In a speech hosted by the Center for Global Development, International Monetary Fund (IMF) managing director Dominique Strauss-Kahn last week called upon wealthy countries to provide an additional $55 billion in foreign assistance to developing nations hit hardest by the financial crisis. He also said he expected progress on reforming the governance of the international financial institutions at the Pittsburgh G-20 Summit, including a possible breakthrough.
Speaking before a standing-room-only audience that included media, policymakers, and NGO leaders, Strauss-Kahn commended wealthy countries’ and developing countries’ initial response to the global financial crisis but said that additional donor support is needed.
“We must make sure that any global recovery also lifts the low-income countries,” Strauss-Kahn said in prepared remarks. “But the IMF cannot go it alone. We think that low-income countries need about $55 billion in additional external financing for this year and next.”
CGD president Nancy Birdsall, who introduced Strauss-Kahn and moderated the discussion that followed, emphasized the importance of precautionary finance for developing countries to fortify them against future financial shocks. Birdsall also repeated her previous calls for governance reform at the IMF, World Bank and other international financial institutions.
“It seems fundamental that we try to move the international financial institutions away from always relying on lending to a little bit more emphasis on risk management and insurance kinds of facilities,” Birdsall said.
Strauss-Kahn said there may be a “breakthrough” at the G-20 Summit in Pittsburgh next week in the ongoing efforts to give developing countries a bigger voice in how the Fund is run. He added that the G-20 should think about how to include poorer countries in its own decision-making process.
Strauss-Kahn is a long-time advocate for reforming IMF governance mechanisms, having urged reforms in a 2007 op-ed in the Wall Street Journal while he was a candidate to head the IMF. Birdsall put forward similar ideas in a March 2009 commentary, Double Majorities at the World Bank and IMF: For Legitimacy and Effectiveness.
Under Strauss-Kahn, the IMF has engaged in extensive consultations with civil society on governance issues, coordinated by the New Rules for Global Finance Coalition.
In a speech the week before, Birdsall called upon the United States to exercise leadership at the G-20 Summit to reform the multilateral development institutions, especially the World Bank, to better address the two main challenges of the 21st century: catastrophic climate change and increased risk to poor people and poor countries arising from the globalized economy.
“First, the G-20 leaders should pledge to begin working together—well before their next summit in Seoul—on reaching a consensus on the functions and institutional architecture needed to implement a global climate accord—including fresh thinking about the potential role of the World Bank,” said Birdsall.
“Second, because climate change and globalization have greatly heightened risks for the world’s poor, the G-20 leaders should call on the multilateral development banks to become much more active in offering countries innovative risk management tools, such as insurance against natural disasters and bonds indexed to their terms of trade,” she said.
Policymakers and development experts will join Birdsall on a panel in Pittsburgh later this week to discuss the top-heavy balance of wealthy-country membership at the G-20 Summit and what that means for the poor countries that were left out of the club.
The panel discussion will take place on Wednesday, September 23, at 12:00 p.m. at the University of Pittsburgh and will include remarks by Donald Kaberuka, the president of the African Development Bank; David Lane, the president of ONE; and Timothy Adams, former undersecretary of the U.S. Treasury. The panel will be moderated by Louis Picard, a professor at the University of Pittsburgh, Graduate School of Public and International Affairs.