Agenda Items 47 (b), (c), (d)

Statement by Dr. Asad M. Khan, Minister Pakistan Permanent Mission to the United Nations on Macroeconomic Policy Questions under its sub agenda Items 47 (b): International Financial System, 47 (c): External Debit Crisis and Development and 47(d): Commodities (New York, 13 October 2008)

Madam Chair,

At the outset, my delegation wishes to align with the statement made by the representative of Antigua and Barbuda, on behalf of the Group of 77 and China.

2. We thank the Secretary General for his useful reports covering the issues before us under this agenda.
3. Our deliberations on the issues of International financial System, External Debt and Commodities assume special significance this year as the world faces a development emergency triggered by an unprecedented confluence of multiple crises of finance, food and fuel. And in the wake of these daunting challenges, the world economy is teetering on the brink of a severe global economic downturn. There is a growing belief that the deepening financial crisis could tip the world into a global recession.

Madam Chair,

4. Over the years in our debates at the UN, including in this Committee, we have carried out many analyses on the various shortcomings and weaknesses in the international financial system. Clearly, UN has been prescient in predicting the present economic slow down and financial crisis. However, this is not the time for claiming credit for one’s better knowledge or prescience in seeing what was coming, for what we face today is extraordinary and unprecedented. Most importantly, as part of a globalized world, we are all in it together.
5. Fortunately, there is a global consensus that the situation demands immediate, collective, comprehensive and determined action. We need to, therefore, devise a comprehensive strategy spelling out a road map for short, medium and long-term actions seeking to:
   • One, stop the free fall of the financial markets;
   • Two, contain the contagion by helping to avoid potentially damaging effects on other countries particularly the developing countries;
   • Three, overcome the uncertainty and restore the investor confidence;
   • Four, protect the precious and hard earned growth and development in the developing countries from going waste;
   • Five, address the factors that are at the root of the current crisis.

6. We welcome the speed and boldness with which the concerned countries and institutions have acted to overcome the current turmoil and financial meltdown. We are also encouraged by the assurances that all economic and financial tools will be used to ensure stability and proper functioning of markets. There are several lessons that we can draw from the unfolding crisis:
• First, if political will and commitment is there, huge financial resources can be generated at a very short notice to help those who need them the most.
• Second, the capital flows cannot be left entirely and exclusively to the mercy of the market forces and that there are times and situations when the State and/or the Public sector has to intervene.
• Third, there is lack of transparency and serious regulatory deficit in global financial markets.
• Fourth, highlighted the importance of bringing greater transparency in the work of the credit rating agencies.
• Fifth, increased use of newly invented risk transfer instruments in globalized markets carry serious shortcomings.
• Sixth, investments from the developing world appear to have played an important stabilizing role so far.

Madam Chair,

7. For the most developing countries, any further deepening of the financial crisis carries the serious possibility of undoing years of hard work and economic gains made. The poorest and the most vulnerable obviously will be hit the hardest by the unfolding crisis.
8. Frankly, the financial crisis could not have come at a worst time for net food and fuel importing countries like Pakistan that are still reeling from a rising trade deficit on account of high food and fuel prices and rising inflation.
9. We, therefore, fully agree with the recommendation made in the Secretary General’s report that the international community should expand and strengthen instruments to support low-income countries facing sharp hikes in food and energy prices. We strongly urge that this stepped up assistance should be additional to ODA.
10. We also concur with the suggestion that a cooperative and multilaterally coordinated approach to regulatory reform in the international financial system is indispensable as is the need to reinforce and intensify reform of the governance structure of the international financial institutions.

Madam Chair,

11. Clearly, we need a more inclusive, broad-based and strategic discussion to develop a holistic and integrated approach to deal with the whole range of crises confronting the world today. We welcome the calls by the World Bank for a new multilateralism that goes beyond finance and trade to encompass the pressing global challenges of development, energy and climate change. Such Multilateralism, we believe, would emerge only if the process of dialogue is made inclusive, transparent and UN centric.
12. We, therefore, believe that instead of relying on exclusive forums of the select few, it is time for the UN to take the lead in promoting a truly global and inclusive dialogue to find durable and development friendly solutions to the challenges we face today. The Secretary General and the President of the General Assembly may consider launching a special initiative to this effect.

Madam Chair,

13. The ongoing financial turmoil, volatility in food and fuel prices resulting in rising current account deficits in poor countries is not going to be helpful in finding durable solutions to the debt problems of the developing countries. The situation clearly demands bolder and more encompassing initiatives to solve the external debt problems of the developing countries in an effective, equitable and development oriented manner, particularly of those hardest hit by the present crises. We need to particularly focus on considering debt scenarios in the face of exogenous shocks.
14. The welcome debt relief under the Heavily Indebted Poor Countries Initiatives (HIPC) and Multilateral Debt Relief Initiative (MDRI) may have released resources for development related expenditure in the developing countries, yet they are completely inadequate in helping the developing countries to realize the Internationally Agreed Development Goals (IADGs) including MDGs. Importantly, debt relief has been too slow and has not been additional as planned and should be expanded to cover those countries that needed it and were not part of HIPC and MDRI initiatives. Similarly, we believe that debt sustainability, both in terms of its definition and calculation, is critical to the whole debate around debt relief. For this reason debt sustainability should be linked to a country’s capacity to achieve its national development goals including the IADGs.

Madam Chair,

15. There is a need to recognize the importance of commodities for the development process of developing countries in particular the most vulnerable among them. It is, therefore, crucial to bring commodity back to the forefront in the agenda of the international community. The recent turmoil in commodity markets has underlined the shared interest of all countries in ensuring that commodity markets do not become a source of global macroeconomic instability and social and political upheaval.
16. It is also important to identify and agree on the best ways to strengthen the nexus between trade, food, energy security and industrialization, based on the lessons from experiences of countries that have succeeded in achieving growth from a commodity base. The present crises have reinforced those inter-linkages and the case for an integrated approach.
17. There is also an urgent need for the international community to support the efforts made by developing countries at national levels such as the integration of local producers into international supply chains and the innovative financing and risk management tools for agricultural commodity producers.
18. Linked with the commodity issue is the unfair nature of global agricultural trade, as agricultural products are the main exports of developing countries. For developing countries the problem lies in the North’s continued high protection through subsidies and tariffs. These two issues need to be addressed for achieving IADGs including MDGs as well as for establishing a fair international economic order.

I thank you.

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