Reforming International Financial Institutions Critical in View of Escalating Global Debt: Economic Affairs Secretary

New Delhi: Reforming international financial institutions has become critical in view of escalating global debt and sustainable development needs, Economic Affairs Secretary Ajay Seth said on Wednesday. Escalating global debt has been putting significant pressure on a number of low income and middle income countries having repercussions on the ability of these countries in improving their development outcome. The past gains in poverty reduction and development are reversing, he said, while a seminar on multilateral institutions for the 21st century.

Unmet Financing Needs

The unmet financing needs for sustainable development goals are ballooning while the global challenges, such as those arising from climate change and the pandemic, are growing in urgency, scale and complexity, he said.Reforming international financial institutions becomes critical in this context. These reforms cannot focus on just financial of the international financial institutions but need to be more comprehensive to include the mandate, the governance framework and operational elements of the international financial institutions, he said.

G20 Leaders' Commitment

The leaders of G20 nations in September agreed to urgently and effectively address debt vulnerabilities in developing countries, including Zambia, Ghana, and Sri Lanka.Debt vulnerability-related issues of three countries -- Zambia, Ghana and Ethiopia -- are addressed under the common framework, while Sri Lanka is outside the framework.The G20 New Delhi Leaders Declaration noted that with notable tightening in global financial conditions, which could worsen debt vulnerabilities, persistent inflation and geoeconomic tensions, the balance of risks remains tilted to the downside.The G20 leaders committed to promote resilient growth by urgently and effectively addressing debt vulnerabilities in developing countries, the Declaration had said. The leaders re-emphasise the importance of addressing debt vulnerabilities in low and middle-income countries in an effective, comprehensive and systematic manner.

The need to reform international financial institutions has become increasingly apparent in light of the escalating global debt crisis and the urgent need for sustainable development. The G20 leaders' commitment to addressing debt vulnerabilities in developing countries is a positive step, but more comprehensive reforms are needed to ensure that these institutions are fit for purpose in the 21st century. These reforms should include a focus on the mandate, governance framework, and operational elements of the international financial institutions, and should be aimed at ensuring that they are able to effectively support developing countries in achieving their development goals.