Developing countries said on Friday they could fall victim to the global credit crunch that began in the West and blasted industrial nations for not living up to promises for aid. The Group of 24, which brings together developing and large emerging countries from Africa, Asia, Latin America and the Middle East, said the world economy faced its most difficult situation in years.
"Developed countries have the means to deal with the problem, but we who are developing countries, or emerging countries, could collapse under the weight of such a crisis," G24 chairman Jean-Claude Masangu Mulongo, governor of the central bank of the Democratic Republic of Congo, told reporters. "Our banking systems could come really crashing down."
They also called on the International Monetary Fund to monitor the policies of Western economies more closely. The grouping includes Egypt, India, Iran, Argentina, Brazil, Mexico, the Philippines, Pakistan, South Africa, Syria, Venezuela, Algeria, Peru and smaller economies like Ghana, Gabon and Trinidad & Tobago. China is a G24 observer.
Mulongo said the United States had come up with a $700 billion rescue package in a week, yet it could not make good on promises of increased aid from a poverty summit in 2005.
"We heard promises being made for development and to help countries in trouble," he said, "These promises have not been respected in the face of an international crisis, which may spread very quickly, become systemic, with the risk of the international, whole world economy falling apart, or collapsing."
Many African countries are angered by the prospect that the crisis could undo years of hard-won economic gains, and by the West''s lack of oversight of its financial sector after years of lecturing to developing countries about the importance of prudent economic policies.
REGULATORY REFORMS: While finance ministers from the Group of Seven industrial nations were locked in talks on a cure for the crisis on Friday, the G24 called for fundamental reform of regulatory and supervisory frameworks in the US and Europe. "(G24 ministers) considered it essential to address the deep-rooted weaknesses in risk management and regulation in advanced countries'' financial sectors that led to excessive risk-taking and speculation," the G24 said.
Until recently, most emerging and developing countries were shielded from the cascading market crisis but in recent weeks the crisis has spread to global markets. Panic over toxic, illiquid US mortgage loans has sapped confidence in financial institutions, forced governments to pledge hundreds of billions of dollars of taxpayer money and pushed Western and other central banks to deliver co-ordinated interest rate cuts.
The G24 said their economies were resilient but they worried about increased financial contagion that could revers capital flows, raise funding costs, and shift investor sentiment. For developing countries, the G24 said the priority was to safeguard economic stability.
"Ministers considered that preventing macroeconomic volatility from financial spillovers and sustaining continuous growth were key priorities for developing countries," the G24 added. The countries called for flexibility when it came to fiscal and monetary policies in the short-term to soften the blow from the still unfolding global crisis.
They also said the balance of risks in many developing countries was shifting as inflation risks begin to recede and the global slowdown gathers speed. The grouping called on the IMF to design a new liquidity instrument before the 2009 spring meetings that would help emerging markets prevent or deal with crises.
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