Photo: UN Secretary-General António Guterres speaks at the IMF Development Committee meeting in Bali, Indonesia. Credit: Grant Ellis/World Bank - Photo: 2018

Trust Deficit Disorder Jeopardising Sustainable Development

By António Guterres

The following are extensive extracts from UN Secretary-General António Guterres’ remarks to finance ministers and central bank governors at the International Monetary and Financial Committee (IMFC) in Bali, Indonesia, on October 13, 2018. Stressing that the meeting was taking place “at a time of enormous uncertainty”, he cautioned that high debts in many countries are limiting fiscal space and taking away much needed resources vital to achieve Sustainable Development Goals (SDGs). – The Editor

BALI (IDN-INPS) – As Finance Ministers and Central Bank Governors, you are accustomed to dealing with deficits every day.

But the biggest deficit the world faces today is not in budget plan or accounting chart.  It’s the deficit of trust, a bad case of what I called in the UN General Assembly Trust Deficit Disorder.

It is feeding discontent and instability and eroding faith in our political institutions and our rules-based multilateral system.

And you are essential to restoring and building the trust that our world so desperately needs.

Yes, global growth is stable and relatively strong. But it is uneven, and risks are mounting rapidly.

The global community needs to act now to set a path of growth that is socially inclusive and environmentally sustainable.

The 2030 Agenda for Sustainable Development with its 17 Sustainable Development Goals provide a roadmap for that action.

But we know there are many obstacles and challenges on that road – climate change, rising inequality, illicit financial flows, the impacts of the 4th industrial revolution, rapid urbanization, migration.

Alongside these mega-trends, the increased volatility in financial markets and global trade tensions also loom large.

The trade dispute feared in April, in your last meeting, became a reality and has already affected the outlook for growth.

Financial market conditions have tightened in several countries and will get worse with further spillovers from the trade dispute.

However, because of the rising debt levels, countries have less space to react than ten years ago.

To this comes the major risk of rising debt, to which the IMF has called attention with increasing urgency.

Thirty least developed and low-income countries are already in debt distress or at high risk of getting there.

Many more countries — including many characterized as middle income — are facing levels of debt service that shrink their fiscal space at a time when much more public spending would be needed to achieve the SDGs.  And this underlines the importance of international cooperation and of the full motivation and attraction of the private sector to fully play its role in the Agenda 2030.

The 2030 Agenda points the way to a fair and inclusive globalization and resilient societies.

But present trends project that we will only get half way to achieving the SDGs by 2030.

While we have made some progress, much more is needed. We must dramatically step up our actions.

We need a surge in investment, long-term financing and global stability.

The Addis Ababa Action Agenda, if fully implemented, provides the framework for achieving this.  In line with the Agenda, I have just launched a forward-looking Strategy to support the Financing of the 2030 Agenda.

The Strategy sets out three priority lines of action.

First, aligning global financial and economic policies with the 2030 Agenda.

Second, enhancing national and regional sustainable financing and investment strategies.

Third, encouraging financial inclusion and equitable access to finance for all, particularly for women and youth, through financial innovations, new technologies and digitalization.

This strategy cannot be implemented without your active engagement, working together as the International Monetary and Financial Committee, and in your individual capacities as Finance Ministers and Central Bank Governors at home.

Working as the IMFC, you are critical to the first element of the strategy: aligning global economic policies and financial systems with the 2030 Agenda.

You will lead the way in framing the policies needed to stabilize financial flows and minimize the disruptions that could otherwise accompany the normalization of monetary policy.

You can begin now to prepare the necessary mechanisms to address rising global indebtedness in a coherent manner that does not derail our progress towards the SDGs.

And you can work to strengthen the institutions of global economic and financial governance to reinforce our rules-based multilateral system against the threats to assail it, including now in the area of trade.

As Finance Ministers, you are also central to the Strategy’s second pillar: developing sustainable financing solutions, strategies and investments at the regional and country levels.

Your cooperation to fight illicit flows of capital, money laundering and tax evasion, and other abusive practices will help put an end to the drain of vital tax resources away from developing countries, exactly when many of them are making progress in relation to good governance and the strengthening of tax systems.

You bear the responsibility for formulating national budgets that support national sustainable development strategies that are fully aligned with Agenda 2030.

You can set your fiscal policies to create positive incentives for longer-term sustainable investments and a transition to sustainable, equitable and inclusive growth.

As the regulators of the financial system, you can work to minimize the adverse impact of prudential regulations on longer-term capital flows, while preserving short-term financial stability.

Your regulations will also determine how well we capture the enormous potential of innovative financial technologies and digitalization to promote a more inclusive financial system, capable of providing access to finance to all, and better mobilizing domestic savings.

Finally, Excellencies, a last word on climate change.

The truth is that climate change is running faster than we are.  In a moment in which we see a trend in several parts of the world to diminish their commitment and sense of urgency, that would be suicide.  In their report published on Monday, the UN Intergovernmental Panel on Climate Change says that the world is now completely off-track on keeping the rise in global temperatures to under 1.5 C above pre-industrial levels by the end of the century, and is heading instead toward 3 C.  The report also underlines that the preferred target of 1.5oC would require “rapid, far-reaching and unprecedented challenges in all aspects of society.”

We are still collectively very far from this target. We have very little time to curb the emissions of green house gases if we want to avoid that the targets of the Paris Agreement on Climate Change become irreversibly unattainable, with catastrophic consequences for the future of the planet.

We have technology on our side, the green economy is more and more the best path for development. But political will is still lacking—to put a meaningful price on carbon, to end fossil fuel subsidies, to invest in climate-friendly infrastructure that does not lock us for decades into an unsustainable path.

This is not a matter for Ministers of the Environment.  This is a matter for all political leaders in today’s world.  This is a matter for each one of us.

We face many challenges, but we can overcome them acting together.

We at the UN are stepping up our collaboration with the International Monetary Fund and the World Bank Group at all levels, in keeping with our respective comparative advantages.

I am particularly grateful to Christine Lagarde for having framed our discussions on financing the Sustainable Development Goals and for having frank discussions on financing the SDGs during the recent UN General Assembly High-Level Week.

We are also undertaking in the UN the most comprehensive reform to strengthen our ability to promote peace, security but especially to make much more effective our UN development system.

We need your help to protect and preserve a rules-based global economic and financial order that supports sustainable development.

We count on your leadership to translate global aspirations into national strategies, programmes and projects.  And we depend on your action to galvanize the financing needed to achieve the 2030 Agenda and help restore trust in a world that sorely needs it. [IDN-InDepthNews – 15 October 2018]

Photo: UN Secretary-General António Guterres speaks at the IMF Development Committee meeting in Bali, Indonesia. Credit: Grant Ellis/World Bank

IDN is the flagship agency of the International Press Syndicate –

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