President Ranil Wickremesinghe’s recent call for a new financial architecture to address the concerns and problems of the Global South could not have come at a more opportune time.
The Global South and even the developed world have been left reeling in the aftermath of the Covid pandemic, the Ukraine War, the Climate Crisis and the resulting food and energy crisis. In this context, President Wickremesinghe’s suggestion at the Berlin Global Dialogue for a comprehensive reworking of the global financial order deserves wider attention by developed nations.
As the President explained at the forum, the Bretton Woods financial institutions such as the International Monetary Fund (IMF) and the World Bank were established in a different era – almost 80 years ago. The world’s economy has undergone vast changes since then, some for the better but mostly for the worse as the disparities between the Global North and South are now wider than ever.
The President, in his address titled “Worldwide Economic Shocks and the Impact on the Global South”, cautioned that without immediate corrective measures, the world could be on the brink of another crisis. He said that many developing countries are burdened with substantial debt, highlighting the inadequacy of existing mechanisms like the IMF to address this situation.
As Sri Lanka’s recent experience shows, multilateral lending agencies are not fully equipped to deal with countries facing multiple crises. As a first step, the IMF should take up the President’s call at the Berlin Dialogue for utilising the US$ 100 billion available with the IMF as a starting point to resolve these issues.
It is crystal clear that the IMF and the World Bank do not possess adequate mechanisms to address the issues faced by the developing world. Nevertheless, the Western world is also not too pleased with efforts such as the Asian Infrastructure Investment Bank (AIIB) and the Global Development Initiative (GDI), both of which are proposed and led by China. The West is also wary of initiatives such as BRICS, which give a greater voice to the Global South.
But this is not the time for a North-South competition. It is actually the time for a dialogue between the North and the South and also among the developed nations themselves on the way forward. As the President told the Global North at the Berlin Dialogue, China must necessarily be a part of this discourse.
President Wickremesinghe expressed the need for a comprehensive dialogue between Western nations and China, the USA and China and the European Union (EU) and China, as a critical component of a robust international plan capable of addressing the global challenges anticipated in 2024. New and emerging regional blocs such as BRICS and BIMSTEC must also be a part of this dialogue.
The world, especially the developed world, must rein in defence spending, which is currently at a staggering US$ 2.2 trillion per year. The Ukraine War has become a test bed for the latest weapons, from kamikaze drones to hypersonic missiles. The entire annual budgets of many African countries could have been funded several times over with the monies spent on such weapons. In fact, many of the problems faced by the developing world – from the lack of clean water to premature deaths of children- can be solved if even a fraction of such war funds can be diverted to address those concerns.
It is not only the IMF and the World Bank that should be reformed to suit modern times and needs, but also the United Nations (UN) itself. The UN Security Council (UNSC) seems to be an anachronism, given the widely-criticised Veto Power wielded by the five Permanent Members. The UNSC should induct more countries on a permanent basis to reflect the rise of the Global South in world affairs. Another bone of contention is that the UN Human Rights Council (UNHRC) is often used by the West to unfairly target the Third World.
In this light, there should be a bigger focus on South-South cooperation to tide over the problems affecting developing nations. Blocs such as BRICS, BIMSTEC and IORA (Indian Ocean Rim Association), which Sri Lanka will chair soon, could play a wider role in this regard.
There is no doubt that the world needs a dialogue – and concrete action – on a range of issues from addressing the next pandemic to debt relief for countries facing financial crises. The response to the Covid outbreak exposed the global imbalance in terms of vaccine procurement and access to drugs such as Paxlovid. Likewise, there is still no proper mechanism for debt restructuring for poorer nations.
The fall meetings of the World Bank and the IMF, to be held in October in Morocco, could be a prelude to such a global dialogue on these and other pressing issues. As the President said, 2024 will present a golden opportunity to tackle these global issues head-on and evolve viable, long-term solutions. The developed world must not shirk its responsibility on this score.