Manmohan Singh demands more $500 bn for developing world

April 2nd, 2009 - 2:41 pm ICT by IANS  

Manmohan Singh By Arvind Padmanabhan
London, April 2 (IANS) Drawing lessons from history, Prime Minister Manmohan Singh warned rich nations against protectionism and called for $500 billion fresh funds from the Internmational Monetary Fund (IMF) to help developing countries cope with the worst financial crisis in six decades.

An issue of vital concern to developing countries is the rise of protectionist sentiment in the industrialised world, the prime minister told a dinner hosted by his British counterpart Gordon Brown for G20 leaders Wednesday.

“This phenomenon is not surprising, given the downturn in economic activity and the rise of unemployment. However, it will be a test of leadership whether we persuade the public that we must not repeat past mistakes,” he added.

“We know that the great depression was as deep and prolonged as it was because countries resorted to protectionist responses, leading to downward spiral.”

Manmohan Singh, who will participate at the G20 summit Thursday and hold talks with US President Barack Obama later, also wanted more resources for the poor and developing world to help them tide over the economic crisis.

“We must declare our resolve to increase the resources available with the IMF substantially, buy around $500 billion over the next two years,” he said, adding:”We should agree on a fresh allocation of SDRs (special drawing rights) of around $250 billion.”

This, he said, will provide developing countries with about $80 billion of usable resources at a time when liquidity was exceptionally tight.

Manmohan Singh also suggested several other steps and urged the G20 leaders to demonstrate their willingness to help.

These include:

* Increasing the capital of Asian Development Bank by 20 percent;

* Concrete steps to revive trade finance, and expansion of lending by export credit agencies;

* Stronger regulation and improved supervision of global financial system;

* Bring tax havens and non-cooperating jurisdictions under closer scrutiny;

Speaking about India, Manmohan Singh the economy was expected to have expanded by 7 percent in 2008-09, as opposed to 9 percent in the previous fiscal, even as the country’s fiscal deficit shot up due to the fiscal measures taken by the government.

“While India will be able to manage, many other developing countries may not be in the same position and this is where the international community can help, he said, while appealing for free flow of private capital.

He said the developments since November when the G20 leaders met last have shown that the downturn was much deeper and that the prospect of recovery had receded to 2010 at best.

“This is the worst recession in 60 years and is generating negative expectations which threaten a downward spiral if not corrected. The pain is being felt in industrialised countries and in developing countries.”

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