[Dateline: Santiago | Author: ECLAC]
An article in the latest edition of the CEPAL Review , a publication of the Economic and Social Commission for Latin America and the Carribean (ECLAC), says that an additional US$ 50 billion a year are needed to achieve the Millennium Development Goals.
Of the trillions of dollars in assets circulating in international financial markets, according to OECD data, less than one percent is actually used for development assistance, says Jorge García-Arias, professor of the University of Leon, Spain.
The article "International finance and development: Opportunity or menace?", published in CEPAL Review Nº 96 , is available only in Spanish.
The article examines private capital flows, official development assistance, and external debt. Mr. García-Arias maintains that at least an additional US$ 50 billion is needed in order to meet the Millennium Development Goals. Achieving the Goals requires large-scale reforms of the international financial system and the instruments and mechanisms for financing development.
The sheer magnitude of financial market transactions has intensified the interconnections of national banking, monetary and financial systems, says the author. However, the connection between international finance and development faces a number of threats.
In this scenario, Official Development Assistance (ODA) could serve to compensate this imbalance and fill the gaps left by private initiatives. ODA has evolved favourably over recent years, but several problems persist: its low total amount, structure and composition, its volatility and high degree of spatial concentration and conditionality.
García-Arias suggests reforming the international financial architecture through which private capital flows, fulfilling commitments to allocate 0.7 percent of world GDP to ODA, reforming ODA instruments, and rebalancing its management in order to favour association more than aid from donor to recipient countries.
Lastly, he proposes implementing innovative mechanisms for financing development, specifically, the International Finance Facility (IFF) and supranational taxes.
About CEPAL Review
The CEPAL Review was founded in 1976 and is published three times a year by the ECLAC. The Review has full editorial independence and follows the usual academic procedures and criteria, including the review of articles by independent external referees.
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