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WASHINGTON, DC: Due to the COVID-19 pandemic, the global economy is suffering its steepest decline since the Great Depression.
But while the whole world is suffering, it is the poorest countries in the world that will pay the highest price unless they receive more aid.
Some 1.5 billion people live in low-income developing countries and struggle to overcome weak public health systems, limited institutional capacity and, in many cases, high levels of debt.
All of these countries entered the crisis with limited capacity to combat it. They faced a dramatic increase in spending needs just as the pandemic triggered a decline in tourism revenue, remittances and commodity prices.
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While actions to protect companies and workers in advanced economies accounted for about 20 percent of GDP, this support in low-income countries was only 2 percent.
INSECURITY CAN LEAD TO GREATER INSTABILITY
With up to 115 million additional people at risk of falling into extreme poverty this year, the current deep economic decline threatens to reverse two decades of advances in living standards.
The current damage will last for many years, as children, especially girls, drop out of school, the quality of health services deteriorates, and employment levels remain depressed.
This matters to all of us. Insecurity in poor countries translates into instability for the rest of the world. And most importantly, the COVID-19 crisis will never really end until it is defeated everywhere.
Experts warn that the poorest and developing countries face a series of obstacles that could deny billions of people the first proven protection against the coronavirus. (Photo: AFP / Pamela Tulizo)
To that end, international institutions and bilateral donors must help poor countries as they work to create the right economic conditions for recovery in the country.
The International Monetary Fund continues to provide practical technical assistance and training to its members, helping governments manage debt, raise revenue, and manage public finances to ensure the effective delivery of vital services, including health.
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The Netherlands has supported these efforts by contributing to specific IMF thematic funds and the Fund’s network of regional capacity development centers in Sub-Saharan Africa, the Middle East and the Caribbean.
The critical task now is to help low-income developing countries overcome the current crisis and build resilience for the future.
Bilateral donors like the Netherlands complement IMF loan programs with specific interventions for health, education and job creation, as well as through programs that address climate change and greening the economy.
UNSUSTAINABLE DEBT
We must also do more to help countries with unsustainable debt burdens. Even before the pandemic, around half of low-income countries were in debt or at high risk of it.
Now that many countries have only limited, if any, access to new market financing, they are faced with a dire tradeoff between supporting their people during the pandemic and servicing their debt.
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The international community has taken some important steps to address this problem. With the support of 13 bilateral donors, including the Netherlands, the IMF has provided one year of debt service relief of approximately US $ 500 million to 29 of its poorest members, and is now seeking additional resources to extend this. relief beyond April 2022.
IMF Managing Director Kristalina Georgieva is stressing the message that governments must help the poorest countries emerge from the Covid-19 crisis. (Photo: AFP / Nicholas Kamm)
We have welcomed the expansion of the G20 Debt Service Suspension Initiative, which has already provided the poorest countries with around $ 5 billion in temporary debt service relief.
The IMF also supports the establishment by the G20 and the Paris Club of an ambitious new Common Framework for debt resolution, combining a standard approach to decision-making among creditors with a case-by-case approach to relief. Of the debt.
EXTERNAL FINANCIAL SUPPORT
Beyond tackling debt, low-income developing countries need strong international financial support. Since the start of the pandemic, the IMF has doubled access to emergency financing services and provided $ 11 billion in emergency financing to 47 countries in this group.
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The IMF remains committed to guaranteeing sufficient access to such credit in the coming years.
To this end, the IMF is counting on its wealthier member countries to support this effort by providing new lending resources to finance concessional loan programs.
Since the beginning of the pandemic, the Fund has raised an additional $ 22 billion and is now working to mobilize grants to guarantee interest-free loans at these levels, to which the Netherlands will also contribute. Many bilateral donors have also strengthened their own programs to support low-income countries.
The Netherlands, for example, recently raised 500 million euros ($ 595 million) to keep existing development efforts afloat and to fund new ones to help poor countries fight the pandemic.
The IMF warns that many countries will not see their economies return to pre-pandemic levels until 2022 or 2023 AFP / Brendan SMIALOWSKI
DO NOT SQUEEZE THE TRADE
Finally, low-income countries need trade now more than ever.
Over the past two decades, global poverty levels have fallen dramatically as these countries increased their participation in international markets. But the pandemic and ongoing trade tensions have jeopardized that progress.
An open, stable and transparent rules-based trading system remains absolutely critical to ensuring global economic stability, inclusive and sustainable growth and long-term prosperity.
The IMF continues to promote the recovery of world trade by working to keep markets open and advocating for further policy reform.
Within the European Union, the Netherlands and France have promoted trade policies that place more emphasis on sustainability and responsible business conduct.
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Meeting the many unmet needs of low-income countries will require more joint efforts from bilateral donors, including national public development banks and multilateral institutions.
Together, we can help the most vulnerable countries and communities recover from the pandemic. In doing so, we will build a more inclusive and resilient world for all.
Kristalina Georgieva is Managing Director of the International Monetary Fund. Sigrid Kaag is the Minister for Foreign Trade and Development Cooperation of the Netherlands.
