Transform Finance-Development Relationship from Vicious Cycle into Virtuous One, Deputy Secretary-General Urges Group of 20

Following is UN Deputy Secretary-General Amina Mohammed’s message, as prepared for delivery, on the occasion of the Group of 20 (G20) Finance Ministers and Central Banks Meeting Session II:  International Financial Architecture, held in Cape Town, South Africa, today:

Let me begin by thanking our South African hosts for their warm hospitality and leadership.  Cape Town — this vibrant city where two oceans meet — could not be a more fitting location for a presidency that aims to bridge divides.

South Africa takes the helm of the G20 at a testing time.  Global gross domestic product (GDP) this year is projected to fall below pre-pandemic averages.  Poor countries are no longer converging towards the income levels of rich countries. 

This “new normal” of low growth affects the possibilities of developing countries to navigate the energy transition, and build resilient, fair societies.  It ultimately affects whether people will fulfill their potential or not — and whether the promise of the Sustainable Development Goals (SDGs) will be kept.

We are especially worried about the halting effect of high uncertainty on investment, the possibility of a new inflationary shock resulting from trade disruptions, and the scope for higher-for-longer interest rates that would exacerbate the debt crisis affecting developing economies.

To face these challenges, we need an international financial architecture that can support economies to grow, liberating them from a vicious cycle where high debt leads to low investment, low investment to low growth, and low growth back to high debt.

We need an architecture where the cost of capital to developing countries is low, enabling capital to flow where it can be most productive.  The G20 has a unique responsibility to lead this reform.  Three key actions are essential.

First, we must further strengthen multilateral development banks.  The G20 Roadmap for Better, Bigger and More Effective Multilateral Development Banks points us in the right direction.  Now we must accelerate.  A successful replenishment of the African Development Fund will be a crucial milestone.

Second, we need a comprehensive approach to the debt crisis.  Member States have put forward important structural proposals in advance of the fourth International Conference on Financing for Development, which we look to the G20 to support.

Third, we must strengthen the global financial safety net, with the International Monetary Fund (IMF) at its core, to shield all economies in a shock-prone world.  We must channel special drawing rights to where they are most needed. We urge the G20 to use its voice to support the progress and reform developing countries need.

With the right reforms, and with sufficient political will, we can transform the relationship between finance and development from a vicious cycle into a virtuous one.  This is the promise of South Africa's G20 presidency — and of your leadership.