UNGA SECOND COMMITTEE DISCUSSES BRETTON WOODS

UNCLAS USUN NEW YORK 000950 SIPDIS TREASURY FOR USED IMF AND WORLD BANK E.O. 12958: N/A TAGS: ECON EFIN ECIN PREL EAID EAGR IBRD IMF UNGA/C-2 SUBJECT: UNGA SECOND COMMITTEE DISCUSSES BRETTON WOODS INSTITUTIONS AND FINANCING FOR DEVELOPMENT ¶1. SUMMARY: During the UN General Assembly (UNGA) Second Committee's October 16 meeting to discuss Financing for Development, UN Department of Social and Economic Affairs (DESA) briefed committee members on plans for the upcoming Doha Financing for Development Review Conference, with the United States and others encouraging DESA to provide more details on the substance as soon as possible. International Monetary Fund (IMF) and UN officials briefed the committee on the annual meeting of the Bretton Woods Institutions (BWIs) in Washington, where the financial crisis dominated talks. Reform of the international financial architecture was a focus during the Second Committee debate, with a representative from the IMF noting that technical reforms are needed in the short-term to address the ongoing crisis, and deeper, institutional reform will be a medium-to-long term remedy. END SUMMARY. ¶2. The UNGA Second Committee met October 16 for discussion of the follow-up to, and implementation of, the outcome of the 2002 International Conference on Financing for Development and preparations for the 2008 Doha Review Conference. At the outset, a representative from DESA presented the Secretary-General's (SYG) report on implementation of the Monterrey Consensus (A/63/179) and the SYG's note on the proposed organization of work for the Doha Conference (A/63/345). The United States encouraged DESA to provide added attention to the substance of the conference, notably the themes of the six proposed round tables, and requested early information on the panels. The G77 and CANZ supported this call. DESA reported that it welcomes specific suggestions for panel topics, and is working to provide the requested information as soon as possible on the conference website (http://www.un.org/esa/ffd/doha). ¶3. IMF Special Representative Elliott Harris and Assistant Secretary-General Jomo Kwame Sundaram provided a read-out of the annual meeting of the BWIs held in Washington October 10-12. The financial crisis dominated the meetings, they reported, with the G7 announcing a coordinated policy response involving public sector intervention to restore confidence and stability in the global financial and credit markets. The International Monetary and Financial Committee (IMFC),along with the G7, G20, and G24 agreed on the need for closer international cooperation, prompt implementation of enhanced risk management capabilities, more transparent regulatory frameworks, and the activation of early warning systems. The failure of regulatory and supervisory bodies to keep up with financial innovations was at the heart of the current crisis, the IMF representative stated. ¶4. The G24 Communique focused on the crisis' impact on developing countries, noting the need to be prepared to assist them in the face of financial instability. UN Assistant Secretary-General Sundaram explained that many developing countries had weathered the "first round" of the crisis, but that they would likely face impacts of the crisis as its lagging effects work through the global economy. The IMF is preparing responses in the case that countries' economies are significantly affected by the crisis, and will likely turn to currency reserves held by some Asian and European nations to provide emergency funding with "a minimum of conditionalities." ¶5. G24 Countries pointed to the upcoming Doha Review Conference as an opportunity to further existing commitments, provide new resources to meet emerging challenges such as climate change, and to address "inequities" in international financial governance. A cornerstone of that effort should be structural changes to the BWIs to better reflect current global economic realities, they stated. Some discussed convening a stand-alone international conference to examine BWI reform. ¶6. Sundaram and other speakers drew the distinction between "inclusive" multilateral institutions (i.e., the UN, and to a much smaller extent the IMF and World Bank) and "exclusive" fora like the G7, G20, OECD and EU. They suggested that many smaller nations were excluded from the latter and that they therefore are less optimal channels to address crises of a global nature. In the opinion of several speakers, the IMF seemed marginalized in the response to the crisis, which they said underscored the urgent need for reform of the BWIs. The IMF representative explained that the nature of the crisis demands technical reforms in the short term to overcome the current crisis, and deeper reform of the international financial architecture will be a medium-to-longer term remedy. He added, however, that this opinion was "hotly debated" in Washington, as are opinions about the extent of needed reforms. ¶7. Sundaram reported that some in Washington considered current proposals for BWI reform a good first step, while others described them as insufficient. Now that the G7 has also called for BWI reform, the whole world is united in this aim and sufficient political will exists to enact change, he added. Sundaram also suggested that Foreign Ministers and Finance Ministers must consult more closely to reach a consensus on the extent and nature of reforms. Wolff