Eighth High-level Meeting of the Governing Board of the OECD Development Centre
24 October 2022
Putting Development Back on Track
I would like to thank the OECD for this kind invitation. And I want to send my regards to the Honourable finance minister of Mauritius, who is chairing this session, as well as all member states presents.
I only have five minutes so let’s go straight to the answer.
I want to highlight three main challenges to our current development landscape.
The first challenge is what some are calling the ‘polycrisis’, the cascading crises phenomenon we are witnessing. We have climate change. We have the pandemic which is still not over. And now the war in Ukraine has exacerbated a cost-of-living crisis, with soaring prices in food, energy, and fertilisers.
And that’s the first thing we have to do – bring prices down. That is the aim of the Black Sea Grain Initiative and the MOU between the UN and the Russian Federation. To solve the supply side of the crisis, from a trade angle. To bring food and fertilisers from Ukraine and the Russian Federation back to the global markets, so we can stabilise markets. We have been successful so far, but we are not out of the woods yet!
Another issue here is that the crisis of affordability we are going through today can become a crisis of availability tomorrow if we cannot bring the prices of fertilisers down. Fertilizer prices are rising faster than food prices, small farmers are being priced out and the sowing season will be soon over in large parts of the world.
Lastly, to bring prices down we must pursue a pragmatic policy mix. The key word here is mix; we cannot depend in a single policy only. Interest ates alone risk pushing
us into a recession. In such a scenario, developing countries will be the hardest hit, because of devaluation, capital flight and debt distress
The second challenge to the development landscape follows from the above – developing countries have no capacity to cope with the “polycrisis”.
So not only do we need to bring prices down, but we must also bring liquidity up. Liquidity is drying up at record pace in the global south because due to the impact of climate change, Covid, and rising interest rates.
According to UNCTAD calculations, almost $750 billion have left developing countries this year due to capital flight, lost foreign reserves, and foregone income. This is almost four times as much as they received last year in Special Drawing Rights. To make matters worse, debt burdens are becoming more onerous as well.
Action in this front should focus on three areas: liquidity, debt, and investment. On liquidity, we need a new emission of Special Drawing Rights, more recycling pledges of Special Drawing Rights, and replenished access to emergency lending windows.
On debt, we need to advance on the common framework and reactivate debt service suspensions. On investment, we need MDBs to step up at scale – only they can leverage SDRs and the private sector to raise up the capital we need to meet our long- term needs.
Here, the OECD Development Centre has a very important role to play, to provide the space for policy dialogue to take place. During crises, it often feels like we have no time left to pause and reflect. The OECD Development Centre can bring that pause, can bring that space.
Lastly, the third challenge is geopolitical fragmentation: both East -West and North- South.
Geopolitics is now in driving seat of globalization. This is bringing massive disruptions to global supply chains.
Countries in the global south feel acutely abandoned. They felt this way during COVID, especially because of unequal access to vaccines. But lack of action this year in the multilateral arena has exacerbated this feeling.
The Resilience and Sustainability Trust and the food shock windows are good steps forward. But we need the speed and the scale. We need to press the G20, the boards of the International Financial Institutions and the Multilateral system.
So, I know I have left you a very gloomy message – cascading crises, dwindling capacities to cope, massive geopolitical fragmentation – But my main message is a call for action. There is much more we can do with what we have. The institutions are there. The tools are there. The resources are there.
What we need is leadership, hope, and collective action. Thank you.
