Sources
Reuters: G8 pledges $20 billion in farm aid to poor nations, African leaders to ask G8 to honour pledges, G8 summit pledges $20 bln to boost food output
Financial Times: G8 to commit $20 billion for food security
According to United Nations reports, the number of malnourished people worldwide will exceed 1.02 billion this year. This represents a dramatic reversal, as the current global recession erodes decades of progress in reducing malnutrition. 103 million more are predicted to suffer before the end of the economic downturn. In response to these predictions, and near the end of a summit frustrated by discord, the G8 announced a pledge of $20 billion to fight hunger in the developing world.
On July 10th, the G8 promised to deliver $20 billion over the next three years, investing in agriculture to promote food security. The pledge is smaller than past aid commitments but has the potential to effect real change, according to development experts, because of its clear focus. Jacques Diouf, director general of the U.N. Food and Agriculture Organization, responded optimistically to the pledge, calling it “the biggest shift in strategy [he’s] seen over the past two decades.” The new strategy highlights the need to help hungry and poor people produce their own food. Emergency food aid, though necessary to help impoverished countries withstand food crises, is only part of the equation, according to Ajay Vashee, president of the International Federation of Agricultural Producers. The new G8 pledge aims to improve food security through investment in infrastructure- reaching small farmers with new seeds, irrigation technologies and farming methods to improve agricultural productivity within developing countries.
Leaders from Algeria, Angola, Egypt, Ethiopia, Libya, Nigeria, Senegal and South Africa joined G8 members later in the summit for a half-day meeting, discussing food security, past aid commitments and a proposal for climate change compensation. Led by Ethiopian Prime Minister Meles Zenawi, the African leaders were initially positive in their response to the $20 billion pledge but asked the G8 to live up to their commitments. Some remain wary, hesitant to rely on new promises from the G8 while member countries fail to follow through on 2005 aid commitments. Nigerian Agricultural Minister Abba Ruma called the pledge “very commendable,” especially in view of the current global recession, but called for the funds to be disbursed expeditiously.
NGOs have responded to the pledge with a mixture of hope and skepticism. Many view the pledge as a potentially significant policy shift, but are wary given the G8’s track record. According to ActionAid, a British aid organization, total food aid must reach $23 billion per year by 2020 to reach the millennium development goal for world hunger reduction. The G8 pledge does not reach that goal independently, but for many it is a welcome step in the right direction.
Discussion
1. U.S. president Barack Obama, discussing the G8 pledge, said "there is no reason Africa should not be self-sufficient when it comes to food.” What are the reasons that Africa has not been self-sufficient in food production in the past?
2. Can G8 leaders responsibly pledge additional aid when some are failing to meet existing aid commitments? Does the current recession affect the likelihood that G8 countries will follow through on the pledge?
Showing posts with label G8. Show all posts
Showing posts with label G8. Show all posts
Sunday, July 12, 2009
Monday, July 06, 2009
China Advocates Fundamental Reform of the Global Monetary System, and Works to Ease Dependence on U.S. Dollar
Sources: Businessweek.com: China Ratchets Up Pressure on the Dollar; Reuters.com: China Officials Call for Displacing Dollar, In Time
As the G8 summit in Italy approaches—the summit begins on Wednesday—China has heightened its call for the fundamental reform of the international financial system. In its push for the replacement of the U.S. dollar as a reserve currency, China acknowledges that it will take time to overhaul to current system. Chinese officials maintain that the IMF unit of special drawing rights (SDRs) may provide a viable alternative to the dollar.
The dollar comprises an estimated 70 % of the $1.95 trillion China holds in official foreign exchange reserves. Accordingly, China remains cautious not to make statements which may hurt its investments.
To reduce its dependence on the dollar, China stated last week that it would permit its exporters and importers to settle international trade agreements with the renminbi. Prior to this action, companies have had to exchange renminbi for U.S. dollars or alternative currencies when settling cross-border transactions. Starting July 2, the People’s Bank of China (PBoC) would invite banks to offer settlement services tied to the renminbi.
