United Nations chief Ban Ki-moon has called for 'deep and systemic' reforms based on inclusive multilateralism for a global financial system that can better meet the challenges of the 21st century.
The ad hoc manner in which the governments have responded to the management of current crisis, Ban said, is reflective of serious lacunae in the existing world financial system.
Voicing deep concern over impact of the current crisis on the developing countries, he described the steps taken by the major economies so far as 'laudable' but called for more global action to ensure the poor States are not impacted adversely.
"More coordinated approaches, including direct intervention by governments of the major economies, are necessary to recapitalise the banking system and guarantee the savings of ordinary people," he said.
The initiatives by the World Bank and the International Monetary Fund to provide new emergency liquidity provisioning to poor countries, Ban said, could help them counteract some of the consequences of this crisis.
"But more needs to be done," he added, calling for urgent reform of the global financial system.
The UN chief's call for reform of the international financial institutions followed similar calls over the weekend by UN Under-Secretary-General for Economic and Social Affairs Sha Zukang, who told several meetings in Washington that the crisis was clear proof of the urgent need to reform the international monetary and financial system set up during three weeks of talks in Bretton Woods in New Hampshire in the US in July 1944.
"The current crisis throws a spotlight on the international community's failure to adequately address systemic issues," he said, calling for more effective regulatory frameworks, particularly in financial markets.
Other areas that 'require critical attention' include improved risk monitoring and crisis avoidance as well as management better suited to the realities of contemporary global financial integration and more universal and equitable distribution of voice and representation in global decision-making bodies, he added.
There also must be follow through, in an accountable manner, on all international commitments made in the areas of aid, trade, debt reduction, and access to technology and affordable medicines in support of developing nation's efforts to achieve the millennium development goals, Sha said, referring to the ambitious UN programme to reduce a host of social ills such as hunger, poverty and lack of access to medical care and education, all by 2015.
"Progress on the question of how existing mechanisms can provide financing on the scale and in the form required to address climate change is urgently needed," he said, stressing the limitations of relying solely on voluntary mechanisms and on the amount of financial resources identified for climate change to date.
"It is critical that the international community reach agreement on financing targets and mechanisms to which all parties can be held accountable in the negotiations under the United Nations Framework Convention on Climate Change," he declared.
"Deficiencies in global governance, already much in evidence in the financial crisis, will, therefore, have to be overcome in order to adequately and effectively address climate change."
Both Ban and Sha said a Financing for Development Conference next month in Doha in Qatar provides an important opportunity to ensure that current financial difficulties do not undermine commitments already made to provide more aid and other financial resources for the achievement of the internationally agreed development goals.
The UN expects World Gross Product growth to decline to a recessionary pace below 2 per cent for 2008, down from the 3.8 per cent of 2007, implying zero growth in world per-capita income and likely fall in income for a large proportion of the population, particularly the poor.
The outlook for 2009 will be even worse, with the growth of WGP expected to drop to about one per cent, Sha noted.
Growth in developing countries and economies in transition is expected to decelerate on average by about 2 per cent in 2008, from the previous year, and by another one per cent or so in 2009.
"The root cause of the global financial crisis is deeply embedded in policy deficiencies in the international financial system and in the unsustainable fundamentals of the world economy," Sha declared.
"The prospect of a systemic world financial breakdown and, consequently, a long lasting economic slowdown is real."