The Group of 77 (G77) is the largest single coalition of developing countries comprising over two-thirds of the 193-member United Nations (UN).
Besides protecting and promoting the economic interests of 134 nations, the G77 is also home to several sub categories, including the world’s Least Developed Countries (LDCs), Land Locked Developing Countries (LLDCs), Small Island Developing States (SIDS) and Middle Income Countries (MICs).
But most of the MICs have recently taken a severe beating—their economies undermined by heavy debt burdens, recurrent natural disasters, rising inflation, political upheavals and the lingering after-effects of the Covid-19 pandemic.
MICs include countries such as India, Indonesia, Malaysia, Brazil, Sri Lanka, Argentina, Nigeria, South Africa, Morocco and Algeria, amongst others.
Speaking at a conference focusing on MICs in Rabat, Morocco, on February 6, UN Deputy Secretary-General Amina Mohammed said middle-income countries represent close to one-third of global GDP, and they are major engines of global growth.
With 75 percent of the world’s population, she pointed out, MICs are global drivers of sustainable development. Yet, vulnerabilities are not solely a function of and do not disappear with income level.
Middle-income countries are also home to some 62 percent of the world’s poor. Of the ten poorest countries, where more than half the population lives in extreme poverty, three are MICs in Africa, she said.
Climate emergency
un General Secretary
António Guterres
Mohammed said middle-income countries are still recovering from the impacts of the Covid-19 pandemic that left millions, especially women and youth, without jobs and livelihoods and drove millions into poverty, setting back decades of achievements, fuelling social discontent and loss of confidence in governance.
“Like other developing countries, they are staring down a climate emergency that, for some, threatens their very existence or viability. Increasing conflicts and instability, and for some domestic upheavals, are causing immense suffering to those directly affected with consequences felt around the globe,” she said.
Recurrent and more intense natural disasters, with mounting economic losses, equally dramatic recovery costs and heavy public debt burdens, hamper economic recovery and weigh on investments for a better future.
Thirty-nine middle-income countries have net interest payments that account for more than ten percent of Government revenue, compared to twenty-three countries a decade ago, she noted.
Bhumika Muchhala, a political economist and advocate, and researcher with Third World Network (TWN), told IDN the past two years of monetary tightening by the Federal Reserve (and the European Central Bank) has led to an approximately 20 percent dollar appreciation generating a domino effect of adverse spillovers for many developing countries, particularly those with twin deficits and financial vulnerabilities.
“These spillovers include currency depreciation, as capital rushed out of developing countries and into US Treasury bills and other assets, generating Cost Of Living (COL) shocks, increasing the national import bill and importing inflation, leading to a tightening of domestic monetary policy and even deeper economic contraction in developing countries, (and especially MICs)”.
She said these multiple channels exacerbated pre-existing sovereign debt distress by increasing both dollar-denominated interest payments and the domestic currency cost of repaying dollar debt. At the same time, local risk spreads widened, and equity prices decreased.
“Perhaps most critically, in this cascade of deleterious effects, trade and tax revenues have decreased in a context of fiscal austerity measures, where women and girls absorb a disproportionate share of economic shocks generated by public budget cuts, regressive taxation and domestic rate increases led by independent central banks.”
The result has been a compounding crisis of inequality between and within nations, reversing economic development, stalling social contracts and derailing SDG achievement even further.
“All the while, the international responsibility of rich countries, in particular the US, for cross-border spillovers that violate the economic and social rights of other nations goes unheeded,” she said.
In an interview with Time magazine last week, World Bank President Ajay Banga said: “We are a money bank. We gave out US$ 100 billion-plus last year to the poorest countries, as well as MICs, to fight everything, from inequality to Climate Change to food insecurity”.
“But for many of the countries I met with, what was more important was our knowledge and our subject matter expertise. I call that the knowledge bank.”
According to the World Bank, MICs are a diverse group by size, population, and income level. They are defined as lower-middle-income economies—those with a GNI per capita between US$ 1,086 and US$ 4,255; and upper-middle-income economies—those with a GNI per capita between US$ 4,256 and US$ 13,205 (2023).
