SDRs PLUS: FINANCIAL AND GOVERNANCE REFORMS IN SUPPORT OF DEVELOPING COUNTRIES

The response to the global crisis remains paradoxically centered on the developed countries. As its effects have moved to hurt first the emerging economies, and now the “bottom billion” economies, the World Bank, the IMF, the regional development banks and the UK Government led by Prime Minister Gordon Brown have sought to put the spotlight on them, so far with limited success. The paradox is partly explained by the yet unreformed governance structure of global institutions and forums. It is not surprising that there is little recognition that any transfer of purchasing power to the developing world will surely be spent, not saved, and will generate global demand, which is the biggest challenge facing the world today.

There is a quick and effective way to increase resources for the developing world and to introduce the beginnings of a new governance structure in the multilateral institutions:

• Double the volume of SDRs and distribute these equally between the IMF on the one hand, and the group of multilateral banks on the other;
• Introduce a new voting structure that reflects the distribution of global economic activity in today’s world for all decisions on the allocation of these new SDRs;
• Introduce fast-track support for single issue policy changes undertaken by countries in support of fiscal, monetary or structural reforms that will build greater resilience for their economies in the current crisis.

The developing countries are an indispensable part of the solution to the global crisis. It is time not only to recognize this, but to take concrete steps to support them while reinforcing the reform of global governance.