April 2, 2009

Will Increased Financial Support Lead to Better Accountability?

The leaders of the Group of 20 (G-20) nations concluded their conference today in London with a financial commitment of $1.1 trillion in additional loans and guarantees to finance trade and bail out troubled countries. According to a United Nations article, "The G-20 nations today also 'reaffirmed previous commitments to increase aid and help countries achieve the Millennium Development Goals,' Mr. Ban said in a statement, referring to the ambitious anti-poverty targets with a 2015 deadline."

I am not questioning the actions the world's industrialized nations to increase financial support to developing nations, but will an increase of financial support lead to better accountability of spending? Does sending more money help alleviate the problem of corruption that plagues many developing nations? What measurable and definable results should G-20 nations expect? As the world economies have become globalized, the need to help the world's poorest population takes on a different precedence. I realize there is a global economic crisis that requires quick and decisive action, but each spending package should require built-in accountability measures.

Part of this money, as explained in The New York Times, will support the International Monetary Fund, "which has emerged as a 'first responder' in this global crisis, making emergency loans to dozens of countries." The G-20's pledge triples "the resources of the Fund to $750 billion — through a mix of $500 billion in loans from countries, and a one-time issuance of $250 billion in Special Drawing Rights, the synthetic currency of the Fund, which will be parceled out to all its 185 members."

A recent World Bank article said "that economic growth in developing countries would slow sharply to 2.1 percent in 2009, a more than three percentage point decline from last year. Growth would actually decline in Central and Eastern Europe, Central Asia, and Latin America and the Caribbean. An estimated 53 million more people would be trapped in poverty this year, subsisting on less than $1.25 a day, because of the crisis. The world economy would contract by 1.7 percent this year compared to growth of 1.9 percent in 2008 – the first global decline since World War II. Global trade in goods and services would fall six percent this year, the largest decline in 80 years."

The New York Times article mentioned above addresses how some countries are seeking tightened regulations of hedge funds and other global financial institutions including those located in tax havens such as Liechtenstein and Switzerland. Tighter regulations, however, is only part of the solution and the world’s industrialized nations should expect increased transparency and accountability in how the funds are appropriated.

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