There has been much demand of late for a new
reserve currency to replace the US dollar. The
arguments in favour of such a demand are quite
powerful: if one nation’s currency plays the role
of a reserve currency in the world economy, then
this confers enormous advantages upon that
nation, which is not fair. It can, in effect, print
money which other countries are more or less
obliged to hold.

The need for increasing government expenditure
for overcoming the current recession is widely
recognized. But when such expenditure increase
is undertaken in one particular country, part of
the stimulus leaks out to other countries through
increased imports. The original country therefore
finds its external debt increasing for the sake of
creating jobs in other countries, and is tempted to
be more protectionist. This then induces other
countries to also adopt protectionist measures as
they increase their own government expenditures.
We thus end up with a scenario of sequential
uncoordinated fiscal stimulus packages, each
accompanied by protectionism.

A basic problem with any international financial
system is that while adjustments should ideally be
undertaken by the surplus countries, they are
precisely the ones who are under no compulsion
to adjust. If instead of maintaining balance of
payments surpluses, the surplus economies
expanded domestic demand, especially through
enlarged domestic consumption, then all
economies, both surplus and deficit ones, would
be better off: the surplus ones would be better
off since the people there would enjoy higher
living standards, and the deficit ones would be
better off since they would experience larger
aggregate demand (because of reduced imports),
leading to larger output and employment.

Following the Monterrey Consensus of 2002, most
bilateral donors set ambitious targets for increasing
their official development assistance (ODA) as part of
efforts to meet the Millennium Development Goals
(MDGs). Over the last few years, aggregate ODA has
indeed risen considerably. However, most donors are
not on track to meet their ODA commitments, and
there is still a considerable gap between actual ODA
flows and the aid needed for implementing measures
to achieve the MDGs. For a realistic chance of
meeting the MDGs, annual ODA flows need to be
stepped up by $50 to $60 billion.

The Monterrey Consensus recognized that foreign
borrowing can be a useful tool for promoting economic
development but that "unsustainable" debt can lead to
crises and harm economic growth. "Excessive" foreign
borrowing also reduces a country's monetary or fiscal
policy space and can discourage private investment.

The sharp increases in global food and fuel prices in
2007-2008 created significant burdens for many
developing countries that rely on commodity imports.
A soaring import bill has led to new trade imbalances,
higher fiscal deficits, imported inflation and other
macroeconomic imbalances. The International
Monetary Fund (IMF) estimated that net fuelimporting
countries were facing an increase in their
fuel bill in 2008 equivalent to 3.2% of their 2008 GDP
relative to 2007, or US$60 billion; and for 43 net food
importers, the rise in their food bill was estimated to
be 0.8% of their 2008 GDP, or US$7.2 billion.1

In recent years, an increasing number of developing
countries have registered current-account surpluses,
implying net capital outflows. At the same time, many of
these countries have registered higher rates of domestic
investment. The mainstream view, by contrast, is that
developing countries require net capital inflows ("foreign
savings") as a complement to national savings for raising
investments and accelerating growth.

This brief argues that an emergency climate program
is needed, that such a program is only possible if the
international climate policy impasse is broken, and
that this impasse arises from the inherent – but
surmountable – conflict between the climate crisis and
the development crisis. It argues that the best way to
break this impasse is, perhaps counter-intuitively, by
expanding the climate protection agenda to include
the protection of developmental equity. To that end,
the Greenhouse Development Rights (GDRs)
framework is designed to hold global warming below
2°C while, safeguarding the right of all people
everywhere to reach a dignified level of sustainable
human development.

At the London summit in early April, the leaders
of twenty of the world’s largest economies
decided that the IMF will be the major
international instrument to respond to the
financial and economic crisis. They agreed to
quadruple the Fund’s resources from $250 billion
to $1 trillion.