Ms. Nemat Shafik, Deputy Managing Director of the International Monetary Fund
The world as we know it today is facing multiple challenges. They include globalization, and the rather poor job the world collectively has done of managing that process; policy and market failures - cruelly exposed by the global economic crisis; and longer-term trends such as widening disparities in income distribution, aging and imbalanced population growth, global food security, and climate change.
Finding a cooperative solution to all of these challenges has become even more urgent than at the turn of the millennium, when the world community joined forces for the first time to overcome the scourge of poverty.
Much progress but also new imperatives
The Millennium Development Goals succeeded in focusing attention on the need to reduce absolute poverty. And while significant gaps remain relative to the targets set out in the Millennium Declaration, the achievements are remarkable. Let’s not forget, for instance, that the incidence of extreme poverty has been halved since 2000.
But the global economic crisis was a huge setback - one from which the world economy still has not fully recovered. Now, Europe is battling a debt crisis that has exacted huge costs in terms of growth and employment. Similarly, the Middle East and North Africa is undergoing a historic transition, where hopes for a brighter, more democratic future rest crucially on making the economic transformations necessary to sustain high and equitable growth. And then there is the challenge of ensuring that rapidly rising incomes in other emerging and developing countries continue apace but in a manner that is socially and environmentally sustainable.
Consider the following facts:
- Widening income inequality. The past decades have seen unprecedented economic growth, which has raised living standards on average. But overall, the rich have done much better than the poor. This growing inequality breeds social resentment and generates political instability.
- Chronic unemployment and pervasive underemployment. Five years after the crisis first erupted in the U.S. mortgage market, 200 million people worldwide still cannot find decent work, including 75 million young people, who are at risk of becoming a lost generation.
- Uneven trends in population growth. By 2050, the global economy would need to provide food and jobs for more than 9 billion people, of whom 85 per cent will be living in what are now developing countries.
- Unsustainable climate change. Biodiversity has been enormously reduced and global warming continues, with carbon dioxide emissions reaching deeply worrying concentrations.
A truly global agenda
All these problems are deeply intertwined and cannot be solved in isolation. That’s why the post-2015 global development agenda must go beyond our traditional understanding of development - helping the less developed countries to catch up with the more advanced ones. It must also address the various imbalances in the global economy with spillovers that ultimately affect the poor and vulnerable everywhere.
A new agenda needs to be truly global in scope, relevant to all in its goals, and realistic in how it assigns responsibilities. It will also require a change in how we measure progress. Traditional indicators, such as GDP, are, by themselves, insufficient as guides to our future policy choices.
Safeguarding the well-being of future generations is a joint responsibility of the international community, but we must also achieve fair burden sharing, given the enormous difference in capabilities between the poorest and richest countries.
The increasing interconnectedness among countries, and across sectors and policy areas, calls for greater policy coherence. We need effective global leadership, and we need it fast.
With its global membership, the United Nations should continue to play a leading role in fostering effective international cooperation. But multilateral coordination needs to become more effective - to put it bluntly, we cannot afford to waste time on endless discussions among countries, only to arrive at the lowest common denominator. We need a bold yet realistic approach, one that allows us to move from words to implementation more quickly.
The IMF will play its part
The IMF has played a key role in helping the global economy recover from the global economic crisis, and we continue to work with our 188 member countries on multiple fronts to put the global economy on a sounder footing. There has been tremendous change these past five years, but we still have a lot more to do.
- Strengthening global stability. The IMF has improved its ability to connect the dots between countries and focus on the stability of the global economy as a whole. An upgraded surveillance framework provides for deeper analysis of spillovers and cross-border effects, and we have sharpened our assessment of countries’ policies from a multilateral perspective. We are also placing greater focus on the critically important financial sector.
- Supporting countries in downturns. Since the start of the global economic crisis, the IMF has committed well over $300 billion in loans to its member countries. We have overhauled our lending framework to make it better targeted at meeting the varied needs of our member countries and streamlined conditions attached to our loans. We are particularly cognizant of the need for financial assistance for our low-income member countries to whom we have quadrupled concessional lending.
- Creating a crisis firewall. To meet ever increasing financing needs, the IMF has greatly bolstered its lending capacity by obtaining commitments to increase quota subscriptions and securing large temporary borrowing agreements from member countries, including recent pledges of $456 billion.
- Making growth more inclusive. Our research shows that countries with a more equitable distribution of income do better at sustaining their growth performance. The Fund has been working with the International Labour Organization to formulate more effective policy advice on employment and labour market issues, and with the World Bank, UNICEF, and other international organizations to help countries strengthen social protection, including through the UN Social Protection Floor Initiative.
- Designing policies for the green economy. Our policy advice is congruent with encouraging the transition to a greener economy by ensuring that prices reflect the full costs of adverse environmental side effects. For example, eliminating costly energy price subsidies that mostly benefit the well-off and replacing them with directly targeted financial assistance to the poor can help free up fiscal resources for social and development spending while also helping fight climate change.
Fostering sound economic and financial management is the most important contribution the IMF can make to sustainable development. It provides the foundation for everything else - the economic growth that creates jobs, generates resources to protect the poor and the environment, and ultimately, creates conditions for peace and stability. We stand ready to work with our member countries and with other international organizations to take the global agenda to the next level. Now is the time to act.