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Urgent Action Needed To Fix Global Imbalance

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April 19, 2004—The global imbalance between rich and poor countries must be urgently addressed if the world is to prosper into the 21st century, the World Bank and the International Monetary Fund (IMF) Spring Meetings will be told this weekend.

Global Balance
The meetings, and Bank research to be released over the next week, which will unveil the latest information on global poverty and the international economy, are expected to reinforce the message issued by World Bank President James D. Wolfensohn at the Bank and IMF's annual meeting in Dubai last September.

"In our world of 6 billion people, one billion own 80 percent of global GDP, while another billion struggle to survive on less than a dollar a day," Wolfensohn said. "This is a world out of balance."

"Over the next 25 years, 50 million people will be added to the population of the rich countries. About one and a half billion people will be added to the poor countries. Many will experience poverty, unemployment, and disillusion with what they will see as an inequitable global system."

Wolfensohn warned that unless the world's imbalance was corrected, it could threaten the peace and prosperity of future generations in both rich and poor countries.

The 2004 Global Development Finance Report (GDF), released today, ahead of the Spring Meetings shows that imbalances are continuing. Private capital flows are again increasing to developing countries but remain highly uneven in their distribution.

GDF finds most of the rebound in net private capital flows, to $200 billion in 2003 from $155 billion in 2002, flowed to Brazil, China, Indonesia, Mexico and Russia. But other low income countries were not sharing in the rebound in private capital inflows - leaving them still struggling for resources to grow their economies.

The Spring meetings, in Washington DC, will also be told of the need for an urgent increase in efforts to meet the Millennium Development Goals (MDGs) - an international pledge to eradicate poverty in all its forms - if they are to be achieved by their target year of 2015.

At the Dubai annual meetings, Wolfensohn called for a more vigorous implementation of the Monterrey Consensus as part of an effort to meet the MDGs. The key pledges at Monterrey were:

  • For the developed countries to take action and increase aid, open markets for trade and support poor countries by enhancing capacity building
  • For the developing countries to strengthen governance; create a positive investment climate; build transparent legal and financial systems and fight corruption.
The meetings will be told there is a clear need for more and better quality aid to support countries in implementing sound policies and to strengthen progress towards the MDGs. In Dubai, the Development Committee asked the Bank and Fund to examine various options to mobilize the extra resources needed. The committee will review an "interim" paper on the issue and a final report is expected at the Annual Meetings in September.

After the Monterrey conference, international donors made additional commitments of about $18.5 billion a year by 2006. But as countries improve their policies and governance, the amount of additional aid that can be used effectively will rise to the $50 billion per year range - roughly a doubling of current aid levels.

Given this, the Spring Meetings will again be dominated by the debate on how to mobilize more resources for developing countries.

The GDF also reinforces the need for an increase in aid. It expresses concern that global aid flows increased only slightly and last year remained well below the level needed to achieve the MDGs. Another report, World Development Indicators, will be launched on Friday April 23, and will provide the latest snapshot on the state of world poverty. This will include regional breakdowns on poverty trends in regions such as Africa, South America and South Asia.

About the Meetings
More than 1000 delegates from member country governments and observers from 80 organizations are expected this weekend for the meetings.

The event consists of the meeting of the International Monetary and Financial Committee on Saturday, April 24, which reports to the Bank and the IMF's Board of Governors on issues relating to the international monetary and financial system. This is followed the next day by the meeting of the Development Committee which advises the Board of Governors on critical development issues and the financial resources necessary to promote economic growth in developing countries.

A Ministerial meeting on HIV/AIDS will also be held on the Sunday afternoon to discuss ways to increase international efforts to tackle the epidemic which threatens to reverse gains in development in affected countries.

The meetings will be preceded this week by a round of consultations with civil society organizations and the private sector on a range of issues including trade, debt relief and debt sustainability, the voice of developing countries on the World Bank and IMF Boards and the role of the IMF in developing countries.

What's to be Discussed
Key issues on the Development Committee agenda include:

  • Discussion of a monitoring report on progress in meeting the MDGs and an interim strategy paper on how to mobilize the necessary resources to boost aid levels to achieve the goals. Earlier research has suggested that only the MDG of halving the number of people living on less than $1 a day from 1990 levels will be met in 2015 if current trends continue
  • Debt sustainability in low-income countries
  • The level of progress on the Education For All initiative, an international commitment aimed at providing every boy and girl in the developing world a good quality, free, and compulsory primary school education.

The poverty discussions at this weekend's Spring Meetings will form the backdrop to a major international conference in Shanghai, China in May which will focus on how to improving development outcomes. It will bring together more than 600 international experts to discuss ways to scale up poverty reduction efforts. The practitioners and policymakers will analyze more than 70 case studies to examine what has worked and what has failed in previous development efforts.

Bank officials are also expected to discuss trade and the fundamental importance of getting the Doha negotiations in the World Trade Organization back on track after the breakdown in talks in Cancun, Mexico in 2003.

 





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