The UN expert on the promotion of a democratic and equitable international order, George Katrougalos, stated in a report on Thursday that comprehensive reforms are needed to rebuild a fairer global financial system. He stressed that international financial reforms should be grounded in a human rights-based approach and consistent with the principles of the UN Charter, including equality, solidarity, and human dignity.
In his report, Katrougalos found that the policies of the Bretton Woods Institutions, namely the International Monetary Fund (IMF) and the World Bank, have been disproportionately shaped by high-income countries, often neglecting the interests of developing nations. He observed that despite claims of neutrality, these institutions have prioritized market liberalization, deregulation, and fiscal discipline at the expense of social equity and human rights protection. Consequently, developing countries have become increasingly dependent, allocating resources to debt repayment rather than domestic investment, which has exacerbated the economic gap between the global North and the global South.
The UN expert further explained that inequality between developed and developing countries originates from governance structures within the financial institutions that rely on weighted voting systems rather than population size or gross domestic product (GDP). These arrangements have enabled developed countries to control 41 percent of the voting power despite representing less than 10 percent of the global population, while more populous and low-income countries hold less than 10 percent of the voting shares.
Furthermore, Katrougalos highlighted that both the IMF and the World Bank have disregarded the human rights implications of their decisions. The instiutions claim that their founding treaties confine their mandates exclusively to economic objectives. Nevertheless, the expert asserted that they function within the UN legal framework and are therefore bound to adhere to international human rights law.
Katrougalos concluded his report by calling on the IMF and the World Bank to align with UN principles and demanded greater cooperation with UN human rights mechanisms. He also recommended rebalancing voting rights within global financial institutions in a way that enhances the inclusion of developing countries, as well as implementing measures to close the global financial gap, including curbing illicit financial flows and taxing excess profits of multinational corporations and financial speculators.
International concern has intensified regarding the alignment of the current global financial system with UN human rights standards, particularly in light of rising corruption and limited financial resources available to developing countries to address serious challenges such as climate change.
The UN has previously urged policymakers to increase adaptation funding and implement strategies to ensure that climate finance benefits marginalized communities, given that 80 percent of the world’s poorest populations reside in regions highly vulnerable to climate-related disasters. Additionally, the UN Environment Programme Finance Initiative (UNEP FI) developed a Human Rights Toolkit to assist financial institutions in meeting international human rights standards and integrating these considerations into their decision-making processes. In July 2024, a coalition of finance and foreign ministers called for urgent reform of the global financial architecture and greater inclusion of developing countries in financial institutions to enhance sustainable development financing in African nations.
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