Bias, injustice built into global financial systems – UN Chief

By Zeus Legaspi

The United Nations (UN) chief, António Guterres, urged for a reform of the international financial architecture to make it "more resilient, equitable, and accessible to all."

Speaking at UN Headquarters in New York on Monday, June 5, Guterres expressed that the global financial system had "largely failed" in fulfilling its core mandate as a financial global safety net in the wake of the COVID-19 pandemic.

According to Guterres, the system did not provide sufficient financing to support the recovery of developing countries, many of which now face deep financial crises.

He stated, "Fifty-two developing countries are in, or near, debt distress. Inflation and rising interest rates are adding to the unsustainable financial pressure on developing countries."

Guterres presented three new policy briefs, one of which outlined proposals in six areas to "address historic injustices and systemic bias."

Proposed reforms to global finance

The brief focuses on global economic governance, debt relief, the cost of sovereign borrowing, the global financial safety net, and a global tax architecture.

Among the proposed reforms, the brief suggests strengthening the voice of developing countries on the boards of the World Bank and the International Monetary Fund (IMF).

Guterres also mentioned the creation of a Debt Workout Mechanism, potentially at a Multilateral Development Bank, to link development financing with commercial creditors. Furthermore, the brief proposes reforms to IMF quotas, decoupling them from access to resources, and the establishment of a representative apex body to oversee the entire system.

Overall, the proposals aim to move away from a system that favors the wealthy and prioritizes short-term gains towards one that is equitable and invests in the Sustainable Development Goals (SDGs), climate action, and future generations, the UN Chief explained.

Moving beyond GDP

Additionally, Guterres emphasized the need to move beyond Gross Domestic Product (GDP) as the sole measure of growth. While GDP remains important, he advocated for the inclusion of other metrics to assess progress.

He stated, "GDP tells us the cost of everything and the value of nothing. Our world is not a gigantic corporation. Financial decisions should be based on more than a snapshot of profit and loss."

Guterres emphasized that human progress depends on multiple factors, including poverty and hunger levels, inequality, social cohesion, and vulnerability to climate breakdown and other shocks. He called for a broader set of indicators to monitor and analyze progress while acknowledging trade-offs and consequences.

Economy of Francesco

Pope Francis has repeatedly called for a transformed economic model to empower and allow developing nations to have equal opportunities and exit a vicious cycle that undermines their potential for growth.

In 2019, Pope launched an initiative called The Economy of Francesco which aimed to push for a global economic change to ensure that the world’s economic future is “fairer, inclusive, and sustainable, without leaving anyone behind.”