The renminbi’s projected regular appreciation next to the dollar provides the incentive for Hong Kong companies to use it in settling trade agreements. Even though China has limited the renminbi’s appreciation since July 2008 to assist exports, the mainland currency has risen 21% since 2005 when a dollar peg was cast aside. Investors are betting it will strengthen less than 1% to 6.77 per dollar in the next year. Since July 1, 2008, the central bank has maintained a range of 0.08%.
Other initiatives also aim to promote the renminbi’s regional usage. For instance, China said in May that it would endorse the issuance of renminbi bonds by locally incorporated foreign lenders.
Still, in spite of the disfavor with the dollar-centric global financial system, the IMF announced on June 30 that the portion of dollars in international foreign exchange reserves reached 65% during the first three month of 2009, rising to its highest level since 2007.
Discussion Questions:
1) What short and/or long-term effects might China's promotion of the renmindi as a regional currency have on the dollar as well as other currencies?
2) How might China's efforts fuel discussion concerning the reserve currency at the G8 summit in Italy on Wednesday?
As the G8 summit in Italy approaches—the summit begins on Wednesday—China has heightened its call for the fundamental reform of the international financial system. In its push for the replacement of the U.S. dollar as a reserve currency, China acknowledges that it will take time to overhaul to current system. Chinese officials maintain that the IMF unit of special drawing rights (SDRs) may provide a viable alternative to the dollar.
The dollar comprises an estimated 70 % of the $1.95 trillion China holds in official foreign exchange reserves. Accordingly, China remains cautious not to make statements which may hurt its investments.
To reduce its dependence on the dollar, China stated last week that it would permit its exporters and importers to settle international trade agreements with the renminbi. Prior to this action, companies have had to exchange renminbi for U.S. dollars or alternative currencies when settling cross-border transactions. Starting July 2, the People’s Bank of China (PBoC) would invite banks to offer settlement services tied to the renminbi.
The renminbi’s projected regular appreciation next to the dollar provides the incentive for Hong Kong companies to use it in settling trade agreements. Even though China has limited the renminbi’s appreciation since July 2008 to assist exports, the mainland currency has risen 21% since 2005 when a dollar peg was cast aside. Investors are betting it will strengthen less than 1% to 6.77 per dollar in the next year. Since July 1, 2008, the central bank has maintained a range of 0.08%.
Other initiatives also aim to promote the renminbi’s regional usage. For instance, China said in May that it would endorse the issuance of renminbi bonds by locally incorporated foreign lenders.
Still, in spite of the disfavor with the dollar-centric global financial system, the IMF announced on June 30 that the portion of dollars in international foreign exchange reserves reached 65% during the first three month of 2009, rising to its highest level since 2007.
Discussion Questions:
1) What short and/or long-term effects might China's promotion of the renmindi as a regional currency have on the dollar as well as other currencies?
2) How might China's efforts fuel discussion concerning the reserve currency at the G8 summit in Italy on Wednesday?
Tuesday, June 16, 2009
The G8 is Unified on Fragile Recovery, Divided over Policy Details
Sources
Bloomberg: G8 plans to reverse stimulus as rebound signs grow
Reuters: G8 says economies stabilizing, recovery uncertain
Financial Times: Measures to tackle downturn cloud G8 meeting
The Group of Eight (G8), comprised of government leaders from Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States, met in Lecce Italy last weekend to discuss the current economic outlook and monetary policy priorities. The G8 leaders took a united stance on the global economy’s tentative recovery, but remain divided on multiple important issues.
The leaders of G8 member countries disagreed on the timing of economic recovery strategies. U.S. and British leaders argued for a continued emphasis on combating the recession, saying that the recovery is still too fragile for the removal of strong federal support. Canada and Germany meanwhile, insisted that the time is right to begin scaling back mammoth government spending programs, in an effort to avoid inflationary problems. The French economic minister Christine Lagarde hesitated in the middle ground, saying that France should “anticipate” the planning of exit strategies, but that it was too soon to give up the stimulus measures.
