Financial system unfair to developing countries, says UN trade report
THE world financial system is fragmented and unfair, according to the United Nations (UN) Conference on Trade and Development.
The sentiments are expressed in a 2015 report that was released globally yesterday. “In the long run we are all ... in debt,” the report said, in commentary that will resonate strongly in SA.
World economic growth was “nowhere near” levels before the 2008 financial crisis hit, and developing economies were “not wavering but drowning”. It also said that private finance “recurrently created external debt crises” that often became the problem of governments.
“Systemic problems of international financial architecture need to be addressed,” Diana Barrowclough, a senior economist at the organisations’s globalisation and development strategies division, said.
“Quantitative easing has not translated into gross fixed capital formation,” she said, presenting the report at the Industrial Development Corporation offices in Sandton.
The report said the present global financial system had deepened depression in indebted countries and facilitated the bailing out of private creditors. “In addition, it allows the action of vulture funds that makes restructuring more difficult and affects the interests of both the debtor and other creditors.”
The report found that 97% of global bank lending went to other financial institutions, and financial regulation — in the form of Basel III — which increased capital requirements was “too timid and narrow”.
“With tepid recovery in developed countries and headwinds in many developing and transition economies, the crisis is not over and the risk of a prolonged stagnation persists,” the report said. “Developing countries should not be required to apply rules designed for countries with active international banking sectors, as this causes rationing of credit to sectors that need support.”
The report said there was insufficient demand in developed economies. The world economy was awash with asset bubbles and speculative debt after the global financial crisis had led to the nationalisation of banks deemed “too big to fail”.
Remedies suggested by the report include the provision of long-term development finance to developing countries, among others.