries receiving direct foreign investments in 2006, with investments reaching 68.6 billion riyals.  On a global level, Saudi Arabia was classified twenty-third among 178 States in terms of its investment competitiveness.  His Government had also established two industrial cities during the last two decades to maintain the diversification of the industrial bases and to implement a strategy of resource independence.

D. RAJA ( India) said developed countries must take effective steps to ensure their development financing commitments.  Many developing countries would also need more international support to address the impact of the financial, food and energy crises.  The current financial crisis made the case for genuine multilateral governance.  Traditional responses involving select developing countries could not deliver results.  Multilateral mechanisms with the full and effective participation of developing countries were needed.  Comprehensive reform and democratization of the Bretton Woods institutions was indispensable, and it must enhance the voice and participation of developing countries.  Steps thus far were inadequate, and they must be intensified.  He urged the United Nations to oversee the reform process.  Developing countries, like developed countries, should also have the necessary policy space to implement polices suited to their unique circumstances, rather than face a restricted choice through conditionalities.

For more than a decade, there had been a net transfer of financial resources from developing to developed countries reaching almost $0.8 trillion in 2007, instead of the inverse, he said.  Private capital flows into developing countries had increased, but not all such flows were stable and pro-development.  Instead, they included speculative flows that reversed themselves at the first sign of turbulence.  Moreover, not all investment flows had fostered commensurate links with the domestic economy, thus minimizing their positive impact.  The international community appeared to be paralysed by a steadily declining trend of official development assistance, which was crucial for many countries.  He expressed grave concern that most donors were not on track to meet their commitments.  A thorough review of that by the Development Cooperation Forum was urgently required.

AHMAD HAMZAH ( Malaysia) said the financial events last month demonstrated the fragilities in even the most sophisticated financial markets.  It brought to the forefront issues regarding financial intermediation, financial innovation and the related regulatory and surveillance systems needed to provide the necessary oversight over those activities.  States needed to rid themselves of the notion that regulations were inherently evil, and that, left to themselves, financial markets would be self-correcting.  It was necessary to find the optimum balance between a level of regulation that would prevent extreme volatility in the financial markets, and, therefore, protect society from its effects, and continue to promote innovation in the financial markets.

Regulators must be vigilant in enforcing rules and prudential standards, he continued.  It was necessary to get back to basics, and find a mechanism that would promote rapid multilateral responses to situations such as the current one.  The effects of the financial meltdown would go beyond the stock markets and trade.  What was perhaps most worrying was that it might result in a momentum towards a protectionist or isolationist drift.  Stemming such a drift required that the developed world:  recognize its mistakes and rectify them, while acknowledging that there would be pain involved; nurse the global economy back to health; give the emerging economies their rightful place in the international economic system; and take steps to ensure that the developed world as a whole, and not just the emerging economies, could act as engines of growth in the event of a future downturn.  That implied that official development assistance and other related measures must be increased and intensified, which would act as a global anti-cyclical measure for now and the future.

NOREDDINE BENFREHA ( Algeria) said the current global financial crisis would impact world markets and growth.  Good global governance and multilateral monetary and economic policies were needed to resolve global imbalances and tackle the root causes of the problem.  Paradoxically, current global economic policies had marginalized many developed countries through the structural obstacles they imposed, making it difficult for developing countries, in particular, to achieve the Millennium Development Goals.  A global partnership for development was necessary to implement the global development agenda.  He called for reforming the international financial architecture, and for regulations that were non-discriminatory and transparent.  He called for better coordination of macroeconomic polices to end the global imbalances in the international financial system.

Adequate multilateral monitoring was the best way to help and maintain the health of economies, as well as prevent international financial crises, he said.  At present, developing countries had little, if no voice in decision-making in international financial institutions.  That must change.  The system must be coherent, equitable and transparent.  Better commitment was needed to implement the Monterrey Consensus and, thus, promote development.  Donor nations must make good on their commitments to funnel 0.7 per cent of gross domestic product into official development assistance.  They must also work to implement debt reduction measures.  Debt continued to be a major challenge for many developing countries, due to the non-compliance of developed partners of their development commitments.

DAMPTEY B. ASARE ( Ghana) said the financial crisis would take a turn for the worse if countries responded by erecting barriers to trade and turning to protectionism.  Any austerity measures taken by donors to cut assistance to poor countries would have a devastating impact in the provision of social services and overall efforts to eradicate poverty.  Major economic powers must take immediate and comprehensive steps to combat financial turmoil and help poor countries deal with their problems.

