Addis Ababa’s Development Declaration Decathlon
The third UN Financing for Development forum in Ethiopia’s capital produced a 40-page “outcome document” for consideration in the September General Assembly covering private capital themes, as the dense prose masked a more accepting but still skeptical tone 15 years after the “multi-stakeholder consultative process” was launched. Official aid and redefinition of the original Millennium anti-poverty goals with a 2015 deadline remained a core focus, and the environment was also in the spotlight in the run-up to the Paris carbon emission treaty conference at year-end. It calculated a $1 trillion developing country infrastructure funding gap and called for a global forum to coordinate public sector and commercial efforts which would include new players like China’s AIIB and the African Development Bank’s “50” fund. Domestic tax mobilization was a major thrust with an appeal for information-sharing between revenue authorities, including in offshore centers, and crackdowns on money laundering and illicit outflows. On financial regulation the participants urged risk-based approaches across the spectrum from microcredit to international banking, and steps toward universal customer access and literacy. They noted remittance charges remain steep and should fall to no more than 5 percent by 2030.
On domestic capital markets long-term bonds and insurance are lacking and the declaration committed to stronger supervision and clearing and settlement. Regional markets are an option to obtain scale, and at the opposite extreme poorer countries have yet to establish securities activity. Foreign portfolio investors have taken large shares in local debt markets over the past decade, and cross-border cooperation can help manage volatility. Pension and sovereign wealth funds in both advanced and emerging economies can increase infrastructure investment so that the clean energy annual $100 billion tab by 2020 is met. Trade finance is often unavailable and the WTO and its members should expand guarantee, factoring and small business programs.
Debt sustainability remains an issue as the last candidates for HIPC relief are approved by bilateral and multilateral lenders. A central registry on sovereign restructurings is overdue and the UNCTAD principles on responsible treatment have not been widely honored. The Paris Club has launched a dialogue with private creditors, and the IMF and UN are both exploring new burden-sharing formulas, but the signatories are “concerned” over bond holdouts. The pari passu and collective auction clause changes recently adopted in prospectus language are helpful but developing country borrowers may require facilities for international legal assistance to redress the capacity and resource imbalances in negotiations. Special provisions should also be triggered in the event of natural disasters, including disease outbreaks as in West Africa, and distress could be worked out in debt for health swaps and similar mechanisms that were popular in previous crises.
IMF governance reform remains a priority despite the refusal of the US Congress to pass 2010 quota reallocation proposals, and emerging market “voice” is also under-represented at the Basel Committee and as counterpoint to the main global rating agencies. The standard-setters should focus attention on ways to hedge and avoid economic damage associated with commodity price swings. Shadow banking may pose systemic risks in an unmonitored chain of credit and securities transactions, and upcoming UN sessions should try to illuminate data and knowledge gaps, the Addis Ababa roundup adds.
