We hear from Yuefen Li,  the senior advisor on South South cooperation and development finance in the Geneva-based South Centre. She analyses the initiatives proposed by Brazil during its G20 presidency - the global wealth tax on the ultra-rich and the global alliance against hunger - and looks ahead to South Africa’s presidency in 2025. And she explores the most pressing challenges facing the Global South: from interest rate hikes; to urgent reforms needed in a global financial architecture that has stayed the same despite a massive shift in the world’s geopolitics. 

From the International Development Economics Associates - a network of progressive economists who centre the perspectives and needs of the Global South.

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Hi there.

Welcome to Economics from the South.

Rethink

economics, give a voice to marginalized communities, and come up with lasting solutions to ensure a

fairer, more sustainable future for all of us.

I'm your host, Julians Amboko, a Kenyan business journalist.

It's great to have you on board this series from the International Development Economics Associates.

A network of progressive economists who challenge the way the world is run and put forward viable alternatives that

center the perspectives and needs of the Global South.

Our focus has been on two really important research areas for ideas, sovereign debt, and rethinking how the international

financial institutions are structured, governed, and operate.

Episode 5 I'm delighted to be joined by a woman with many accolades to her name.

She once taught at the University of International Business and Economics in China and was head of

the Debt and Development Finance Branch of the United Nations Conference on Trade and Development.

I'm Yuefen Li from the South Center.

I'm the senior advisor on South South cooperation and development finance.

Professor Yuefen Li, thank you so much for joining us.

Tell us about what the South Center specifically does in relation to the international finance institutions.

First of all, the South Center was established in 1995 by the South Commission.

It is established as a think tank for the developing countries.

Only, and it is an international organization, which means it is intergovernmental.

We now have 55 developing countries as members of the South Center.

For the South Center, the development finance is a very important part of the work of the center.

We follow international negotiations.

on the topic.

For instance, right now, the preparation for the finance for development next conference, which will happen in Spain in 2025.

In addition, uh, the South center also undertake research and analysis, which means, uh, we'll, we'll, Publish papers

and briefings, policy notes for the developing countries to give them ideas and advice and also keep them, uh, update

relating to the broad progress, uh, in the international community, relating to the Uh, development finance

and also, uh, brief them of the most important topics relating to the interests of the developing countries.

So when you talk about, uh, the international financial institutions, the international

financial system, in terms of the reforms you have already briefly hinted at, what are the most pressing issues

for the Global South, in particular, the global economy?

African countries.

I think the most urgent one at this moment is, uh, we are in the face of the important systemically important

developed countries hiking interest rates, which has led to the increase of Uh, for debt servicing cost, uh, of course,

the borrowing cost also, which right now is, uh, in the double digits and also has resulted in the devaluation of

national currencies, uh, including the countries in, uh, Africa, uh, some of them, uh, have, uh, their currencies

The debt even more expensive for these countries.

So together with the increase of cost of servicing debt and also outflow of financial resources, because of

the, uh, rate hiking, uh, by the fed and other actors.

Uh, countries, uh, like, uh, uh, Japan, uh, as well as, uh, the EU, uh, there has been a kind of massive outflow

of, uh, financial resources, uh, and also the lendings from multilateral institutions, uh, have not really kept pace.

So The most urgent thing right now is to provide the countries, especially countries in Africa, with

sufficient liquidity to cushion off the kind of physical gap and also that servicing gap they are facing.

Uh, however, There are various difficulties we are facing right now.

For instance, for instance, the rechanneling of the SDR, a special drawing rights in the IMF

is not happening as fast as we wish it to be.

And also there has been the discussion of issuing more SDRs.

Uh, however, we've run into Resistance from some countries, and we know that SDR is kind of liquidity, which will not

introduce cost and will not increase debt burden for the developing countries, which should be uh, Kind of increase

during the moment of difficulties for, uh, developing countries, especially African countries at this moment.

So right now it is a very important, urgent issue.

Another urgent issue is the reform of the international financial architect.

And for the reform, one very important issue is to increase the voice and quota of developing countries.

Uh, we know since the World War II, the, uh, reform of voice and quota has been going very slowly, really

lagging behind the economic development, the growing GDP, uh, growing economic importance of African countries.

And of course, the growing weight of the African countries, including, uh, uh, the population of Africa, which

now is, um, is, uh, quite important in the, uh, world.

Uh, so there has, uh, been a lot of changes in the world.

However, the international financial architecture has really not changed very much.

Professor, allow me to push you a little bit on that point and to seek clarity.