He said Africa was richly endowed with natural resources and environmental diversity, and that with the right combination of sound domestic policies and genuine external support, the continent could overcome the scourge of poverty and disease afflicting its people, and go on to rival other regions in economic growth and prosperity.  Several plans and programmes had been adopted by the international community to address these issues, but prevailing conditions in the international environment continued to impinge on economic growth and development.

Meanwhile, high fuel and food prices had serious implications for economic growth and poverty reduction in Africa, and the World Bank estimated that as much as seven years of progress in achieving the Millennium Development Goals hunger targets could be wiped out.  He said it was, therefore, important to underline the shared interest of all countries in ensuring that commodity markets did not become a source of macro-economic instability, causing social and political upheaval.  Debt relief had increased expenditure on social services in the beneficiary countries, but that did not mean that developing countries no longer had debt problems, as many had not yet benefited from any of the programmes.

He said a comprehensive solution should include joint responsibility of creditors and debtors; a foundation of development rather than financial needs for debt reduction and cancellation; responsible lending and transparent financial institutions, among others.  Finally, he said that trade could generate gains that surpassed any form of international economic cooperation, and thus, all countries needed to demonstrate the political will and flexibility required for a successful World Trade Organization Doha Trade Round.  The breakdown of talks in Geneva had been unfortunate, he said, as global trading systems needed to remain open to support development.  A failure to reach agreement boded ill for future multilateral cooperation in trade.

ASAD M. KHAN ( Pakistan) said there was a global consensus that the current world situation demanded immediate, collective, comprehensive and determined action.  There were several lessons that could be drawn from the crisis, including that, if there was political will and commitment, huge financial resources could be generated at a very short notice to help those who needed them the most; there was a lack of transparency and serious regulatory deficit in global financial markets; the importance of bringing greater transparency in the work of the credit rating agencies needed to be recognized; increased use of newly invented risk transfer instruments in globalized markets carried serious shortcomings; and investments from the developing world appeared to have played an important stabilizing role thus far.

There was a need to recognize the importance of commodities for the development process of developing countries, particularly the most vulnerable ones, he said.  It was, therefore, crucial to bring commodity back to the forefront in the agenda of the international community.  The recent turmoil in commodity markets had underlined the shared interest of all countries in ensuring that commodity markets did not become a source of global macroeconomic instability, and social and political upheaval.

It was also important to identify and agree on the best ways to strengthen the nexus between trade, food and energy security, and industrialization, based on the lessons from the experiences of countries that had succeeded in achieving growth from a commodity base.  There was also an urgent need for the international community to support the efforts made by developing countries at national levels, and for the issues of subsidies and tariffs to be addressed, he said.

HIRUT ZEMENE ( Ethiopia) said some of the policy challenges ensuing from the global financial crisis concerned the need to improve the governance structure of the international financial institutions, as well as its methods of surveillance.  The fact that more than 100 million people were now at risk of falling under the bare minimum of $1 a day, of which the continent of Africa would house the most, was clear testimony to the sense of urgency in addressing the matter.

The crisis would discourage foreign currency inflows from remittances and would also negatively affect foreign direct investments to low-income countries, he said.  The multilateral financial institutions should help developing countries with the situation, and development partners should live up to their solemn commitments pledged.

He said Ethiopia had benefited from the debt relief provisions under the HIPC Initiative and the enhanced HIPC initiatives, and had become eligible for debt relief under the Multilateral Dept Relief Initiative.  That had enabled the Government to finance priority social and economic sectors, particularly pro-poor projects.  The rapid rise in food and energy prices, if not managed properly and globally, could pose a significant threat to growth, employment, good governance, and even peace and security.

Ethiopia had ventured on a subsidized local distribution programme, particularly for basic staple food and related items.  Taxes for imported food items had been waived.  However, he said the already meagre resources of low-income countries like Ethiopia were being unduly consumed by the current global financial crisis, while they should have been used for development-oriented goals that were closely relating to the Millennium Development Goals.

MOHAMMED AL-ALLAF ( Jordan) said developing countries’ external indebtedness had become an increasingly difficult problem, reaching some $373 billion in 2007.  That had made it difficult for them to achieve the internationally agreed development goals, including the Millennium Development Goals.  The unprecedented run up in debt had been due to rising food and energy prices.  That had delayed investments in many socio-economic projects, increasing unemployment and productive growth.

Since 1989, Jordan had been cooperating with the World Bank and other international financial institutions to resolve its external debt.  Between 2004 and 2008, the Jordanian Government invested much of its financial revenues to pay off foreign debt, which had since decreased significantly.  That was the result of the conclusion of early purchasing agreements of debt by the Paris Club, he said.

