Finance and foreign ministers have called for the remaking of the international financial system to improve the prospects of developing countries at a just-concluded United Nations (UN) Member States meeting in Addis Ababa, Ethiopia.
After four years of a series of global shocks – including the COVID-19 pandemic, geopolitical conflicts and economic instability – the financing gap for developing countries has grown to US$ 4 trillion annually from US$ 2.5 trillion in 2015. At the meeting, known as Addis Ababa Action Agenda, participants from 103 countries pushed for radical reform to fix the structural flaws in the international finance and tax architecture.The Addis Ababa meeting this July is the first of four on the issue ahead of a 2025 conference in Spain on reforming global financial systems.“The ministers, experts and other stakeholders that gathered here in Addis Ababa made clear that we cannot continue with business as usual and must dramatically reshape the international financial system to ensure investment where it is most needed,” Li Junhua, the Under-Secretary-General of the United Nations Department of Economic and Social Affairs (UN DESA), and Secretary-General of the FfD4 conference, said.
The shocks of the last four years have worsened the gaps for developing countries, as a confluence of high debt, high interest rates, and systemic issues have increased the financing problems. In July 2023, UN Trade and Development (UNCTAD) released a report detailing the ever expanding financing gap and how it was disproportionately hurting the prospects of developing countries.
Among other recommendations, it pushed for debt relief for heavily indebted developing economies to ease the pain of debt repayments on budgets. Calls to reform the financing system often center on such measures as the first step as it would provide much needed fiscal space for more investments, lower risk ratings, and improve the prospects of private sector growth and investment.
“The international financial architecture created nearly 80 years ago needs to be reformed to respond to the most pressing challenges of African countries in a more effective and inclusive manner,” Claver Gatete, Executive Secretary of the United Nations Economic Commission for Africa, added.
Among the major mandates of the AAAA meeting, one of four preparatory meetings ahead of the conference in Spain, is to draw a roadmap towards a new global framework, with clear policy actions.
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