We asked Stephany about the positives and risks in the international financial architecture for mobilising and using finance effectively for development in the poorest and most vulnerable countries. Stephany highlights a large proportion of FDI flows to developing countries, a positive trend as FDI tends to be more stable than other flows and can bring technology and access to markets. However there is a risk of reversibility of major capital outflows remains, which tends to happen very quickly and leads to depreciating exchange rates, forcing banks to tighten monetary and fiscal policies, leading to lower growth and employment and higher poverty, posing the risk of crisis. A stronger international financial architecture is needed to help compensate these countries during times of external shock, either through their trade accounts or capital accounts.
over 1 year ago