G8 leaders also discussed the rift over European stress tests. U.S. and Canadian leaders pressed for increased transparency in European banks. They believe European countries should be doing more to test their banks, and that the results should be made public. European leaders like Germany’s Peer Steinbrück, resist disclosure, citing concern for investor confidence. The vulnerability of the Euro zone’s recovery was highlighted by the release of April’s industrial production numbers. Official figures confirm a staggering 21.6 percent drop from the previous year, the steepest year-on-year decline since Euro zone records began in 1991.
IMF managing director Dominique Strauss-Kahn didn’t sugarcoat his global recovery outlook, calling the current recovery “weak” and insisting that the social effects of the crisis aren’t going to diminish anytime soon. He predicted a recovery in average growth in the beginning of 2010 and estimated the peak in unemployment for more than one year from now, in early 2011. One thing is clear after the international debate of the Italy summit: there is not a lone, correct path out of the mire. Each country will emerge from the crisis in different shape, and at a different pace. The timing and content of recovery plans will vary as widely as the economic landscapes upon which they are based.
Discussion
1. Global financial markets are interconnected. As individual nations attempt to combat the effects of recession at home, does it make sense for leaders to strategize together? What are the benefits and the shortcomings of a global approach to recovery?
2. Who is right in the European stress test debate? Are the European leaders justified in resisting disclosure? What are the potential benefits of the increased transparency?
Bloomberg: G8 plans to reverse stimulus as rebound signs grow
Reuters: G8 says economies stabilizing, recovery uncertain
Financial Times: Measures to tackle downturn cloud G8 meeting
The Group of Eight (G8), comprised of government leaders from Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States, met in Lecce Italy last weekend to discuss the current economic outlook and monetary policy priorities. The G8 leaders took a united stance on the global economy’s tentative recovery, but remain divided on multiple important issues.
The leaders of G8 member countries disagreed on the timing of economic recovery strategies. U.S. and British leaders argued for a continued emphasis on combating the recession, saying that the recovery is still too fragile for the removal of strong federal support. Canada and Germany meanwhile, insisted that the time is right to begin scaling back mammoth government spending programs, in an effort to avoid inflationary problems. The French economic minister Christine Lagarde hesitated in the middle ground, saying that France should “anticipate” the planning of exit strategies, but that it was too soon to give up the stimulus measures.
G8 leaders also discussed the rift over European stress tests. U.S. and Canadian leaders pressed for increased transparency in European banks. They believe European countries should be doing more to test their banks, and that the results should be made public. European leaders like Germany’s Peer Steinbrück, resist disclosure, citing concern for investor confidence. The vulnerability of the Euro zone’s recovery was highlighted by the release of April’s industrial production numbers. Official figures confirm a staggering 21.6 percent drop from the previous year, the steepest year-on-year decline since Euro zone records began in 1991.
IMF managing director Dominique Strauss-Kahn didn’t sugarcoat his global recovery outlook, calling the current recovery “weak” and insisting that the social effects of the crisis aren’t going to diminish anytime soon. He predicted a recovery in average growth in the beginning of 2010 and estimated the peak in unemployment for more than one year from now, in early 2011. One thing is clear after the international debate of the Italy summit: there is not a lone, correct path out of the mire. Each country will emerge from the crisis in different shape, and at a different pace. The timing and content of recovery plans will vary as widely as the economic landscapes upon which they are based.
Discussion
1. Global financial markets are interconnected. As individual nations attempt to combat the effects of recession at home, does it make sense for leaders to strategize together? What are the benefits and the shortcomings of a global approach to recovery?
2. Who is right in the European stress test debate? Are the European leaders justified in resisting disclosure? What are the potential benefits of the increased transparency?
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