Pres. Ali calls for reform of international financial architecture

Sep 19, 2023 News

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…says more financing needed to achieve SDGs

Kaieteur News – President Irfaan Ali on Monday called for the reform of the international financial architecture so that the disparity between developed and developing countries can be reduced and ultimately eliminated.

The President was at the time speaking at the United Nations (UN) 78th session of the UN General Assembly in New York. In his address, President Ali highlighted the woes developing countries face to achieve the Sustainable Development Goals (SDGs).

President Ali is leading a delegation to the High-Level Political Forum on Sustainable Development under the auspices of the UN General Assembly.

The 2023 SDG Summit commenced on Monday, September 18, and concludes today. It will mark the beginning of a new phase of accelerated progress towards the SDGs with high-level political guidance on transformative and accelerated actions leading up to 2030.

Convened by the President of the General Assembly, the Summit will mark the halfway point to the deadline set for achieving the 2030 Agenda and the SDGs. The summit is said to respond to the impact of multiple and interlocking crises facing the world and is expected to reignite a sense of hope, optimism, and enthusiasm for the 2030 Agenda.

In his address, President Ali underscored that combined effects of food, energy, climate, and the impact of COVID-19 pandemic have significantly derailed the achievement of the SDGs.

The Head of State noted too that the increased cost of financing, rising debt to Gross Domestic Product (GDP), and unsustainable balance sheets placed the developing world in a precarious position.

“Just to cite a couple examples, according to a recent IDB (Inter-American Development Bank) report, the gap in financing to achieve four critical SDGs for the Latin America and Caribbean region, including access to water and sanitation, energy security, building infrastructure that promotes innovation, and making our cities sustainable, requires US$2.2 billion,” Ali said.

He highlighted that Guyana’s expansion of the economy has allowed the country to focus heavily on the SDGs. However, he noted that national commitment alone will not be enough to achieve the SDGs, especially for poor and vulnerable countries.

“Our international financial architecture is out of sync with the needs of developing countries and must be reformed. Developing countries are faced with higher food inflation 5% higher than the rest of the world in most cases,” President Ali said.

He underscored that the average interest rate paid by developing countries on external borrowing is three times higher than what developed countries pay.

He continued, “We’ll not have a world where everyone, everywhere, enjoys their full human rights, peace and security and is free from poverty and hunger until the right to development is realized and respected. Guyana believes that significant progress can only be made in achieving the SDGs if national efforts and mass recommitment has been fulfilled in an environment that creates and fosters progress for all countries.”

President Ali’s comment comes on the heels of a report by the United Nations which shed light on the disparity between interest rates paid by the developed world and developed countries.

The report, ‘A World of Debt: A growing burden to prosperity’ was produced by the UN Global Crisis Response Group and released in July 2023.

Public debt can be vital for development; some Governments use it to finance their expenditures, to protect and invest in their people, and to pave their way to a better future – it was stated in the report. However, it was noted that it can also be a heavy burden.

Explaining the inequalities in the international financial architecture, it was stated that developing countries are dealing with an international financial architecture that exacerbates the negative impact of cascading crises on sustainable development.

Further, it was highlighted that the burden of debt on development is intensified by a system that constrains developing countries’ access to development finance and pushes them to borrow from more expensive sources, increasing their vulnerabilities and making it even harder to resolve debt crises.

Kaieteur News had reported on the report which stated that when developing countries borrow money, they have to pay much higher interest rates compared to developed countries, even without considering the costs of exchange rate fluctuations.

In the report, a comparison was done for the bond yields (2022-2023) between developing countries and developed countries.

It showed that countries like the United States and Germany had interest rates of 3.1% and 1.5%, respectively. Whereas, for developing countries in Asia and Oceania, Latin America and the Caribbean and Africa, those countries had to pay interest rates ranging from 6.5% to 11.6%.

“Countries in Africa borrow on average at rates that are four times higher than those of the United States and even eight times higher than those of Germany,” it was underscored.

President Ali’s call for reforming this international financial system highlights the urgent need to address these disparities and create an environment that fosters progress for all nations in the pursuit of the Sustainable Development Goals.

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• eliminated, international financial architecture, New York, President Irfaan Ali, Sustainable Development Goals (SDGS), UN General Assembly

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