Reform IMF, WB to reflect interests of Global South, BRICS has role: Guterres

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The international financial and development institutions should be reformed to reflect the interests of the Global South, Secretary-General Antonio Guterres has said. While the BRICS can play an important and complementary role for developing nations, he stressed that it should not contribute to a fragmentation of the world economy.

The international financial institutions — the International Monetary Fund and the World Bank — and the Security Council that were created in the 1940s after World War II reflect “what the power relations and the global economy were at that time” but aren’t relevant to today’s world, he said at a news conference here on Thursday.

Since they don’t “correspond to the power relations and to the global economy as it is today”, he said, “it will be very important for those institutions to reform to represent today’s global economy, to be truly universal and truly inclusive.” “We obviously need that those institutions reflect more obviously the interests of the Global South”, he emphasised.

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Asked about the role of BRICS, he said that “it is important to have a multiplicity of different organisations to support developing countries” in the finance and trade sectors. “But”, he added, “it is essential that (it) doesn’t correspond to a fragmentation of the global economy.”

“One of the most important aspects that we need to preserve today is One Global Economy, One Global Market, One Global Internet and to avoid the fragmentation of that global economy”, he said. “Within a united global economy, I think that many of these institutions (like BRICS) can play an extremely important and complementary role”, he added.

BRICS, made up originally of emerging economies Brazil, Russia, India, China and South Africa, has expanded to include Ethiopia, Egypt, Iran, Saudi Arabia and the United Arab Emirates with membership queries from 34 countries pending. The group, which aims to foster trade and financial cooperation has created the New Development Bank to fund development projects and help financial stabilisation in the member countries, functioning in some ways like the established financial institutions.

About the fitness of the Bretton Woods Institutions — as the World Bank and the International Monetary Fund are known for the venue of their founding — to meet contemporary needs, Guterres said that besides the unrepresentative character of their power structure and orientation, they are undercapitalized and too small for the current global needs.

“The truth is that they became too small”, he said, pointing out that “the paid-in capital of the World Bank as a percentage of global GDP today is less than one-fifth of what it was in 1960”. “So we obviously need a meaningful capitalisation of those institutions”, he said.

While the UN cannot reform them, Guterres said that he would like to see the United Nations Summit of the Future in September give some directions for the way those institutions “should structurally move.” Assessing the global political situation, Guterres said, “We are no longer in a bipolar or unipolar world, as I said, we are in a kind of on the way to a multipolar world, but in a very chaotic situation.”

“Power relations became unclear and what we see today in the world is political actors doing whatever they want and with total impunity”, he said. To end the multitude of conflicts and divisions and to effectively address threats posed by Artificial Intelligence, to act on climate action and to achieve the Sustainable Development Goals, “a serious conversation between developed and developing countries; between rich and emerging economies; between north and south, east and west” is needed, he said.