When G8 leaders met last July in Italy they promised Africa $20 billion worth of assistance for ending hunger. “That promise has not been evident yet, and no money has moved [to Africa] because of that pledge,” says Soren Ambrose, Development Finance Coordinator for Action Aid International.
Ambrose says he hopes that at the G20 summit in Pittsburg 24-25 September some announcement will be made about the promise, as either new aid money or a reshuffling of existing resources.
Priorities at Pittsburg
Reforming international financial regulations, cracking down on tax havens, climate change, trade, and a financial transaction tax are some of the major topics for discussion in Pittsburgh.
The creation of an international tax on financial transactions is a plus for Africa, according to Ambrose. “It is an interesting concept that has come into prominence in the last few weeks,” he says. “The idea is to levy a small tax on individual financial transactions [be it exchanging one currency for another, buying stocks or derivatives].”
This potentially is very beneficial for Africa and other developing regions according to Ambrose, because the funds could be used for HIV/AIDS prevention, helping countries deal with climate change, and enhancing development in desperately poor countries.
Special Drawing Rights
Ambrose does not expect much progress to be made at the Pittsburgh summit in reforming the World Bank or the International Monetary Fund (IMF) to give lower income countries more weight.
But he credits the IMF for creating its own currency known as Special Drawing Rights (SDRs). All members of the IMF get SDRs in proportion to their economic standing at the institution.
They are distributed on the basis of IMF quotas, and the richest countries get about two-thirds.
If countries want to use the SDR’s as currency, such as dollars, euros, or yen, they only need to pay a small fee. “The fees,” Ambrose says, “are minimal compared to what most developing countries would incur in order to get useable capital on the world market.”
According to Ambrose, as long as they are kept as SDR’s they can be used as reserves in the central banks of each country that gets them. “It is like having a free boost to your reserves,” he explains.
Ambrose points out that the richest countries in the world don’t need SDRs because they can get hard currency in other ways. “The system has to be reformed. SDRs should be allocated on the bases of need,” he says.
The Obama administration has promised millions to help Africa improve its food production. That help has not materialized, according to Ambrose. “The U.S. government as host of the G20 summit in Pittsburg should take the lead and bring the other G20 countries along to focus on Africa,” Ambrose says.
Currently East Africa is experiencing a devastating drought. Much of the livestock has perished, and thousands of people are on the brink of starvation. “The Obama administration has to move beyond the promise stage to the delivery stage and there is no better time to do it than now,” says Ambrose.
The developing and emerging countries in the G20 are South Africa, Brazil, India, China, Indonesia, Argentina, Mexico, Turkey, South Korea, and Saudi Arabia. These countries he says are likely to influence policies that would help Africa.
“A country like Brazil or India which has traditionally been in the developing country block, bring some of the assumptions and some of the knowledge that was missing from these kinds of negotiations before,” Ambrose explains.
However, Ambrose says he is seeing these countries pursue their own interests, and not those of the developing world.
For instance,” he says, “they are starting to take ownership interest in the IMF, and quite rapidly they are starting to see their interest become similar to that of the richer countries. This self interest-only role does not benefit Africa.