Sunday, March 29, 2009

A Call for Reform During Crisis

All Africa - Kofi Annan
All Africa - Ngaire Woods

Kofi Annan recently wrote a piece for that calls for reform in the world’s economic institutions. Mr. Annan says that Africa is being hit twice by the current global financial crisis: first, African economies are hit as demand for the exports decreases, and second, when developed countries pass their own stimulus spending it causes capital to flow out of Africa. Thus, Mr. Annan feels that Africa is in dire need of funds to protect its economies and shelter the world’s most vulnerable people. Mr. Annan writes that “trillions of dollars are being found, at short notice, for stimulus plans and bail outs in the richer countries, the least developed countries find themselves lacking access to credit and faced with lending policies and practices that minimise their chances of receiving loans.”

To achieve its goals, Mr. Annan says that Africa can no longer sit on the sidelines as the world’s most developed countries dictates the recovery of the global economy. Instead, African leaders must use this crisis as an opportunity to push for substantive changes in the World Bank, the IMF, the G20 and other major financial players. If the G20 is going to lead the recovery, then, Mr. Annan argues, Africa should have major representation at the discussions. Additionally, the World Bank should have more African representation and a fairer voting system in order to increase its reach and legitimacy in the World. Mr. Annan, however, mentions that these changes will not occur unless there is a political will to reform and also that more developed countries must be willing to cede some of their power to emerging economies.

Along the same lines of Mr. Annan, Ngaire Woods also argues for reform at the IMF and World Bank. Ms. Woods lays out four demands that she feels African leaders should make. First, the IMF and World Bank should give “unconditional assistance to deal with emergencies related to food security or political and security crises.” Second, IMF should be easier to obtain during this liquidity crisis. Third, she calls for a more powerful African Development Bank and finally for the IMF and World Bank should offer practical advice for central banks to follow during the immediate financial crisis. Mr. Woods also advocates better representation of Africa on the IMF and World Bank staffs and also fairer voting systems. (For a great discussion of governance issues related to multilateral banks, please see the UICIFD’s main website here.)

Mr. Annan recognized that institutional reform, alone, would not solve all of Africa’s problems. He concludes as follows:
Africa must do its part too. If they are to profit from the new multilateralism outlined in the contributions published below, the continent's states must heed their commitments regarding governance, accountability and transparency and find ways to act in a more coordinated and concerted fashion.

1) What are ways to increase Africa’s representation at the G20? Right now, South Africa is the only Africa country to sit on the G20. Gordon Brown recently met with many African leaders in order to solicit African opinions prior to the G20 meeting. Is this enough, or is more needed?
2) Why would rich countries be willing to give poorer countries more representation in global financial institutions? Is it for moral obligations, or would it also benefit the rich countries to have more opinions? Would increasing African representation lead to more efficient lending at the World Bank and IMF, which would in turn be a better use of the rich countries’ investments?

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