Helen Clark: Implications of the Financial Crisis on Development
Remarks by Helen Clark, UNDP Administrator on the occasion of a Side Event organized by The Netherlands on: “The Financial and Economic Crisis and the Implications for Balanced and Sustainable Development”
My thanks go to the Ministry of Foreign Affairs of the Netherlands for organizing this timely discussion on the eve of the gathering of the G20 in Pittsburgh. I am delighted to be part of it. It is also a pleasure to join such distinguished co-panelists today.
This is a difficult time to be pursuing our development mission to help deliver improved living standards for the poorest and most vulnerable people and nations.
The international recession, climate change, and other global crises – from high food and fuel prices to the more recent influenza pandemic – threaten to undo hard-won development gains in many countries, at the very time when we need to accelerate action to achieve the eight Millennium Development Goals by 2015.
Nowhere is that more important than in Africa, where recent gains on the MDGs are now under real threat.
In the past few years, a number of African countries, supported by the international community, have made tremendous progress in mobilizing their own domestic resources for development and in developing MDG-aligned sector plans to improve access to services for the most vulnerable.
But the global recession has cut demand for African goods and services. Remittance and investment flows have diminished, and Africa-wide GDP growth has slowed significantly.
Similar patterns have also occurred on other continents. Worldwide, the number of people who will live in extreme poverty in 2009 is now estimated to be 55 to 90 million higher than was forecast before the recession.
The United Nations in April agreed that there should be a common framework to tackle the economic crisis, help speed up recovery, and build a more inclusive and greener globalization. The framework developed includes initiatives for food security, trade, a global jobs pact, and a social protection floor.
At UNDP, we have been helping developing countries to analyze the impacts of the recession on their people. We are advising on policy responses and on approaches to social protection. We assist with resource mobilization, and we work in parallel with other multilateral agencies and the International Financial Institutions. The recent hiring of some forty economists for UNDP field offices in Africa is testimony to this commitment.
Our primary concern in UNDP, as well as in the broader collection of agencies which make up the United Nations Development Group, is to support those who are already poor and vulnerable, while also safeguarding the investments and efforts made towards poverty reduction and achieving the MDGs.
For this to happen, significant advances would need to be made in four strategic and often interrelated areas. They are:
1. Accelerating and scaling-up proven initiatives in key areas such as education, health, gender, sustainable agriculture, energy, and infrastructure, backed by adequate capacities to mobilize and manage financial resources and deliver public services effectively;
2. Supporting sound public investments, strengthened institutions, good governance, and effective social and economic policies which lead to growth with equity;
3. Creating supportive international frameworks for trade, and technology transfer, as well as for climate change mitigation, low carbon growth plans, and adaptation to sustain long-term human development;
4. Ensuring sufficient, predictable, and well co-ordinated financing for development, including official development assistance (ODA), debt relief, innovative approaches, and new financing instruments.
Allow me to expand on this last point in particular, an area in which the example of the Netherlands – which provides 0.8 per cent of its GNI to ODA – stands out as commendable.
In the course of the international financial and economic crisis, massive counter-cyclical fiscal stimuli and financial bailouts have been provided to shore up some of the richest economies on the planet.
The least developed countries, however, which stand to bear the heaviest burden of the recession, do not have deep pockets to dip into to cushion the blow of the recession to their economies.
Increased, and better, aid is therefore more critical than ever before.
It will help immensely if the G8’s Gleneagles ODA commitments, first made in 2005, are delivered on. These were recently reaffirmed yet again in Italy, but still remain far short of delivery – for Africa in particular.
The IMF – with input from UNDP – has been working with ten priority African countries – namely Benin, Central African Republic, Ghana, Liberia, Niger, Rwanda, Tanzania, Togo, Sierra Leone and Zambia – to develop “Gleneagles Scenarios”.
These country specific scenarios identify the macroeconomic feasibility of the development financing if the Gleneagles commitments would be met to double aid to Africa by 2010 over 2004 levels.
So far, the IMF macro-economic analysis has been finalized for eight of the ten countries; the other two are under way.
UNDP estimates the total initial financial requirement for the first ten Gleneagles Scenario countries to be around $4.5 billion in the first year of full implementation - a small sum when compared to the more than $18 trillion recently raised to stabilise the world’s financial system.
The preparation of Gleneagles scenarios is now being extended to an additional ten countries.
UN agencies and their partners stand ready to provide policy guidance and capacity and resource mobilization support, where required, to help implement the Gleneagles scenarios.
Later today I will accompany the Secretary-General to Pittsburgh, where G20 leaders will meet to discuss the world economy. The agenda for the G20 meeting is rightly forward looking on the basis that the international financial system has indeed stabilized, but it is important to ensure that the voices of developing countries which are still in economic crisis can be heard.
Right now, more direct assistance from ODA and from the multilateral banks, along with more fiscal space, to enable developing countries to deal effectively with economic shocks and invest in basic services and safety nets, is vital. The crisis disproportionately affects the poorest, who have the least resilience.
With many developing countries facing reduced domestic revenue streams this year, more assistance would allow governments to maintain budgets for basic services like health and education –which are so vital to meeting the MDGs.
These are issues which the UN would like the G20 leaders to pay attention to in Pittsburgh.
At this time we need unwavering leadership, political commitment, and dedicated resources for development which will bring about lasting improvements in the lives of poor and vulnerable people around the world.
Progress on the MDGs will be reviewed next year when the General Assembly meets in September. We cannot let the MDGs simply become another promise the international community has made but has not kept.
While the recession and other crises have made an already difficult challenge more difficult, we can, working together, still achieve our goals.