Euro crisis needs ‘coordinated response’

South Africa supports global measures being taken to stabilise the world economy, while calling for a consistent, integrated and coordinated response to revitalise global growth and address financial sustainability, says Finance Minister Pravin Gordhan.

Gordhan was briefing the journalists in Pretoria this week following last week’s International Monetary Fund/ World Bank annual meetings in Washington DC.

South Africa also chaired a meeting of the G24 (made up of the developing countries in the IMF and World Bank) and a meeting of the Commonwealth Finance Ministers last week.

The meetings took place in a context of a global economy that, according to the IMF, “has entered a dangerous phase, calling for exceptional vigilance, coordination and readiness to take bold action from members and the IMF alike”.

Gordhan said the interconnected nature of the global economy “gives rise to contagion effects, and with Europe being at the epicentre of the global economy, these effects are all the more severe.

“The contagion has already manifested through fiscal, financial and sovereign channels, heightening downward risks faced by emerging markets and developing economies in particular, and impacting on their future growth prospects.”

Building regional, South-South linkages

Despite the challenges, job creation was highlighted as a priority for both developed and developing countries, and there was also unanimity in the need to find innovative solutions to address this, Gordhan said.

The meetings also resolved that there was a need to relook at the adequacy of the IMF resources and the role of the Fund in crisis management

They also agreed that there was a need to assess current financing tools of the Fund and delopment banks, and their adequacy for supporting developing and low-income countries, particularly in sub-Saharan Africa.

The G24 ministers also called for urgent action to deal with the consequences of volatile commodity prices and long-term impediments to food and energy security, especially with respect to the most vulnerable countries and populations.

They also called for increased investment in developing countries, especially in infrastructure and agriculture, and for developing countries to enchance regional cooperation and South-South linkages.

Shift in identity taking place

Gordhan said that weaker global demand might affect commodity prices and levels of global trade across the world.

“In this context, South Africa recognises possible implications for policy options at our disposal, particularly with Europe being a major trading partner,” he said. “We welcome efforts of European countries to address the sovereign debt crisis and restore confidence.”

As such, South Africa should seek to increase its trading capacity with other African countries and developing nations, he said.

The BRICS (Brazil, Russia, India, China and South Africa) finance ministers also met in Washington DC and committed to speeding up structural reforms to sustain growth and advance development domestically, and contribute to global rebalancing.

The BRICS finance ministers maintained that in the face of a slowdown of global economic growth, it was necessary to maintain international policy co-operation and co-ordination.

“Their openness to consider providing support through the IMF to address challenges in global financial sustainability has highlighted the shift in identity that is taking place between traditional borrowers and creditors in the global system,” he said.

Source: SAinfo 

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