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Debt relief and growth

World Economic and Social Survey 2005: financing for development

Putting the Monterrey Consensus into action: past lessons and future steps

Authors:
Publisher: UN, 2005

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The World Economic and Social Survey 2005 provides a comprehensive review of the wide-ranging challenges addressed in the Monterrey Consensus of the International Conference on Financing for Development and the Plan of Implementation of the World Summit on Sustainable Development. It concludes that while gains have been made in some areas, an immediate and substantial scaling up of effort is needed, especially in the poorest countries.

The report covers six key issues under the overarching banner of Financing for Development:

Mobilising resources for development:

  • economic growth is a necessary condition for reducing poverty, but the strength of the link between economic growth and poverty reduction depends on how the benefits of growth are distributed
  • growth leads to increased investment, but a high investment rate is essential to sustaining a dynamic rate of growth.

Trade:

  • the poorest countries have not benefited as much as they could from the recent trade boom because of their continued reliance on agricultural exports, labour-intensive manufactures and exports of primary commodities
  • among the potential areas of benefit, agriculture is of particular importance for poverty reduction, as some 75 per cent work in agriculture or agriculture-related activities.

International private capital flows:

  • capital, and particularly financial, flows have been highly volatile and reversible in recent decades, generating high costs for developing countries
  • migrant remittances have become an increasing and stable source of foreign exchange for many developing countries.

Official development financing:

  • currently only Denmark, Luxembourg, the Netherlands, Norway and Sweden meet or exceed the 0.7 per cent target set by the Monterrey Consensus.

External debt:

  • progress has been made in reducing the impediment of unsustainable debt burdens for developing countries but much more needs to be done.

Systemic issues:

  • there is a clear need for greater international cooperation and coordination to ensure a smooth global rebalancing that does not lead to a slowdown of global growth, nor to problems in financial markets.