There can be no quarrel with the resolution passed at the end of the 22nd meeting of the international monetary and financial committee of the IMF’s board of governors in Washington D.C. on Saturday. It dealt with important global issues like the fragility and unevenness of the economic recovery of member countries, warned against policies that would aggravate the situation, reform of the International Monetary Fund through greater representation for emerging economies on its executive board, greater surveillance to uncover the vulnerability of the larger advanced economies and increasing effectiveness in managing capital flows which could endanger inflation management in emerging economies. But the area in which the IMF resolution appears to fall short is giving the attention needed for the global war against poverty. India’s finance minister Pranab Mukherjee highlighted this forcefully when he voiced concern that an additional 64 million people across the world have been pushed into poverty; that joblessness has increased; and that international financial flows, while having recovered from their lows, are still far below 2007 levels. He pointed out that the realisation of the UNDP’s millennium development goals by their 2015 deadline had certainly suffered a major setback as a billion people are still suffering from acute hunger — a number that is unprecedented in history.
In this context, Mr Mukherjee pointed out that the developing countries and emerging market economies would not be able to bear another global financial crisis. One does not know if the finance minister included India in this category, but it is a scary thought. India and other emerging economies have come in for a lot of praise at different international platforms of late on how they had managed to weather the global financial crisis and were on the path of recovery, unlike the countries of the developed world. But as the finance minister warned, the emerging economies were better prepared the last time in 2007-08 as they had used their internal financial strengths and discipline to neutralise to a large extent the full brunt of the global crisis. But now that they have used up their “fiscal space” and “buffers” against fiscal shocks, these economies might not be in any position to face another global financial shock. In this context, Mr Mukherjee said the world was fortunate that food and fuel prices had remained moderate during the crisis, while noting that a lot needed to be done on both issues. Food scarcity and rising prices of food items loom large on the horizon, and the world needs to do something about it urgently. There is also a pressing requirement to raise agricultural output through research and development as well as to ensure that the prices of key commodities such as oil do not escalate beyond what the developing economies can bear. This can be achieved if there is a greater understanding at the IMF of the real needs of developing and emerging economies, including of course the least developed economies. To that extent, India’s finance minister echoed the demand of the emerging and developing countries for a more equitable representation on the IMF’s executive board. The developed countries have proved reluctant to shed their bloated quota of representation and voting rights, and Mr Mukherjee drew attention to the emerging countries’ claim to better treatment on the basis of their GDP. At present, while the emerging economies represent 47.5 per cent of global GDP, they only have 39.5 per cent representation on the IMF board. A five-seven per cent increase in their representation thus appears eminently justified. In the run-up to the coming G-20 meeting there should be further consultation between all countries on this vital issue.