As the world experiences its worst financial crisis since the 1930s, policymakers are increasingly calling for a “Bretton Woods II”. To claim the mantle of the 1944 conference, officials will need to be more creative about global financial reform than they have been so far in the three areas where the Bretton Woods architects innovated: 1) the regulation of international financial markets, 2) the management of global imbalances, and 3) the promotion of international development. Important to all these topics is also the need to adjust global financial governance to today’s more decentralized international political environment.

There is intense debate on the origins of the current crisis. The causes of the world’s current financial and economic meltdown can be traced to two different factors: regulatory failures and macroeconomic imbalances.

It seems that global imbalances are here to stay, at least for a while. Curbing them definitively is hard to achieve when economies are managed with no explicit attention to global consistency.

There is a great need for coordination and cooperation. The International Financial System (IFS) has shown flaws in dealing with the imbalances. Changes are necessary. The sustainability of the recovery process may profit from a reformed system, which takes into account the current global economic scenario.

The purpose of this paper is to focus on the IFS, its role in the current crisis and in preventing and addressing future ones. History has taught us at least one lesson – crises are cyclical, but their frequency and effects can be managed and mitigated.

Sustainable development entails three interrelated objectives - economic, social and ecological. The Millennium Development Goals (MDGs), which set clear targets for reducing poverty, hunger, disease, illiteracy, environmental degradation, and discrimination against women by 2015 can be seen as operationalising the objectives of sustainable development. Sustained growth is a fundamental determinant of reducing poverty because it enables households to increase their income expenditure and it also provides the government with resources to provide infrastructure and social services. During the 1970s, Sub Sahara Africa borrowed heavily but these loans did not promote sustainable growth of output and exports. The recession of the early 1980s, the increase in world interest rates and the collapse of Africa's terms of trade ignited the debt crisis. For more than two decades, Sub Sahara African countries have faced a debt crisis that has retarded growth, undermined poverty reduction and degraded the environment.

Although the HIPC program is more ambitious than previous debt reduction programs in promising more and faster debt relief for more countries, it is not grounded analytically in a realistic conception of the amount of debt reduction needed for most countries to achieve a sustainable path of growth and poverty reduction. African countries are in poverty traps with levels of income too low to cover basic needs. Debt servicing reduces the ability of governments to provide basic social services and build the necessary physical infrastructure to promote economic growth. Africa needs 100 percent debt cancellation and the provision of grants to support an investment program to promote growth and poverty eradication.

The HIPC Initiative has been linked to implementation of a strategy to reduce poverty in poor countries particularly by utilizing savings from debt relief to increase expenditure in the social services. Increased social sector spending is commendable but it is not on itself a growth strategy that can eradicate poverty in a sustainable way. SubSaharan Africa is the only region in which both the proportion and absolute number of people in extreme income poverty have been rising sharply. Most countries in SSA are off track to achieve most of the MDG goals. In almost all African countries a big push in investment is needed to attain the Millennium Development Goals. It will require a significant increase of investment spending, especially in areas of infrastructure and human capital needed to attract private investment.

Even with 100 percent debt cancellation, improved governance and effective public expenditure prioritization, domestic resources will not be adequate to break the poverty 2 trap, and additional external assistance will be required. In order to attain the millennium development goals, African countries need to draw up a 10-year perspective plan that is derived from a detailed analysis of what it will take to achieve all MDGs. The three-year poverty reduction strategy papers should be implementing instruments of the perspective plan.