Poor countries call for share of richer nations' stimulus money

By JT Nguyen Jun 22, 2009, 18:36 GMT

New York - Left out of the rich bail-out measures seen the United States and some European countries, developing countries on Monday called for similar fiscal stimulus packages to help their worryingly sliding economies.

The South Center, an intergovernmental think tank of some 50 developing countries, said the poor left out of rich bail-out packages in Western countries now need an additional 1 trillion to 2 trillion dollars in stimulus measures.

The demand set the tone for the debate taking place Wednesday through Friday in the UN General Assembly on the continuing world financial and economic crisis.

The poorer economies 'want to be able to join the practice of fiscal stimulus packages to stimulate economic recovery, and this can happen only if the external financing is forthcoming to fill the trillion-dollar gap,' said Martin Khor, a Malaysian economist who heads the Geneva-based South Center.

The gatherings later this week are seen as the first forum for poor countries since the global recession began. They were excluded from the table as the G20 - group of 20 wealthiest countries - met twice since November to map the way forward.

In fact, the heads of developed countries will be conspicuously absent from the UN debate. They will send low-ranking envoys or their ambassadors at the United Nations to take part in the debate.

More than 20 heads of state, all of them from poorer countries, are expected to attend the three-day debate.

Poor countries have blamed rich ones for causing the current recession, with the US and Wall Street being the epicenter. The first international fallout washed across Europe and Japan, but more and more the recession is also leaving its mark on developing and emerging economies.

The poorer countries say they have good reason to complain of being the victims of the rich, as they suffered collateral damage mounting to 6 per cent drops in gross national products. Economists from the South Center expect that developing countries' economic growth will fall from their booming average of 8.3 per cent growth in 2007 to 1.6 per cent growth in 2009.

The developing countries belong to the UN economic group known as G77 plus China. G77 now has more than 130 countries, taking its name from the original 77 countries that founded the group.

The stimulus funds should be drawn from new SDR (special drawing rights), a basket of currencies regulated by the International Monetary Fund in Washington, the South Center said. Receivers of SDRs can exchange them for US dollars or other major currencies.

The G20 has agreed to set aside 250 billion in SDR that could be allocated by quota to poor countries. The G20 will hold its summit end of September in Pittsburgh, Pennsylvania, away from the UN headquarters in New York.

Among the other proposals pushed forward by the South Center is a moratorium on debt payments and the establishment of an international debt court open to poor countries to plead for their cases. Such a court could restructure debt payments between debtors and creditors, similar to the way US carmaker Chrysler has already reorganized through US Chapter 11 bankruptcy. The US auto giant General Motors is in the midst of similar restructuring.

The South Center also called for a new forum for global economic governance, with the suggested title of global economic council, to be set up by the UN, which would allow developing countries to have a voice of their own.

It called also for reform of the global financial and economic systems.

'The reforms are needed to cover the governance and policies of the IMF and World Bank, the regulation of financial markets and capital flows, strengthening of surveillance over developed countries' policies and the creation of a new reserve system based on the SDR,' the South Center said.