Impact of right-wing politics
Singling out the impact of right-wing politics on MICs, Anuradha Mittal, Executive Director, the Oakland Institute in California, told IDN that the recent history of Brazil shows that at the end of the day, “MIC’s challenges are the same as richer countries, i.e. much depends on the election of public officials with integrity and a commitment to the public good and the environment vs. corrupt and/or far right leaders working for the rich and to further corporate profiteering, as we see more and more in the Western hemisphere.”
“If we look at Brazil, dramatic progress was made in social and environmental polices during President Lula’s first tenure, resulting in historic reduction in hunger, deforestation, and advancement of Indigenous rights.”
Following this, (former President) Bolsonaro, with his right-wing agenda, worked hard to reverse and destroy those policies. Now back in power, President Lula has returned to the same progressive agenda.
For instance, in June 2023, she pointed out, Brazil announced the procurement of 500,000 tons of maize from rural producers through the Federal Government Acquisitions mechanism, intending to replenish public food reserves—resuming a policy that had been discontinued under the previous Government.
With wars in Ukraine and the Middle East, the challenge of picking sides is a major obstacle for the MICs when we need global cooperation to ensure social and environmental progress, including a major lift to address the climate emergency, she said.
Meanwhile, the international financial and development institutions should be reformed to reflect the interests of the Global South, Secretary-General Antonio Guterres has said.
While the BRICS can play an important and complementary role for developing nations, he stressed that it should not contribute to a fragmentation of the world economy.
The international financial institutions—the International Monetary Fund (IMF) and the World Bank—and the Security Council that were created in the 1940s after World War II reflect “what the power relations and the global economy were at that time” but aren’t relevant to today’s world, he said at a news conference on February 8.
Since they don’t “correspond to the power relations and to the global economy as it is today”, he said, “it will be very important for those institutions to reform in order to represent today’s global economy, to be truly universal and truly inclusive”.
“We obviously need that those institutions reflect more obviously the interests of the Global South”, he said.
Asked about the role of BRICS, he said, that “it is important to have a multiplicity of different organisations to support developing countries” in the finance and trade sectors.
“But”, he added, “it is essential that [it] doesn’t correspond to a fragmentation of the global economy”.
“One of the most important aspects that we need to preserve today is One Global Economy, One Global Market, One Global Internet and to avoid the fragmentation of that global economy”, he said.
“Within a united global economy, I think that many of these institutions [like BRICS] can play an extremely important and complementary role”, he added.
BRICS, made up originally of emerging economies Brazil, Russia, India, China and South Africa, has expanded to include Ethiopia, Egypt, Iran, Saudi Arabia and the United Arab Emirates with membership queries from 34 countries pending.
The group, which aims to foster trade and financial cooperation has created the New Development Bank to fund development projects and help financial stabilisation in the member countries, functioning in some ways like the established financial institutions.
About the fitness of the Breton Woods Institutions—as the World Bank and the International Monetary Fund are known for the venue of their founding—to meet contemporary needs, Guterres said that besides the unrepresentative character of their power structure and orientation, they are undercapitalised and too small for the current global needs.
“The truth is that they became too small”, he said, adding that “the paid-in capital of the World Bank as a percentage of global GDP today is less than one-fifth of what it was in 1960”.
“So we obviously need a meaningful capitalisation of those institutions”, he said.
While the UN cannot reform them, Guterres said that he would like to see the United Nations Summit of the Future in September give some directions for the way those institutions “should structurally move”.
Assessing the global political situation, Guterres said, “We are no longer in a bipolar or unipolar world, as I said, we are in a kind of on the way to a multipolar world, but in a very chaotic situation”.
“Power relations became unclear and what we see today in the world is political actors doing whatever they want and with total impunity”, he said.
To end the multitude of conflicts and divisions and to effectively address threats posed by Artificial Intelligence, to act on climate action and to achieve the Sustainable Development Goals, “a serious conversation between developed and developing countries; between rich and emerging economies; between north and south, east and west” is needed, he said.
[IDN-InDepthNews]
