United Nations Secretary-General António Guterres advocated on Sunday the reform of the United Nations (UN) Security Council, the International Monetary Fund (IMF) and the World Bank to transform power relations between countries.
“In the framework of the global economy and finance, there is an unfair and systematic distortion in favour of the rich countries which, naturally, has generated enormous frustration in the developing world,” Guterres said at the summit of the G7 – seven of the world’s largest economies, representing more than half of the world’s net wealth – in Hiroshima, Japan.
In his speech, he advocated a reform of the UN Security Council and the two major international institutions resulting from the 1945 Bretton Woods agreement, the International Monetary Fund (IMF) and the World Bank, to transform once and for all the power, financial and moral relationships that have sunk developing countries into debt.
The UN secretary-general considered that the recovery plans for the Covid-19 pandemic are a clear example of the huge difference that separates these two types of countries.
The G7 countries, with a total population of 772 million people, received $280 billion (about €260 billion) allocated by the International Monetary Fund (IMF), while the entire African continent, home to 1.3 billion people, received only $34 billion (about €31 billion).
In Guterres’ view, this difference represents a moral failure “however much they have followed the rules in that regard”, so he believes “there is something fundamentally wrong with the regulations themselves”.
The UN Secretary-General said he was surprised by the response to an economic crisis that left 52 countries around the world on the brink of bankruptcy and without access to debt relief policies.
Guterres said that this whole situation stems from the power relations established mainly after the Second World War through the Bretton Woods system and the UN Security Council, the organisation’s highest executive body, burdened by the veto that the five permanent members can impose on any decision under discussion.
“Many things have changed since 1945. The global financial architecture is outdated, dysfunctional and unfair. The economic impacts of the pandemic and the Russian invasion of Ukraine have shown that it has failed to fulfil its essential role as a global safety net,” Guterres lamented.
“It is time to reform the Security Council and the Bretton Woods institutions to redistribute power according to the realities of today’s world,” he argued.
As a short-term solution, Guterres once again insisted on his proposal for a Global Package of Stimulus for Sustainable Development to extend debt financing terms, for which cooperation among multilateral development banks is necessary.
He called on the international community to follow the example of Japan, which in April this year pledged to double the percentage of the International Monetary Fund’s monetary reserves of special drawing rights – an international reserve asset that complements the official reserves of member countries – which will be reallocated by up to 40% to the poorest countries.
“I think everything is very clear […]. When I say that there is a growing awareness among developed countries that they are not doing enough to reform obsolete institutions or, much less, alleviate the frustrations of the Global South (the world zone that includes most countries of the southern hemisphere, including all of Africa and South Asia) with an effective policy of solidarity.