However, despite this process of economic reform, Jordan still suffered from external debt, he said, adding that his country was still vulnerable to external shocks.  The debt crisis had undermined the Government’s ability to fight poverty and achieve sustainable development.  Alternative sources of financing were needed. For such efforts to succeed, they should be international and well-coordinated.

YURIY SERGEYEV ( Ukraine) said his delegation welcomed the steps taken by the world financial institutions in addressing new global challenges, including the financial crisis, and recognized that urgent measures should be taken to strengthen macroeconomic policy to prevent a global recession.  Developing innovative sources of financing should be implemented with a view to mobilizing predictable and increased stable sources of financing.  However, innovative sources of financing were not the only emerging issue that should capture attention.  The landscape of international cooperation for development had evolved since Monterrey, and Member States should identify the new issues that would be important for discussions related to financing for development.

One of the principal obstacles to sustainable human development was external debt, which impeded the security and economic stability of developing countries, he said.  Debt relief could play a role in liberating resources that could be directed towards activities consistent with attaining sustainable growth and development.  In that context, debt cancellation would free up national resources for priority development-related purposes.  However, lending rates remained too high in most developing countries and transition economies.  The importance of avoiding the accumulation of new, unsustainable debt should also be recognized.  In addition, governance reforms were essential to the continued effectiveness and credibility of the Bretton Woods institutions, and there should be intensive cooperation within the framework of the United Nations on macroeconomic policy issues, he said.

TACHASIT PRASITTIRAT (Thailand), associating his remarks with those made on behalf of ASEAN and the Group of 77 developing countries and China, said that the guidance provided by international financial institutions had left a lot to be desired in providing a sound international economic environment.  Clearly, regulations were needed to restrict speculative capital flows that destabilized markets.  He urged the Bretton Woods institutions to actively monitor financial irregularities and issue early warnings when necessary.  The greatest challenge for each country, however, required finding the right balance between investor-friendly market conditions and minimizing exposure to short-term capital flight.

Recognizing that the least developed countries had been hit the hardest by the food crisis, he reaffirmed that his country would not restrict food exports, and that rice trade would continue, including Government-to-Government and Government-to-international transactions.  As for long-term solutions to the crisis, he urged cooperation between United Nations agencies and other organizations, particularly the Bretton Woods institutions, in order to realize a green revolution and increase agricultural productivity. 

In addition, he said, biofuels should be produced from crops that were not critical for domestic food consumption, as was true in Thailand.  In addition, speculative distortions in commodity markets must be properly addressed and market distortions in international agricultural trade must be dealt with through exercise of political will and flexibility towards a successful conclusion to Doha Round negotiations.

GUILHERME PATRIOTA ( Brazil) said Member States must strive to avoid a further deterioration of the world economic outlook.  The present liquidity crisis should not only be seen as a consequence of lax monetary policy, insufficient regulation or irresponsible finance.  Rather, States must acknowledge that deep changes were required in the regulatory framework.  It was imperative that States did not allow the continuation of the policies, mostly based on unfettered deregulation, which had wreaked havoc on the financial markets, and, by extension, on the world economy.

The global character of the crisis –- and the need for a global solution –- should be duly addressed.  His delegation was encouraged by the recent coordinated action by the central banks of a number of developed and developing countries.  It remained to be seen whether that would be sufficient to restore trust in the financial markets, he added.

The present crisis underscored the need for a durable and comprehensive solution to the external debt problem.  The persistence of that problem was part of the instability plaguing the markets.  International initiatives, such as the HIPC Initiative and the Multilateral Debt Relief Initiative, had contributed to reduce the debt burden of a number of developing countries.

However, many developing countries had remained outside their scope of action.  Furthermore, many countries that benefited from those initiatives had not been able to sustain low levels of indebtedness.  Brazil also recognized the merit of the debt sustainability framework model developed by the World Bank and the IMF, but considered that it should not be used as a tool to create undue difficulties to new entrants in the international credit markets.  The international community must also be especially sensitive to the needs of developing countries, including middle-income countries, he said.

EDUARDO M. R. MEÑEZ ( Philippines) said the current discussions on the draft outcome document of the upcoming Doha Review Conference needed to reflect the urgency of the need to address the present crisis, especially how it might affect the Monterrey Consensus.  Indeed, the gravity of the present financial crisis should force all Governments to consider seeking immediate solutions to the present problems, and finding common agreement on how to prevent similar crises in the future at all possible levels –- national, regional and global.  During the panel discussion last Friday, the opinion was expressed that perhaps, because of previous experience with the Asian financial crisis, some countries might not be as exposed to the current financial fallout.  However, in today’s globalized world, there was no escaping the economic effects of a slowing international economy, especially regarding trade.

