Increasing trade protectionism will hurt the global economy and welfare of people, Finance Minister Arun Jaitley has warned. “Questions are raised today in certain quarters about the global compact, which we have developed over the years- multilateralism driving the rule-based flow of goods and services- to deliver growth, development and poverty reduction for all and achievement of global public good. The attempt to change the discourse from opening up and focusing on competitive advantage to increased protectionism will only hurt the global economy and welfare of people, Jaitley said in his address to the World Bank Development Committee.
“We need to bond together and renew our compact to protect the World from falling into spiral of slow economic growth, rising inequality and irreversibly altered climate, conflict and fragility,” said the Finance Minister. “I would thus like to call upon this august gathering today to reaffirm our full commitment to the mandate of the Development Committee and to deliver Sustainable Development Goals (SDGs) and our own twin goals.
Noting that there is no doubt that the developing world needs large and growing resources for achieving SDGs and the twin goals of our institutions, he said this necessity is the underlying argument of the billions to trillions discourse. “All the developing countries also know that mobilisation of larger domestic resources and creating conditions for better flow of investment finance from both domestic and international private sector would be necessary for achieving their development ambitions,” he said.
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At the same time, it would be necessary for the multilateral system, especially the World Bank Group, to be stronger than ever to play a meaningful and decisive role in translating this development agenda into reality, he asserted. In his address, the Finance Minister said that the World Bank should provide leadership in setting global standards in terms of financing, process efficiency, benchmarking, operations, monitoring and evaluation.
“We also sincerely hope that the implementation of the new safeguards and procurement policies is indeed characterised by adoption of country systems, a shorter processing time for all clients and hands on implementation support in Fragile and low capacity countries,” he said.
Observing that enormity of the development challenges, its financing and the required knowledge support are continuously changing, Jaitley said this calls for development approach which is constantly evolving and is based on real partnership. “The sustainability of developmental reforms relating to infrastructure, energy, human capital, resource mobilisation and knowledge development can be ensured in partnership mode on a long-term basis,” Jaitley said.
Ensure free and fair trade practices for global recovery, say FM Arun Jaitley
Monetary policy stance of advanced economies and increasing protectionism were among the reasons for weak confidence in the global economic recovery, Finance Minister Arun Jaitley has said, while calling for efforts to ensure free and fair trade practices. Global economic outlook has changed for the better with some silver linings finally emerging, Jaitley said at the meeting of the International Monetary and Financial Committee (IMFC).
Jaitley noted that this momentum was expected to strengthen in 2017 based on gradual improvement in economic conditions in advanced economies, particularly in the US, as well as due to the pick-up in growth in some large emerging markets. However, the confidence in global recovery remains weak owing to the risks associated with the future course of economic policies and monetary policy stance of advance economies, resurgence of commodity price pressures, and the increasing recourse to protectionism, Jaitley said.
“In these circumstances, it is imperative to fortify efforts to support global recovery by committing ourselves to growth-friendly policies and ensuring free and fair trade practices as called for by G-20 leaders at the Hangzhou Summit in September last year,” said the finance minister. Advanced economies have an important role in stimulating global demand with supportive fiscal and monetary policies and eschewing protectionism, he asserted.
At the same time, he noted that the emerging market and developing economies (EMDE) were vulnerable to external shocks and must take ample caution to safeguard ongoing economic recovery. Structural reforms and building buffers constitute the keystones of policy agenda in EMDEs that would ensure sustained growth, Jaitley said.
Improving the flexibility of labour markets and increasing competition in factor and product markets along with incentives for skill building and innovations are important structural efforts required for boosting productivity and potential growth, he said. Noting that the emerging risks to the global economy call for enhanced surveillance by the IMF, Jaitley said the global lender needs to be sufficiently resourced to be able to fully discharge this responsibility.
It also needs to function as a quota based institution, he asserted. Jaitley said the IMF should play a proactive role by productive engagement with Regional Financing Arrangements (RFAs) by way of sharing information and joint mechanisms for surveillance and policy signaling to build confidence among creditors.
Moreover, co-financing arrangements between the IMF and regional financing elements would help in mitigating stigma and delay in programme financing, he said.