IMF recently proposed a $50 billion plan to negate the global asymmetries caused due to the pandemic by enabling social change and impact for less privileged countries. Critical factors for the inequity between advanced and low-income nations would be the lack of an inclusive vaccination program, refined financial, and healthcare facilities for its population among the low-income countries. The $16 trillion fiscal stimulus, the largest of its kind in modern history to fight COVID-19 is significantly driven by advanced countries, an intervention not feasible in countries that have the inadequate financial muscle to take proactive measures in overriding short term economic fluctuations. The G20 Debt Service Suspension Initiative is one enabler for poor countries, especially if the IMF estimates that low-income countries would need to deploy $200 billion over the next five years plus the $250 billion in investment to fight the pandemic turns out to be correct. School closures leading to loss of education, increase in learning poverty and comatose business ecosystem have colossal implications in the short run and require prudent fiscal response lacking in many poor countries. Going forward, the debt forgiveness and the planned $650 billion general allocations of SDR for its member countries might turn out to be a panacea for poor countries.
Graph | Our World in Data
Common framework on Debt Treatment, supported by G20 and Paris club is a structured mechanism to support low income countries with unstainable debt looks good on paper. However, a lot depends on the reforms proposed by the IMF, keeping in mind Joseph Stiglitz book IMF and Its Discontents were certainly not helping many countries at one point in time. The other financial tool Debt Service Suspension Initiative (DSSI) would need to be extended beyond the present date of December 2021 as the spill over from the current crisis will go beyond this year.
Chart | Our World in Data
The recent civil unrest in Cuba, a paragon of equitable healthcare, or long queues of Iranians in Armenia for vaccines highlights the heightened concerns of negative externalities associated with vaccine shortages. As normalcy returns to advanced countries, many parts of the world look far from normal as the delta variant creates havoc, especially in Africa. The IMF staff plan supported by WHO, World Bank, WTO and IMF envisions to save the lives of about half a million people, vaccinate at least 40% of the population in every country by end of 2021 or at least 60% of the population by the first half of 2022, a laudatory social change and impact enabler by the IMF. Sadly, it looks that IMF and its partners are nowhere close to achieving their vision with less than 1% of the population fully vaccinated in the sub-Saharan region. It’s appalling that less than 1% of the population in low-income countries have received one vaccination despite 3.47 billion doses have been registered globally, according to data shared by Our World in Data, 14 July 2021. 25.4% of the world population have received at least one jab of COVID-19 vaccinations highlights inclusive vaccination urgency. Sadly, there is not much global activism for this cause apart from the singular initiative by ONE. There is no focused worldwide Corporate Social Responsibility strategy catalysing equitable vaccination neither a United Nations-backed sustainable development goal embedding this initiative.
The proposed general allocation of Special Drawing Rights (SDR) of $650 billion, the largest ever is a step forward in empowering less privileged nations for COVID-19 response. Special Drawing Rights or SDR was created by the IMF in 1969 as an international reserve asset to supplement other reserve assets of member countries. The collapse of Bretton Woods in August 1971, brought an end to the era of a fixed currency regime linking the dollar to the value of gold. The middle Road, a global thought leader recently discussed SDR in its recent publication under Insights. Whether channelling SDRs to poorer countries, debt forgiveness, and minimum corporate tax alignment will work as bazooka remains to be seen. The most imperative facilitator among civic societies in driving social change and impact within the global arena is a congruence of universal thought for social good.