For that reason, regional forums such as ASEAN and the Asia-Pacific Economic Cooperation (APEC) would need to discuss and consider coordinated responses as part of a wider comprehensive approach, he said.  The Committee, and the United Nations as a whole, needed to contribute the combined wisdom from developing and developed countries, with best practices and informed debate to ensure that similar global crises were avoided in the future.  His delegation trusted that the current session of the General Assembly would be a turning point for all issues falling under the development pillar of the United Nations.

PAUL LOLO ( Nigeria) said the international financial systems’ acute governance deficit had accentuated the imbalances, double standards and lack of transparency in managing it, and thus, the poor in developing countries had been left facing even greater misery.  There was a need for sober reflections, not only on governance, but also on the basic assumptions and attitude towards development issues.

Developing countries were watching with keen interest the zeal and speed with which Group of Seven countries were responding to the financial crises.  Where there was commitment and political will, resources could be mobilized on time to cushion the effects of the current crisis in the short-term, and at the same time, put in place adequate regulatory measures and oversight to check against greed, speculation and manipulation in the long-term.

Against that backdrop, he underscored the need to reverse the continued trend of net outward transfer of financial resources from developing to developed countries, which reached $792 billion in 2007.  The actions of the Group of Seven to respond to the crisis showed that more could and should be done to make good on official development assistance commitments.  Debt relief should complement, not substitute, official development assistance.  Despite promises made in 2005, donors were still not on track to fulfil their commitments to Africa.

He went on to say that a rule-based, impartial, comprehensive and transparent debt restructuring mechanism was needed to replace the current system that was heavily skewed in favour of creditor countries.  Developing countries needed the space to scale up their expenditures in critical development areas, notably infrastructure, education, health and agriculture.  Nigeria was keen on doing that.  The Assembly should send a clear message that some of the budget ceilings of the IMF seriously impeded developing countries’ development efforts.

KENJU MURAKAMI ( Japan) said the world economy was likely headed towards a marked slowdown.  States should bear in mind that the global credit contraction arising from the present financial turmoil might increase the risk of squeezed private capital inflows to emerging economies.  In response to elevated strains in the global financial markets, the Bank of Japan had taken coordinated actions with other central banks to provide United States dollar liquidity, and had supported interest rate cuts taken by other major central banks.  For example, the Bank of Japan provided liquidity of $20 billion last week, and had announced plans to do more in the coming weeks.

With a view to minimizing chain reactions amid the global financial crisis, the Government of Japan had proposed, last weekend, in Washington, the creation of a scheme under the IMF to offer emergency loans to help countries facing extreme difficulties in dealing with the current instability.  Under that plan, foreign reserves would be utilized as necessary.  Japan would call for other countries to participate in that scheme as well, he said.

JOSE ALBERTO BRIZ GUTIERREZ ( Guatemala) said in recent days, it had become evident that no country was exempt from the banking crisis caused by risky behaviour in credit markets.  The climate of mistrust had caused the crisis to spread rapidly, and with great intensity, to other economies worldwide.  That confirmed the interdependent nature of a globalized economy.  The first ad-hoc reactions to the crisis did not produce the desired effect, and it had been only when, over the past weekend, a collective response had been made, that the tide had started to turn.

A deep economic change was underway, he continued.  Its full extent and scope could not be predicted at present.  However, that change and the new capital shortage would make it more difficult for least developed countries, in particular, to achieve the Millennium Development Goals.  Government response of recent days should not be considered a rejection of the market economy paradigm, but rather, a necessary, practical response to the problem.

Much was being said about the need to reform the international financial architecture and strengthen the surveillance capability of international financial institutions, he said.  Indeed, they must respond better to the needs of all stakeholders in the international financial system, including least developed countries.  The Assembly could contribute to the debate to respond to the current financial and other crises, since it could put a human face on globalization.

He expressed hope that the Committee’s work would contribute to a successful conclusion of the upcoming Doha review meeting.  International cooperation was needed for an effective solution to the current food crisis.   It had been a mistake not to make food and agricultural development a priority in development cooperation.  He called for eliminating agricultural subsidies that distorted international markets.

MOHAMED A. A. ALAHRAF ( Libya) said the current financial crisis had risks and repercussions that did not recognize boundaries.  It underscored the need for developed countries to show their sincere political will, live up to their responsibilities, and introduce effective reforms to the international financial system that would guarantee the fair representation of countries.  Such reforms would also serve to achieve the objectives of sustainable development and the Millennium Development Goals, and would allow for cooperation and coordination in instituting a mechanism that would observe and control the markets.

