UN chief calls for reform of ‘biased’ financial system at Pakistan aid conference

UN Secretary General Antonio Guterres called on Monday for sweeping reform of the international financial system to allow for low-income countries vulnerable to climate calamities to receive adequate funding from richer nations.

Addressing a conference in Geneva on rebuilding efforts in the wake of devastating floods in Pakistan, Guterres said the international financial system was skewed to benefit wealthy countries and should be reformed to ensure a more equitable
distribution of resources.

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“It is very clear that the present system is biased,” he told reporters in a strongly-worded critique of what he called a “morally corrupt global financial system.”

“The system was conceived by a group of rich countries and naturally it basically benefits rich countries.”

Guterres was speaking alongside Pakistani Prime Minister Shehbaz Sharif, who said Pakistan needed $8 billion from the
international community over the next three years to support
recovery efforts after floods that killed at least 1,700 people,
displaced millions and damaged critical infrastructure.

“We need a new debt architecture and we need to make sure that debt relief is effectively provided by the system even to middle income countries that are on the verge of very difficult, very dramatic situations including suspending payments,” Guterres added.

The International Monetary Fund, whose delegation was meeting Pakistan’s finance minister on the sidelines of the conference, has yet to approve the release of $1.1 billion originally due to be disbursed in November last year. That has left Pakistan with only enough foreign exchange reserves to cover one month’s imports.

Voicing frustration at the inaction of global leaders and scant investment to combat climate emergencies, Guterres called for the vulnerability of countries to be taken into account when major financial institutions distribute below-market-rate financing.

“We need to redesign our financial system in order to be able to take into account vulnerability and not only GDP when decisions are made about concessional funding to countries around the world,” he said.

Total pledges of $8.57 bln received

Pakistan has already received total pledges of $8.57 billion for helping in flood recovery at a conference in Geneva, information minister Marriyum Aurangzeb said on Monday.

The pledges received are higher than the amount sought initially, with Prime Minister Shehbaz Sharif saying the South Asian nation needed $8 billion over the next three years, as officials from some 40 countries as well as private donors and international financial institutions meet in Geneva.

The Islamic Development Bank has pledged $4.2 billion over the next three years to Pakistan as aid for its climate rebuilding effort, the bank’s president said on Monday.

“I am pleased to announce that the Islamic Development Bank group, as part of contributing to the achievement of Pakistan’s
climate resilience and development objectives, pledges a financing amount of $4.2 billion over the next three years,”
Muhammad Al Jasser, president of Islamic Development Bank said in Geneva.

Read more: Pakistan calls for more climate aid after floods turn country into ‘dystopia’