We believe the time is right for the G20 leaders to hold a second meeting this spring to discuss ways to make progress in the implementation of the G20 Action Plan and to agree a more strongly coordinated global response to the current crisis.
May 20 saw the highest daily figure recorded worldwide for new cases of COVID19 and we are now at a critical moment as, on every continent, countries are attempting to stop the transmission of COVID-19
The G20 has the power to bring people together around a common set of actions, and what it decides next will have a direct bearing on the future of the world economy.
We write to emphasize the urgency and the need to act now because we believe that there are just weeks left, not months, in which to deliver immediate relief to countries. For the first time this century, global poverty is on the rise. The problems faced by the poorest countries in Africa and Asia demand immediate action. The United Nations (UN) predicts that a world-wide recession would reverse three decades of improving living standards and plunge upwards of 420 million more people into extreme poverty.
The World Food Programme has estimated that 265 million of our fellow citizens are likely to suffer from crisis levels of hunger – an increase of 130 million over pre-pandemic levels. We are now hearing reports of the devastating impact of poverty and of the pressure on health and other services, in particular on all the services upon which girls and women depend.
COVID-19 is a public health crisis that has brought in its wake the greatest education emergency of our lifetime: 1.5 billion – 80 per cent of all children – have been out of school. Many may never return. The majority are denied distance learning. Millions who no longer receive school meals are going hungry, while at the same time education aid is being reduced.
Compared to pre-crisis levels (the International Labor Organization estimates a 10.5 per cent deterioration in the number of hours worked, equivalent to the loss of more than 300 million full-time jobs.
The global economic and social emergency cannot end until we can bring the global health emergency to an end. And we cannot bring the health emergency to an end in any of our countries until we end it in all countries.
We welcome the $8 billion pledged on 4 May for vaccines, diagnostics and therapeutic development as recommended by the Global Preparedness Monitoring Board, and urge that these contributions be paid immediately. But more now needs to be done to fund and co-ordinate diagnostics, therapeutics, and vaccines.
- We need global coordination of the development, mass manufacturing, and equitable distribution of a vaccine or vaccines, so that they are universally and freely available as quickly as possible and we urge every G20 member support the 4 June replenishment of Gavi – the Vaccine Alliance.
- Instead of what sometimes seems like a cut throat competition for a share of a limited supply of medical equipment, we urge closer cross-border collaboration to increase the global supply of vital medical equipment
- To withstand COVID-19, developing countries need support to build their health systems as well as to improve their social safety nets and G20 countries should support the UN’s appeal for refugees, displaced persons and those who rely on humanitarian aid
We note not only the obstacles faced by developed countries in returning to growth, but also the deteriorating economic and fiscal conditions faced by many emerging and developing economies. More than one hundred countries have now approached the International Monetary Fund (IMF) for help, and more are expected to do so.
The IMF has said emerging markets and developing countries need $2.5 trillion to overcome the crisis, but only a fraction of that $2.5 trillion has so far been allocated.
While we welcome the good intentions at the heart of the G20 Action Plan, we now urge that concrete measures be agreed to implement it in full:
- Debt relief for the 76 International Development Association countries needs to be scaled up radically to include relief by bilateral, multilateral, and private creditors, and it should be extended to the end of 2021.
- Arrangements need to be such that multilateral creditors can demonstrate that they are providing net new lending in individual countries.
- Time is running out for the voluntary process for private creditors coordinated by the Institute of International Finance, and a new binding approach now needs to be considered.
- A dozen or more emerging markets may well run into debt servicing problems in the coming year. Each will need to be dealt with as a specific case, but the process will be much easier within a framework and forum which bring together the main creditors. The IMF should be mandated to convene the relevant players and through its debt sustainability and policy analysis set broad parameters for resolution.
- The G20 should agree that the level of support – $2.5 trillion – which the IMF has said is needed will now be provided. This requires the IMF, the World Bank, and regional development banks to raise their lending and grant ceilings. Based on their announced plans, the multilateral development banks (MDBs) will likely increase their outstanding loan portfolio from about $500 million now to between $650-700 billion over the next eighteen months. Without further increasing their resources and allowing them to be more ambitious in deploying their capital, their ability to respond to the crisis will be severely constrained.
The consequences of not acting now would be felt for the rest of the decade, for, while the financing needs of developing countries are now bound to be higher, private capital markets may continue to be more risk averse.
Support for existing programmes for social safety nets, regular health services, education, and climate change initiatives must not suffer because of the urgent need for funds to fight COVID-19 transmission. Thus:
- We need to ensure that the MDBs have sufficient resources to sustain the elevated level at least for the next five years, which would require an additional $1 trillion in their combined portfolios. The individual institutions should be asked to provide plans for how they are to achieve these objectives for the resources they need. This will involve new sources of finance for the MDBs including using their powers to borrow with consideration needed of a further set of capital increases, and the creation of new guarantee-based facilities like the International Finance Facility for Education (IFFEd).
- We reassert our commitment to the issue of special drawing rights (SDRs), and their transfer of existing unused allocations and new ones to countries most in need of support. Without requiring a reference to national parliaments, a decision on SDRs would release $600 billion immediately, and more than $1 trillion by 2022. We ask the G20 simultaneously to build political support for an SDR allocation while engaging in the necessary technical work, so that the measure can be put in place without additional delay as soon as agreement has been achieved.
A COORDINATED RESPONSE
In the first stage of the crisis the emphasis was on the provision of liquidity, support for employment protection, and new investment in health. Now as we seek to return the world economy to pre-crisis levels of growth, enhanced fiscal, monetary and central bank coordination is vital. Consideration should be given to setting a global growth target which can sit side by side with national inflation targets. ‘Green’ investment must be part of the stimulus. In 2009, less than 10 per cent of the fiscal stimulus went to environmental projects. Now, infrastructure spending should be prioritized around projects beneficial to sustainable development. In this way, the recovery from this crisis could be transformative, contributing to progress in delivering on climate change agreements. To raise vitally needed revenues for national governments, a coordinated strategy to recover money lost to tax havens should be agreed. Countries should automatically exchange tax information and remove secrecy surrounding beneficial owners and trusts, as well as agreeing to sanction non -complaint countries which refuse to implement the agreed rules.
Without action from the G20, the recession caused by the pandemic will only deepen, hurting all economies, and the world’s most marginalized and poorest peoples and nations the most. Representing, as it does, 85 per cent of the world’s nominal GDP, the G20 has the capacity to lead the mobilization of resources on the scale required and we urge leaders to do so urgently.
COVID-19 is also a wake-up call to the global community. The global health and financial architecture must be reinforced, and in parts redesigned, to enhance our preparedness and capacity to act with speed and at scale to fight future crises. The UN, the governments of the G20 nations, and all interested partners should turn this crisis into an opportunity to build a new and more effective multilateralism, which more appropriately reflects current economic and political realities and is better equipped to address the challenges of the 21st century.