Guest Comment: Four points for the G8 to act on finance

By Martin Khor

1. Curb speculation. The world is on the brink of a new global financial crisis. There has been not action by the G8 to regulate the speculative flow of funds, and new dangerous forms of speculation, carried out by hedge funds and through derivatives etc, have emerged. The G8 must now act to control hedge funds and derivatives, and regulate the flows of hot money and speculative funds. Hedge funds should not removed from the agenda.

2. Fundamental changes to the Bretton Woods institutions should be initiated. The IMF should not involved in policy-based lending to developing countries. It has a very bad record with the adverse effects of its conditionalities. The World Bank should also be reformed by lending only for projects with sustainable development criteria for its project loans. The governance system of both institutions must be fundamentally reformed, so that the developing countries have fair voice and representation. The September 2006 measure relating to the IMF is clearly insufficient and in some ways detrimental.

3. Deepen and widen debt cancellation. The move to cancel debts of some developing countries should continue. The G8 must not lose momentum on debt relief and cancellation. Debt cancellation must be extended to more countries including middle-income countries. Also, a mechanism for debt restructuring and rescheduling should be set up for countries facing debt-repayment problems, in which these countries can suspend their debt payment until a debt rescheduling scheme is worked out.

4. Aid should be reformed to really serve development needs, and the volume of aid should increase, as promised in previous G8 summits but not realised. Aid volume has instead declined in the past year. There should be an increase in aid for example for R and D and innovation for medicines for diseases that especially affect developing countries. Such R and D funds should be linked to medicines that will not be patented as the funding comes from the public sector. The medicine prices can be controlled to a low level so that they are accessible to the poor.

Martin Khor is director of the Third World Network, Malaysia. This comment is taken from his presentation to the Civil G8 Dialogue (25-26 April) in Bonn. We will report.