New Delhi, October 26
Reserve Bank of India (RBI) Governor Shaktikanta Das highlighted the need for reforms in the international financial system to address challenges faced by emerging economies and to adapt to the evolving global economic landscape.
Das made these remarks during his address at the Macro Week 2024 event, organized by the Peterson Institute for International Economics (PIIE) on Friday in Washington, D.C.
Highlighting the significance of reform, Das stated, "The first and foremost priority should be accorded to reforming the international financial architecture. This involves prioritising inclusive global governance frameworks that better reflect the realities of today's global economy."
He added that "The current system, while foundational, needs to reform itself to ensure equitable voice and representation for the emerging economies"
Das pointed out that institutions like the International Monetary Fund (IMF) and the World Bank need to extend greater access to resources and provide emerging economies with a more prominent role in decision-making processes.
He said "Enhanced access to resources and a stronger role in the governance of institutions such as the International Monetary Fund (IMF) and the World Bank will not only enhance the legitimacy of these institutions but also foster more serious global cooperation in addressing macrofinancial challenges,".
The RBI Governor also raised concerns about the structural weaknesses of the global monetary and financial systems, noting that recent events have exposed vulnerabilities that impact both advanced and emerging markets.
He stressed the urgent need for improved global financial regulations to manage the risks posed by private capital flows and the growing influence of non-bank financial intermediaries.
"There indeed is a pressing need to improve global financial regulation to manage systemic risks posed by private capital and non-bank financial intermediaries, which now hold significant portions of global assets" he stated.
Das also warned of the potential risks from the rise of shadow banking, fintech, and decentralized finance, which have increased the complexity of global finance. He called for a stronger regulatory framework to prevent potential contagion effects, stressing that financial stability should be regarded as a "global public good."
Addressing the impact of geopolitical tensions on global economic policies, Das noted that actions like sanctions, trade restrictions, and supply chain disruptions are driving economic fragmentation. He acknowledged the necessity for countries to secure supply chains in key sectors, such as energy and strategic materials.
However, he advocated for collaboration, stating, "The G20 must play a key role in preventing further economic fracturing by promoting open and rules-based trade systems." He encouraged cooperation in areas like technology transfer, investment in global public goods, and advancing the green transition.
Governor Das also emphasized on the critical role of the G20 in promoting unity and preventing further economic divides, suggesting that inclusive and balanced reform in the international financial architecture is essential for global stability.