South-South Regional Financial Arrangements: Collaboration Towards Resilience

Marina Bay Sands, Singapore by Muhammad Faiz Zulkeflee. Photo via Unsplash.

As the world comes to grips with the devastating economic and public health consequences of COVID-19, Southern-led alternative institutions for finance and development have taken on more importance than ever.

The new book, “South-South Regional Financial Arrangements: Collaboration Towards Resilience,” from William N. Kring and Kevin P. Gallagher, in partnership with Diana Barrowclough and Richard Kozul-Wright of the United Nations Conference on Trade and Development, charts the dramatic change in the global financial and monetary landscape that has unfolded over the last few decades; in particular, through the expansion of Southern-led and Southern-oriented institutions and mechanisms. The change is profound, and the evolution of the Southern-led financial architecture is likely to continue, as the South not only adapts to changing global economic conditions, but changes them—increasing its role in global economic governance.

The book takes stock of some of the most interesting adaptations and institutions led by the South with respect to short-term foreign liquidity and emergency finance. It focuses on common currency areas and payment systems designed to avoid exposure to volatile international currencies and to promote a more resilient pattern of interregional trade; the potential for the newly emergent Sovereign Wealth Funds (SWFs) to play a more developmental role; and short-term liquidity mechanisms that can provide countercyclical finance or liquidity to member countries, oftentimes more quickly and more generously than the International Monetary Fund (IMF).

The book is a response to requests from experts in many countries for more information about these new initiatives because some have been more successful than others, and many are not well known outside of their immediate borders or regions. The different experiences described in this volume show that while these Southern-led initiatives offer many and significant benefits to broaden and diversify the global financial architecture, they are only partial and imperfect solutions to the challenges that remain. The institutions that constitute the Southern-led architecture of global financial institutions stand ill-equipped to deal with a truly systemic global crisis— with the added concern that their Northern-led counterparts are just as ill-prepared. Further, many of these new institutions remain untested. That said, they illustrate the promise and under-appreciated capacity of Southern-led institutions at the present moment. To fully realize the potential of a Southern-led architecture, further efforts are needed to help these new mechanisms contribute in ways that significantly alter the global financial landscape and the behavior of the institutions within it. Hopefully these alternative institutions can further ignite the evolution of existing institutions to improve lending decisions and expand access to vital resources to contribute to an inclusive and sustainable economic transformation.

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