Commodities were strategically important as a prime source of income for developing countries, he continued.  Despite the fact that the increase in the prices of certain commodities enhanced opportunities to implement more development plans and programmes, countries that depended on a single or few commodities were more likely to be affected by financial crises.  There was a need to support the efforts of those countries to increase their production, and to guarantee access to world markets.   Making a call for overcoming the current impasse in the Doha trade negotiations, he said developed countries should show the will to arrive at an agreement.

He went on to express hope that all countries would demonstrate flexibility, so that States could arrive at an implementation of the Doha agreements.  Failure to realize the Doha objectives could send a negative signal for the future of the world’s economy, and could even encourage more protectionist trends.  Turning to Africa, he said the continent had been able to realize tangible and encouraging economic and democratic progress.  Continuing such progress, however, would necessitate improving the lack of official development assistance, among other things.

MODEST J. MERO (United Republic of Tanzania) said the entire world was seriously struggling to cope with multiple challenges arising from rising food and commodity prices, volatility of oil prices and climate change, as well as the energy and financial crises.  The unfolding challenges were impacting the growth and economic prospects of all economies, and had the potential to lead to severe consequences in low-income countries, such as his own.

The main concern was the danger of pushing millions of people below the poverty line, and thus, completely reversing efforts made towards achieving the Millennium Development Goals.  Therefore, the launch of the United Nations Second Decade on Poverty Eradication was timely.  His delegation remained convinced that full employment and decent work should be integral and central to any efforts made regarding poverty.

The United Republic of Tanzania continued to address the challenge of debt by meeting the sustainability yardsticks that included payment of debt and adoption of effective borrowing.  In 2007, the country continued to receive debt relief under the HIPC Initiative and from international financial institutions.  Prudent measures to reduce dependence on external resources were being taken, he said.  For example, starting from the next financial year, the recurrent budget would be financed from domestic revenue, and the level of overall budget dependence was expected to decline to 34 per cent from 42 per cent in 2007-2008.

KAUTHER SAFAA AHMED ( Iraq) said Iraq had tried to ensure that it had met all objective conditions needed to achieve its development goals.  Iraq had adopted a diplomatic initiative to address its past debt problem, and, to that end, had signed agreements with 18 members of the Paris Club.  It had signed the alternative convention of the IMF in February.  Iraq firmly believed in broadly opening the country to international markets.

She said that several events and conferences had been held, including one in Stockholm recently, where Iraq’s Prime Minister noted that the debt accumulated before and after the war was an obstacle to the country’s socio-economic development and reconstruction.  The Prime Minister had called on the international community to help create the necessary conditions for economic recovery through external debt reduction.  She called on international partners to follow the lead of the United Arab Emirates in external debt forgiveness for Iraq.

Iraq had achieved tangible economic success, reducing inflation from 65 per cent in 2006 to 20 per cent in 2007, she said.  Unemployment and the percentage of the population lacking potable water had fallen as well.  Agricultural projects had also been launched.  But it needed to reduce and eliminate its external debt to move forward.  She called on other countries to follow Saudi Arabia’s lead and either reduce or write off Iraq’s external debt owed them, and on the wider international community to allow Iraq to resume its role in its economic reconstruction.

ALI MCHUMO, Managing Director, Common Fund for Commodities (CFC), said the food crisis had highlighted the importance of commodities as a major instrument in the development process and the achievement of the Millennium Development Goals.  It was now clear that addressing major development challenges was impossible without accounting for the commodity sector.  Yet, the current food crisis was a symptom of broader, more complex issues, such as high price volatility, supply deficiencies, value share inequity, low yields, market concentration, lack of diversification, and difficulties in market access.  Those long-term structural conditions in the commodity sector had to be addressed to reach a solution to the current food crisis.

The alarming development of rapidly increasing food prices and their aggravation of developing countries’ poverty was, he said, manifestation of fundamental weaknesses in commodity-dependent economies.  Temporary mitigation measures designed to ease emerging pressures might provide temporary, not lasting relief and might even exacerbate long-term trends.

To have lasting impact, a global framework was needed.  Such a reframing of the commodity agenda would need to address:  supply capacity limitations under which commodity producers operate; the lack of diversification of their production and export base; effective participation in the value chain; and the need for an international enabling environment including an equitable, predictable and rules-based international trade regime.  The Global Initiative on Commodities should be the starting point of a sustained initiative that would then need follow-up, so a global consensus could be found, he added.

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