When you talk about re channeling special drawing rights, you're re channeling

from whom to whom, and why is this important?

Well, we know the allocation of of SDR is in line is according to the quota of the countries.

Right now, the majority of the quotas is of course related also to voice is in the developed countries

because they have the majority voice majority quota.

So when we have a new allocation of SDRs,

Most of the SDRs would go to developed countries, which don't really need SDRs, and they just leave it there on their balance

sheet, while the African countries, they really need this SDR.

They have very little because their quota, their voice is very little.

Uh, with the, uh, SDR new allocation, we need to allocate, re channel the unused SDRs to the

African countries, to the developing countries, uh, which are waiting for this SDR to be re channeled.

To solve some of their liquidity problem, however, however, this, uh, rechanneling takes time.

First of all, you would need to have the countries wish to transfer the, uh, SDR.

to the developing countries, and then you would need to have the institution will handle the actual transfer.

So all this takes time.

It seemed to, uh, to me that the pace of the progress in reallocation, rechanneling has been quite slow, unfortunately.

Prof, you have mentioned that, um, there is resistance to the rechanneling of SDRs.

Why would there be resistance and, uh, what would that mean or what does that mean actually for the Global South?

Well, there's not only the resistance to rechanneling, there's also the resistance to floating

new, uh, SDRs, uh, because, The, when you float new SDRs, you will need to get the support of the

majority of the countries with majority of the quotas.

Uh, however, we know the United States has the vetoing power, uh, when it comes to decisions as this.

They have 16 percent of the total IMF quotas.

Quota.

Uh, the U.

S.

is the only country with this, uh, vetoing power.

And for the U.

S., they would need to have the congressional approval of the issuance of new SDR.

So for the moment, um, it seems that the U.

S.

government, at least at some of the meetings from what they've been talking about, they are not

really agreeable with further new issuance of SDRs.

Of course, SDR would also dilute Uh, I mean, with the new issuance of SDR, it would also be diluting the, the importance of, uh,

some of the dominant, uh, currencies in the world at this moment.

So there are various.

Factors relating to the support or no support to the floating of the new SDRs, the same with the rechanneling of SDRs, how

much to who all this Uh, to who means to which country, so all this would require a certain kind of approval and support from

the, uh, countries, uh, with, uh, important shares of quotas.

Thank you for that, Prof.

I'd imagine the dominant currencies you're talking about here are the likes of the U.

S.

dollar, the sterling pound.

The U.

S.

dollar, the, uh, euro, the yen, uh, right now, uh, they are quite important if you look at the share of the foreign

exchange reserves and also, uh, the, uh, debt, uh, holdings.

Thank you for that, Prof.

Now allow me to switch gears here and talk about matters g20.

So Brazil is currently the chair of the G20 presidency.

And the theme here is building a just world and a sustainable planet.

It seems as if this is a very unprecedented G20 presidency in many ways.

What can be realistically achieved with Brazil at the helm of the G20?

I think, uh, the Brazilian presidency so far has already done a great job.

Uh, The formulation of the Global Alliance Against Hunger is, uh, welcomed by almost everyone, uh, because

we know that hunger is a very important SDG goal, and, uh, with the poverty crisis, we've really suffered.

Foot reversal, uh, in implementing this goal because of the increasing number of people suffering, uh, from hunger

and this increasing number, actually a great majority is.

in the sub Saharan African countries.

And, uh, the, the Brazilian presidency has taken this as a major challenge, and they have already

formulated with a very impressive, uh, global alliance.

And also, in order to tackle the problem of widening inequality, the Brazilian presidency has, uh, uh,

has made great progress in formulating a resolution.

Uh, the, uh, global taxation against the very rich.

Uh, and this is something very impressive and has one international support.

So, uh, we, we see the kind of difference when countries like, uh, uh, Brazil is in the helm of G20.

Professor, allow me to seek a little more color when you talk about, especially the, um, Efforts being

undertaken when it comes to taxing the very rich globally.

We know there's been so much debate around how to structure especially wealth taxes when it comes to the global south Give

us a little more color around how that has been done, especially with brazil spearheading the effort I think for them the

most important thing they've done is to keep kind of, uh, uh, reaching out and get a global consensus or consensus from the,

uh, countries within the G20 to support this great initiative.

Uh, we know that, uh, Uh, for taxation issues, uh, in some countries, they've introduced new taxation, uh, which is

terribly regressive and, uh, which has, uh, led to, uh, protests from the, uh, poor and from the young people, uh,

because, uh, Right now, people in the developing countries are still coping with the crisis on the cost of living.

And to increase taxes regressively would certainly make the poor suffer even more.

What the beauty of the Brazilian initiative is that they realize that the top 10 or 5 percent of the rich in the world

have having a kind of expanding pie of the global wealth.

So they think the, they need to tax more.

And very often the very rich, they don't pay taxation at all.

There are various kinds of measures and ways to avoid paying taxation.

So this initiative certainly has won support from countries.

Prof, speak to us a little more about the global alliance around hunger, because this is

a particularly pressing issue, especially in Africa.

I think right now, uh, they've just established this and there was a meeting, I think, took place, uh,

last month and, uh, there was resounding consensus on that.

I think to follow up, we will see what, uh, specific, uh, mirrors.

and tasks they will take up.

So, we look forward with great anticipation to the details relating to what to come up in the future.

Brazil should be handing on the G20 presidency to South Africa.

What can we expect?

What are some of the things you would hope for as you look forward to the South African presidency?

I think for each presidency, the country can only handle a few questions.

uh, issues.

They cannot handle all the pressing issues, all the global challenges.

Uh, so for the Brazilian presidency, they've tackled a few and has made great progress.

So the rest, uh, Probably they would wish some of the issues they wish to tackle, but have not got

the chance, uh, to really go deeper into that.

Uh, I, I think the Brazilian presidency would wish that the South African presidency would

continue to go further on this kind of challenges.

Uh, of course, uh, for, uh, South, uh, Africa.

It is a important country in African, in the African continent.

Of course, the South African presidency would like to, uh, focus on some of the African orientated issues.

So at this moment, I think the, uh, South African, from what I know, the South African, uh, presidency is making preparations.

Trying to seek very broad, uh, kind of, uh, partnerships, uh, in discussing which should be the priorities, uh,

that the, uh, the South African presidency should take up.

Uh, they've already contacted some of the international organizations.

South, uh, South Center included, and also seeking inputs from these institutions, think tanks, famous personalities,

so they would like to see out of all these, uh, proposals from different partners, what would be most suitable,

uh, for the, uh, South African presidency, what will be achieving the greatest impact in a problem solving?

So I think South Africa is right now in the process of selecting the priorities for the South African presidency.

And in this process, they have already joined hands with the Uh, Brazilian presidency, uh, for, for instance, the, the sous

chef, uh, of, uh, Brazil has already, uh, gone to Pretoria to discuss, uh, with, uh, the South, uh, African authorities.

So I think, uh, the discussions are going on, uh, I think it won't take long, we'll see clearly the priorities

chosen by the, uh, South, uh, African government.

So we are talking about passing the baton to South Africa in the G20 presidency.

And we know the African union has been admitted as a member of the G20.

What do you make of those two occurrences?

Do you think it really strengthens, uh, South Africa's presidency?

Certainly, African Union is very much involved and actually strengthened the hand of South Africa

in the preparation for the South African presidency.

For the meeting attended not long ago, not only the Brazilian presidency had sent people, uh, the African Union was.

very much, very much involved in the discussion.

So they bring the kind of perspective from the African Union, which the South African government is taking it very seriously.

So I think the African Union certainly will strengthen the hand of the South African government.

Presidency from what I see it is going to be a very strong, uh, cooperation, uh, as a two S one, uh, for the preparation

and for the implementation of the G20 South African presidency.

Professor Yuefen Li, thank you so much for your time.

Thank you.

It's really nice to be here.

Next

time.

on economics from the South, we hear from a leading critic of the current model of economic globalization, an academic

and activist who once risked 25 years in prison to expose the extent of how World Bank projects helped support

the dictatorship of Ferdinand Marcos of the Philippines.

We posed as World Bank project directors coming in from abroad.

And looking very haggard with our ties askew.

And we were asked for IDs and we tried to pretend that we were trying to find our IDs in our pockets.

And since it took such a long time, the guards just let us go in.

After three years, we were able to sneak out about 6, 000 pages worth of World Bank material, which documented

in detail how they supported the Marcus government

that's Walden Bello from the Philippines.

Thanks for listening to Economics from the South brought to you by the International Development Economics Associates.

Check out the show notes for a link to the ideas website and more resources.

And of course, please do share the show with others.

I'm Julians Amboko.

The producer is Penny Dale.

The concept is by Charles Abugre, C.

P.

Chandrasekhar, and atieno Ndomo of the International Development Economics Associates.